Forex scalping is a popular way to trade for many of today’s Forex traders. Scalping is the process of taking small profits from each trade. This scalping is done on an intraday basis. This means that traders open and close the trades within the same trading day.
Both beginning and experienced Forex traders use Forex scalping as their preferred method of trading. Scalping can be a labor-intensive way to trade if you have to sit in front of your computer and manually place your trades all day long. These days traders have the option of using automated Forex trading systems to make scalping a hands-free activity.
There are several things to keep in mind when considering Forex scalping. The first is that your profit on each trade will be small. With this in mind you’ll need to focus on your risk control in order to be profitable. Remember that since each profit is small traders who scalp must remain mindful of the frequency of trades and the transaction costs they incur.
One of the biggest mistakes that inexperienced Forex traders make in scalping is that of poor risk control. Since smaller sized profits are easier to grab a than huge profits scalpers often experience numerous winning trades. The danger for risk control is that the profit from these numerous winning trades can easily be wiped out by risking too much per trade. That is why it is infinitely important to have your risk in line with your reward. It simply would not make good sense to risk 500 pips in order to only gain five pips. Such actions are the equivalent of trading suicide.
Once you have the hang of Forex scalping and become successful at it your account equity will grow. As your account equity grows you will then be able to trade more and more contracts as your account equity grows larger and larger. This is when the real beauty of Forex scalping shines through. With multiple contracts even though each profit may be small it then becomes multiplied by the number of contracts. With proper money-management and discipline Forex scalping can be extremely lucrative.
