Scalping is one of the most common strategies among traders in the Forex market. It should be noted that especially this strategy is popular among beginners, which is not entirely justified because this style of trading involves significant risks and a great emotional burden on the trader. So we should assume that it is not for everybody and requires a thorough understanding.
The scalping strategy is that the trader opens the position for a very short period of time and does not wait until the price makes a big move, and closes it with a minimum profit if the quotes have changed at least a few points.
In fact, scalping is a trade that involves placing orders at a very short distance from the point of opening a position, as well as opening a large number of trades on one or more assets in one or more days.
To apply the scalping strategy is enough small experience on the demo account. However, it should be borne in mind that this is a rather risky strategy requiring certain psychological stability from the trader.
The scalper is a trader who is almost always present in the market and most of the time does not wait, but works.
Pros of scalping
We have already mentioned what scalping strategies are and before we move to the cons of scalping and explain why it is not for everybody it is essential to talk about the advantages this strategy offers.
- The main advantage is that there is a possibility to get a large income, some traders note that it is possible to return up to 30% of the deposit during the day.
- There is no need to wait for the appearance of the trend because you can trade on a scalping strategy at any trend, as well as a flat.
- There is no need for complex analysis, because first on small timeframes it is useless, and secondly, in this case, enough elementary technical analysis.
- Relatively small trading deposit. According to Axiory, it is one of the most notable advantages of scalping. Axiory is a mid-sized brokerage firm with a relatively little experience however the company is trying to establish itself in the Forex industry.
Cons of scalping
When we talk about the cons of scalping they are the main reasons why scalping strategy is not for everyone. You need to have good experience as well as strong psychology when dealing with this strategy.
- The biggest drawback is a huge risk because a significant number of trades open with a chance of success of about 50%, and this is not allowed in the use of other strategies.
- In addition, most traders use leverage to get a notable return from scalping. And this tool further increases the risk of trading and loss when losing.
- The need to be constantly present at the monitor and keep track of the schedule.
- A lot of nervous tension when working, because you need to make quick decisions and constantly perform the opening of new positions.
- Not all brokers allow scalping. Often as a prohibitive measure is a high spread, which makes the profit from scalping almost unattainable. This can be expressed in limiting the number of trades per unit of time or during a trading session. Or lucrative trades lasting less than 5-10 minutes are simply not counted.
- The huge risk associated, including with large leverage. The slightest movement of the market can sweep away your entire deposit, so the account should be only the amount necessary directly for trading.
In general, scalping is the choice of a very active and aggressive trader, which is very difficult to become. The ability to get a greater return during a single trading session will often be compensated by the fact that on some days the profit will be with a negative sign.
Many of the drawbacks of this strategy are to eliminate the use of automated trading. However, the high risk will still remain.
At its core, scalping is based on the rapid removal of small profits (scalps). This is the rapid opening and closing of positions using small timeframes (M1 and M5). Profit from each trade is taken small in just a few points or pips.
The limited choice of trading tools for scalping strategies is due to the fact that you will need tools with only a small spread because a large spread can negate all the benefits of this method of work.
The mastering of the scalping strategy is not an easy job. You need a lot of experience and knowledge of trading. At the same time, not all people can deal with scalping equally well.