Forex scalping is a strategy that you can use to try to generate small, consistent profits in the Forex market. Many Forex trading systems are based on this type of strategy and if you plan on getting involved in one, read on to find out what you will be doing.
What is Scalping?
The term "scalping" sounds like kind of a scary thing when you think about it, right? However, when it comes to the Forex market, it can be an amazing thing. The idea behind scalping is that you try to take small amounts of pips out of the market on each trade. You take trades very frequently and you do not stay in the trades very long.
How it Works
Scalping systems can be based on a number of different indicators that try to predict what will happen in the market over the short term. You place a trade and then you wait for the market to move. You might only wait for the market to move 5 or 10 pips. Then when you are in profit, you quickly close the trade out and take your profit. Some strategies use bigger profit targets like 20 or 30 pips also.
The benefit of this strategy is that you do not risk as much of your account on any one trade. Most Forex scalping systems use small take profit targets and small stop losses. If the trade goes against you, you will only lose a few pips. Another benefit of this type of trading is that it can potentially be very profitable. If you find a good system, you could easily make hundreds or thousands of dollars every day.
The downside to this type of trading is that it can be hard to find a system that is reliable. The problem with predicting the Forex market is that it moves a lot in the short-term. Even if you can easily predict the long-term trend, predicting what will happen in the next five minutes can be difficult. It is not uncommon to go on a losing streak with most systems. You will have to strongly believe in your system or risk losing a lot of money.
This type of Forex system can be beneficial in the right circumstances. However, before you try any of these systems out in a live account, you need to try them first in a demo account. This way, you can see how accurate the indicators are before you risk any of your hard-earned cash.
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