Is Scalping a Profitable Forex Trading Strategy?

Scalping is a trading style that is used in forex to buy or sell a currency position with the goal of earning small profits (10-20 pips) multiple times throughout the day. Scalping relies on riding the volatility of market prices in very short periods of time (from a single minute down to a single second).

Scalping is seen as a profitable forex trading strategy by some beginners in forex trading. Without having to worry too much about fundamental analysis and market level patterns, beginners can even use technical analysis entirely to scope out a heavy price movement in either direction.

How risky is scalping in forex trading?

Beginners also find scalping profitable because the strategy appears to dampen risks involved in holding a position for a long time. However, it is important to note that this perception of lowered risk is usually held by beginners who are not making much profit when they are getting started.

Professional scalpers would deal with higher risks on a daily basis. In fact there is no valid correlation between risk versus the trading style used. It’s possible for long-term traders to experience high risks. The only difference is that scalpers and day traders find out sooner that the positions that they are holding may or may not be profitable.

How to manage risk with a scalper trading style

Since risk is independent of trading style, there is a way to manage risks for any trading style. However, for scalping in particular, setting up a very narrow stop loss and take profit is advantageous. Given that scalpers earn small profits in a single trade, the currency pair of choice will also determine how smooth the trading experience will be.

It’s also important to limit the number of trades that you do in a single day. Currency pairs with a large ask-bid spread will undermine your earning power. Prioritize on low-spread pairs with predictable volatility. It’s also advantageous to learn how economic news releases may cause sharp price movements so that you can earn more with less trade.

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