Forex trading can be done short term or long term. Most of the day traders are short term traders who open positions each day and close those positions before the close of the day. Some traders use fundamental analysis as a trading strategy. They are usually long term traders opening a trade for a few weeks or a few months.
Most of the day traders are short term traders. Day traders love scalping. A position is opened and closed within minutes making a few pips per trade.
Scalping takes advantage of the fact that most of the time the market is ranging. Ranging means there is no significant price movements or volatility. The aim of a scalper is to make 2-5 pips per trade.
Scalpers look for the period when the market is consolidating and ranging like when between the closing of the US currency markets and the opening of the European currency markets. During this period forex markets tend to range for hours without much movement. This is the time when scalpers like to trade.
However, the more you trade, the higher your trading cost becomes. For example if the broker is giving a 4 pips spread to you than this 4 pip is your trading cost per trade. You will have to make more than 4 pips per trade to start making profits.
In order to become successful at scalping you need thorough understanding of technical analysis. You should have an idea of how to determine over/under brought, support and resistance levels, trendlines, trading channels etc before entering into a trade.
Forex brokers dont like scalpers. Many will try to ban you on one pretext or another if you are using scalping as your trading strategy. So, first check with your broker before adopting this style of trading.
Scalping can be profitable if done many times every day and if the number of pips made each day is more than the number of pips lost.
Since scalpers are looking for capitalizing on very small gains like a few pips per trade, the profits obtained per trade are small. So scalping requires you to use high leverage.
Leverage is dangerous. It is a double edged sword that cuts both ways. Leverage helps you if market favors you but it will destroy you if the market does not favor you. So beware of using too much leverage while trading.
Most of the day traders are short term traders. Day traders love scalping. A position is opened and closed within minutes making a few pips per trade.
Scalping takes advantage of the fact that most of the time the market is ranging. Ranging means there is no significant price movements or volatility. The aim of a scalper is to make 2-5 pips per trade.
Scalpers look for the period when the market is consolidating and ranging like when between the closing of the US currency markets and the opening of the European currency markets. During this period forex markets tend to range for hours without much movement. This is the time when scalpers like to trade.
However, the more you trade, the higher your trading cost becomes. For example if the broker is giving a 4 pips spread to you than this 4 pip is your trading cost per trade. You will have to make more than 4 pips per trade to start making profits.
In order to become successful at scalping you need thorough understanding of technical analysis. You should have an idea of how to determine over/under brought, support and resistance levels, trendlines, trading channels etc before entering into a trade.
Forex brokers dont like scalpers. Many will try to ban you on one pretext or another if you are using scalping as your trading strategy. So, first check with your broker before adopting this style of trading.
Scalping can be profitable if done many times every day and if the number of pips made each day is more than the number of pips lost.
Since scalpers are looking for capitalizing on very small gains like a few pips per trade, the profits obtained per trade are small. So scalping requires you to use high leverage.
Leverage is dangerous. It is a double edged sword that cuts both ways. Leverage helps you if market favors you but it will destroy you if the market does not favor you. So beware of using too much leverage while trading.
About the Author:
Mr. Ahmad Hassam has done Masters from Harvard University. He is interested in investing especially stock and Forex trading. Read about Trend Forex System. Best Forex Signal Service. Learn Forex Trading.
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