What is Forex Scalping?

What is Forex Scalping?

Foreign exchange trading (forex) relies on the differences in currency pairs to generate returns. Traders engage in forex scalping when they make many small trades on currency pairs based on small price movements throughout the trading day.

How does Forex Scalping work?

Traders monitor the price movements of selected currency pairs and create buy and sell points. When the price meets the required criteria for buying, they buy a security and sell it when the price reaches another specified point.

What does this mean for individual investors?

Forex scalping and trading differ significantly from investing. Investors put capital into investments for periods ranging from months to years, while forex traders load a trading account with a broker and make trades in increments of minutes or days.

Requirements for Forex Scalping

To trade forex, you only need to open an account with a forex broker and fund it. You can start trading as soon as the money is in the account and the platform is set up. However, there are many concepts and practices you should familiarize yourself with before trading.

Technical Analysis

It is essential for forex traders to learn how technical analysis works. Technical analysis uses charts, patterns, and other indicators to analyze and predict asset price movements. Some examples of the techniques traders use include candlestick patterns, chart patterns, or indicators.

Stop Trading

It can be tempting to make large trades for quick money; however, this is a path to ruin. A stop loss tells your broker that you only want to lose a certain amount of money on any given trade. When you set a stop, it prevents the trade from executing if the loss exceeds the acceptable limit. A stop loss provides a way to prevent significant losses – set a stop that is the maximum you can afford to lose on a trade and do not change it.

Emotional Control

You must be able to control your emotional reactions and keep a cool head when asset prices rise or fall. Sticking to your plan and not falling prey to greed can help mitigate the risk of losing significant amounts of capital. Keep your trades small and give yourself some room to exit without losing everything if you make a mistake.

Key Takeaways

Forex scalping relies on trading based on small price movements. Forex scalping operates through trading positions. Trades can be automated or executed manually. Forex trading should only be conducted by someone who has studied the forex market, its techniques, and concepts.

Source: https://www.thebalancemoney.com/forex-scalping-a-dangerous-game-1345190