Forex Scalping
I am sure that you have heard the amazing stories of people making hundreds and even thousands of dollars a day with forex scalping. Recently I saw an interview on CNBC of a man that made massive amounts in the forex by scalping and day trading. You know how many trades he made a day? More than 300. That is forex scalping at its finest, and this gentleman made a great living doing it.
So what exactly is forex scalping?
It is buying and selling currencies quickly. A scalper is usually in the market anywhere from 30 seconds to 10 minutes, but not much longer than that. The goal is to see the market moving, get in and get out while making just 1 – 5 pips. If you do this enough and keep your losses to a minimum, then you could make 50 – 500 pips in one day fairly easily. This is as much as some forex traders make in a whole month!
Forex Scalping Theory
The theory behind scalping is that no one really knows what the market is going to do next, so you don’t want to be in the market for long. How many times have you entered a trade 95% certain that the market was going to move up only to see the market fall? When scalping, you aren’t really concerned which way the market goes. As long as it is moving, you are fairly certain that you can enter a trade, gain 1-5 pips, and then close the trade.
Of course, there is a certain amount of knowledge and experience required for profitable forex scalping. It does help to have a decent idea which way the market will go. You certainly wouldn’t want to sell a currency when the market is shooting straight up. And if a currency is in a severe downtrend, it only makes sense to trade in that direction. But forex scalpers don’t put a lot of time or effort in determining which way the market will move. They just get in and get out quickly.
The Pitfalls of Forex Scalping
The big drawback to currency scalping is that you are aiming for only a few pips per trade. A couple of things can cause you problems.
One of them is the spread. You have to pay the spread every time you open a trade. Usually the spread is anywhere from 1-5 pips depending on the currency. This means that if you are aiming for 1-5 pips profit, you really have to earn 2-10 pips. So basically you start out in the negative on every trade, and you have to earn twice as much just to earn a few pips.
Another drawback is that you can have 10 scalping winners in a row and make 50 pips, but one bad trade can easily wipe out your 50 pips and then some. This makes money management and risk tolerance very important. Forex scalping is very stressful, and it certainly is not all fun and games. But if it is something you are interested in, I would say give it a try and make it work for you.
Incoming search terms:
- 1-5 pips profit in forex scalping
- scalping 50 pips
- scalping 50 pips per day