One of the popular
strategies among traders is Scalping, which involves the rapid opening and
closing of positions. Some scalpers deal with each trade of 5-15 pips within 5
minutes tops, while most traders stay in a trade for as little as 1 minute.
The trick in scalping
is to be in and out with a profit but still maintain the discipline and risk
management. While trading, you might want to pay attention to market indicators
which affect currency rates.
Exchange rates tend to fluctuate based upon economic and
political news events - on both the national and international levels. There
are several key indicators that scalpers (or any Forex trader) pay special
attention to before investing:
1. Government
statistics, including the Gross Domestic Product (GDP) rate
2. Unemployment
figures
3. Trade
balance reports
4. Inflation
5. Interest
rate announcements
Not every trader can be
a scalper. Since positions are opened for a short period of time, each return
might seem insignificant. Combined together, however, great gains can be made.
Scalper is a trader who doesn’t like to risk and only looks for safe, small and
frequent opportunities.
What are the
Challenges?
1. Patience
The difficulty that most scalpers face is the lack of patience. Some
traders find it hard to trade in such small portions and feel motivated enough
to collect these pieces of pips into a bigger profit picture. If you tend to
get excited easily and have a plan to produce large profits with each trade,
scalping strategy is definitely not for you.
2. Concentration
Being a scalper requires great concentration and knowledge. Since you will
be opening and closing many positions during a day and each position will bring
small profits, you can hardly afford to suffer the losses.
3. Full-Time
Scalping is a very challenging and time-consuming technique. If trading is
not your full-time job, you should probably scratch scalping out of your to-do
list! You will have to give up at least
6 hours a day in order to make a decent earning.
4. Forex Brokers that
Allow Scalping
Believe it or not, some forex brokers do not allow scalping. You will read
about it either in their terms and conditions or find it extremely difficult to
scalp with brokers that make sure this strategy is impossible to implement.
Overall, scalping is
not for everyone. Before you step blindly into it, you have to figure out your
trading character, plan out the trading style and consider all the pitfalls
lurking behind scalping.
