There is much fascination with scalping among traders. Some hold conservative views about it while some welcome it as an advanced option to further their profits. The word advanced is used because experienced traders are highly suitable for this method. Forex scalping is a short-term trading strategy that is characterized by imprecise length. It can take one to five minutes for some and three to fifteen minutes for others. A higher number of lot sizes are opened for this strategy and trading transactions are executed in succession to each other. If you are one of those who are fascinated, learn from these tips before you start.
- Start with a high leverage: You can start by 20:1 or better yet 50:1. Those should make up a reasonable amount of leverage to get you started. You can widen it as you get proficient in forex scalping.
- Use a Demo Account first: Do not jump right in to the forex scalping scene especially if you are a beginner. Note that there is much learning you need to have in forex trading before you will actually call yourself a trader. By using a demo account, you get a shot at feeling the experience of what forex traders call “adrenaline rush in trading”. Besides, if you have not done scalping before, it pays to try it out first just like you did before you engaged in traditional trading methods.
- Exercise a definite stop loss: Just like customary trading, you need a stop loss to determine when you should exit a trading transaction or not. And when it comes to forex scalping, you need a really tight stop loss limit. When you know how much you can lose, you will also know when you need to stop. Note that scalping totally discounts the idea of risk and the only way you can get around it is to define your stop loss strategy.
- Observe the right time to open trading positions: The forex market is seemingly operating on a 24-hour basis now since the launch of the Internet, but it does not mean that you can open your position at any time. Even the hours where you seemed comfortable trading may not be consistent because the forex market fluctuates rather drastically. So to make your forex scalping strategy more efficient, you need your skill in technical analysis to work for you. Study the market indicators first and monitor activity closely. Exercise caution at all times and be wary of making a trade when a new release is ongoing.
The tips above deal with your approach when it comes to scalp trading. On a deeper sense, you can also consider the average range of the daily prices of your favorite currencies. Doing this makes sense because the value of your preferred currency pair determines how much you can get as a profit in the end. You can also widen the type of currency pairs you deal with. Presently, the US and Canadian Dollar, the Euro, and the Japanese Yen hold the record for the most traded currencies.