Okay, I've been trying to find information on forex scalping and the
pickings are mightly slim indeed. In fact, the so-called information on
the net is so bad I'm going to write up a small post of my own...
because I'm sure if you found this page you are desperately looking for
some real information.
What Is Scalping?
Quite simply, very short term trading.
Why Don't Brokers Like Scalping?
Well,
some brokers don't like scalping because of how they are set up. If
they are not able to execute your trades quickly or efficiently enough
then they risk being the source of your profits.
Does Scalping Work?
I've
seen some people claiming that it works great as well as others
claiming that it is impossible to do profitably. The reality is that if
you can predict the direction that an equity pair will move, either up
or down, then you can hop into the market and grab a few pips when it
happens.
How Easy Is It To Predict Equity Pair Price Changes?
Well,
that's the million dollar question! I don't have any books to sell or
anything, but a lot of people claim to have solutions for you.
Personally, I think if they really had solutions that worked they
wouldn't waste time telling you about it, they'd be busy trading.
However, in an effort to be informative, when you spend enough time
watching a market (which is quite boring) you'll get a feel for it's
current state and how it is moving. Often, until conditions change, you
can be fairly accurate with your predictions.
Can Anyone Do This?
If
you find a market maker that doesn't mind scalping, you can try.
However, you must know how to place stop and limit orders with their
trading platform. In particular, it would be very nice if you were able
to have someting known as a trailing stop. As well you will want to
understand the concept of leverage as it applies to a forex account.
Basically, I'd suggest throwing $100 at a starter account and playing
around, carefully, until you've made enough bad decisions to learn how
things work. After that, you should have the tools needed to try out
various strategies.
How Much Effort Is It?
Scalping is
very time consuming. You have to spend a lot of time watching the
markets, to the point that it would be difficult to do well if you had
an existing full time job. Also, scalping is very demanding from a
psychological point of view, as you will have large amounts of your
capital ready to put into play, but you may have to wait hours before
you spot a good entry point. Then, upon entry, you might find you are
back out with a small loss in no time. Alternately, you might get a
small profit, take it, and then watch the market skyrocket after your
exit. The shorter your trading is the more attention it will take and
the more nerve wracking it will be.
Are You Scalping?
I'm
thinking about it. I've been opening up a grid strategy to catch swing
trades, but I have noticed that using half of the scalping mentality to
accumulate positions in trends may be able to have a significant
positive impact on my results. I guess I'll end up letting you know how
things work out.
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