For the avoidance of doubt this is nothing to do about removing a person’s scalp but rather about a quick-fire forex trading technique that some market players use to generate profits in the currency markets.
So how quick is quick? We are talking about holding the forex position for about 5 minutes at most, with most people unwinding the position after just 1 minute.
So how can you possibly analyse, open and close a trade in just under 1 minute? Most of the trade analysis is performed very much real time by a forex trading system or other software-assisted forex signal software. To find out more about the different types of systems and signals feel free to have a look at my website where these are analysed in detail.
The popularity of forex scalping is its perceived safety, or conservatism. The logic is that as you only hold the position for 5 minutes at most you certainly risk losing less money than if you were to hold the position for the day as a day trader or even worse, for a week or more as a trend follower would do.
Don’t be fooled though. The apparent safety of scalping as a trading strategy doesn’t mean this is for everyone. Scalpers are willing to forego large profits as trend followers would do for example, in exchange for small but frequent gains.
Scalping also requires much more attention than other trading strategies such as trend following for example. A scalper would typically close tens, if not hundreds of positions every day in order to avoid large losses. Therefore strong concentration and attention to detail are core skills to have to make sure you capture every small profit and cut every small loss to avoid a bigger one.
Therefore, scalping can be a time-consuming and demanding trading activity. Most traders conceive trading as a part-time occupation generating an additional income source, and cannot or are not willing to dedicate 6 hours or more a day to this task. To solve this issue, many forex trading systems have been (and are being) developed. Essentially, they are a piece of software that will execute trades more or less automatically on your behalf following a given set of rules. For sure, not all of these work but as long as you don’t invest too much money into any one of them they will teach you a lot about how these are developed. Eventually, you may end up designing your own forex trading system which may be a mix of other systems and some indicators you designed yourself.
All in all, scalping is a fun but intense and time-consuming forex trading strategy based on a constant monitoring of positions. You will need to be able to trade up to hundreds of times a day, willing to cash in small but frequent profits and cut losses promptly.
Also, scalping is just a trading strategy based on a quick analysis of a number of forex signals. In order to profit from these, you will need a deep knowledge of the main forex trading signals.