A method of scalping is very popular among Forex traders. It is applied by traders who get the profit from the price fluctuations during one day. Usually the time between the position opening and closing is very short and may last only few minutes. Accordingly the profits achieved from these positions are low too, but the total earning achieved by the large number of trades can be high enough. Some traders may make up to 200 positions a day.
Of course not all of these positions are profitable, the target is to reach the profit in total, that is quite possible. While making scalping the stop-loss order is set closer to the price of position opening in order to guarantee the reduction of losses if the market changes its direction.
All Forex traders know about the changability of the currency market. Even the price within one day moves in a certain cycle with its ups and downs. If during one day the average price change is about fifty points, the difference between the minimum and maximum prices will have much greater value. Once you get a small movement, you will have a chance to significantly increase your capital.
Novice traders often get a false impression of the great opportunity to increase their capital as there is an opportunity of reinvestment. Unfortunately this first impression may be wrong as without any experience, this strategy is doomed to failure. First of all you need to know on what level you place the stop-loss orders. Because if you set it up too close to the price of opening, it increases the risk of losses in the market during the volatility even if you can assume the direction of trend correctly. In order to decrease this risk, we recommend you to avoid placing the stop loss if you make scalping. But you must always be in front of the trading platform and watch your trades. 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 trades, otherwise you may lose all. More than that, if you have a big deposit and trade without the stop loss, your total funds 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 trading with real money. We recommend all newbeis 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 allow scalping. We recommend you to review the best Singapore Forex brokers list and join the one that meets the needs of your trading method.
Hassam 