A strategy of scalping is very popular among Forex traders. It is used by traders who have the profit from the price fluctuations during one day. Usually the time between the position opening and closing is very short and may be only few minutes. Therefore the profits gained from these positions are low too, but the total income achieved by the large number of trades can be high enough. Some traders may do up to 200 positions a day.
Apparently not all of these trades are profitable, the target is to have the profit in total, that is quite possible. While making scalping the stop-loss order is placed closer to the rate of position opening in order to guarantee the diminishing of losses if the market changes its direction.
All currency traders know about the volatility of the Forex market. Even the price within one day moves by a certain cycle with its ups and downs. If during one day the average rate change is about fifty pips, the difference between the minimum and maximum prices will have much greater value. Once you capture a small movement, you will have a chance to significantly increase your capital.
Beginner traders often get a false impression of the brilliant opportunity to enlarge their capital as there is an opportunity of reinvestment. Unfortunately this first impression may be deceptive as without any skills, this tactic is doomed to failure. First of all you need to know on what level you place the stop-loss orders. Because if you place it too close to the rate of opening, it increases the risk of losses in the market during the movements even if you can assume the direction of trend correctly. In order to diminish this risk, we recommend you to avoid placing the stop loss if you trade scalping. But you must always be in front of the computer and watch your positions. In case of a quick movement against you and there is no chance to roll back to initial levels in the next few hours, you must close the positions, otherwise you may lose more. More than that, if you have a large investment and trade without the stop loss, your total balance may be lost and you will get a margin call.
The other reason of the novices’ failure might be because of the emotional side and the tension that arises when dealing with real money. We recommend all novices to try scalping trading on a demo account first, since there is virtual money there is no fear of loss.
Every scalping trader must be careful while selecting a Forex broker to trade with. Not all Singapore brokers accept scalping. We recommend you to review the best Singapore Forex brokers list and join the broker that meets the needs of your trading method.
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