Is Forex Scalping the right Strategy for you?

If you’re researching forex trading, you’ve more than likely heard the outlandish bragging of people who claim to have made kazillions of dollars by “forex scalping". But what does this mean?

Scalping is when the trader makes extremely quick trades in the market, extracting small amounts of profit in a matter of seconds. They then do this over and over and over, thus building their profit in this way.

“Great!” I hear you say. “How do I sign up for this wondrous money-making venture?”

Easy, tiger. For the sad truth is, this method can make people some money in the short-term, but as a general rule, brokers don’t like to work with scalpers as there isn’t enough profit in a trade for them.

Brokers charge a spread per trade, and this is how they make their money. They don’t care whether you win or lose a trade, as the profit is made when you ENTER a trade. However, if you enter on a tight position (for example, you only stand to make a few pips out of a trade), it just isn’t worth your broker’s resources to accommodate the frequency of your low-value trades.There is also the question as to whether forex scalping is a fair thing to do – as it adds some extreme volatility to the currencies you are trading. Small-time traders won’t have too much of an impact but if the banks and larger institutions started scalping on smaller-time or more fragile currencies it could spell big trouble for those currencies.

I personally wouldn’t be able to sustain a scalping strategy – not only do I not have the time/energy/patience, my trading platform won’t allow me to get into and out of trades that quickly. I prefer a day-trading strategy, trading off the hourly chart (sometimes the 15 minute chart for gap trades). This was I get the benefit of the short-term trade (shorter term trades are easier to make with smaller amounts of money) but I don’t risk making a negative impact on the market!

Taking day trades, which give you profit within a more reasonable window, say an hour or two, is definitely the way I would recommend trading. You’re able to take better-informed trades to sustain your position in the market, and make larger, more sustained profit.

Of course all trading strategies involve risk. This is what trading is all about. But the more informed you are, and the better you are with timing your market entries and exits, as well as preserving your capital, the more successful you will be.Take my word for it: If you are promised amazing returns by ‘scalping’ the forex market: Run. Away. Immediately!!!

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