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What is scalping in Forex: all the pros and cons
What is scalping in Forex: all the pros and cons

Acquaintance with the financial market gives all the beginners an understanding that in order to trade successfully and increase their funds, they need to choose one or several efficient strategies that suit their trading styles. When studying this method, many will surely face the question of what scalping in Forex is and whether it is worth using. In this article, we will try to figure it out.

SCALPING AS A TRADING APPROACH TO THE FINANCIAL MARKET

Scalping is often referred to as pipsing by professionals, but the essence of these two terms remains the same. Scalping is a popular model of behavior in the financial market, which allows you to make money on small price fluctuations within short time periods. Accordingly, those who follow this way of trading are called scalpers.

The idea behind such a behavioral strategy is that the trader closes the trade almost as soon as it becomes profitable. It allows you to do over a hundred trades within a single day. This approach implies that the trader needs to act within strict boundaries, not deviating from the chosen strategy, otherwise one losing trade can absorb all the profit from dozens of winning ones.

 Having understood the concept of scalping in Forex and starting to successfully apply the technique in practice, traders must set themselves the following goal: close the maximum number of positions with low profitability. The success of someone who chooses scalping depends precisely on how many trades he or she closes within a day, not on the amount of profit that each of them brings.

The benefits of scalping

When considering what scalping on Forex is and whether you should use it, it is important to take into account the benefits of such a model of behavior in the financial market:

 

  1. Traders can earn up to 30 percent of their deposits in just one session.
  2. When choosing small timeframes, traders do not have to do an in-depth analysis since in this case, it is useless. Using the data of technical analysis will be enough.
  3. Even entering the market with a small trading deposit, you can multiply your funds.
  4. More chances to earn, as small price fluctuations are much more common than large ones.
  5. It gives you complete independence from a trend since scalping is effective even during a flat.

 

 

It is worth noting that when scalping, traders most often use high leverage of up to 1:1000. This allows them to maximize the profit that each trade generates.

UncoverING the pitfalls

To fully understand what scalping in Forex is, we should not forget that even the most effective model of behavior in the financial market has its downsides and disadvantages. In particular, when choosing scalping, you may face a number of challenges:

 

 

  1. Some brokers do not welcome the use of scalping, so they may limit the possible number of trades per unit of time or the entire trading session.
  2. Using high leverage is a big risk in itself, especially if you have little experience and funds on your balance. The slightest market movement not in your favor can reduce your balance to zero in a matter of minutes, so it is worth keeping in your account only the amount that you are not afraid to lose and which is intended EXCLUSIVELY for trading.
  3. Scalpers are faced with a meager choice of trading tools. The thing is that only tools with a small spread are effective in a market that behaves this way.
  4. Constant psychological and emotional stress.

 

 

Remember that it is important for traders who choose scalping to use platforms that allow you to instantly open and close trades. The slightest delay can lead to losses or reduced profits.

SUMMARY

After understanding what scalping in Forex is, many beginners are enthusiastic about making a deposit to some brokerage account and starting to trade in the financial market, randomly opening positions. Most face a margin call, in which case the broker automatically closes all trades.

To avoid this, you should prepare your behavioral strategy beforehand and test it on a demo account. Only following strict rules for entering the market and closing a trade can make a scalper successful.

If you have learned what scalping on Forex is, and understand that it is best used during long-term consolidations, but are afraid of not coping with constant stress, you should pay attention to automated trading systems.  Algorithmic trading robots  do not get tired, are not subject to emotional factors, and always trade within strict guidelines, which is crucially important for scalping.

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