What is scalping?
What is scalping?
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Definition
In Forex trading, scalping is taking advantage of currency pair changes over a very short period of time. Traders that scalp usually use high leverage and aim for less than 10 pips within a few minutes. Scalping is generally considered to be a dangerous practice by professional traders and is officially frowned on by Forex brokers. If you are analyzing the best Forex trading system scalping is a well known practice.
Scalping is opening trade and then closing it in just a few seconds or minutes, gaining 2-3 pips, of course spreads are not included. It usually involves opening and closing a position within seconds or minutes to gain a few pips of profit.
Scalpers aims are simple enough: get in, get out and take small but regular profits with you.
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Risks
If you want to find the best Forex trading system you must know the risks involved in scalping, so pay attention to the following lines.
Beware; high spreads sometimes blow away scalpers. Scalping is best for traders with ECN account, because spreads are lower, down to only 0.5 pip.
My mentor called scalping “glorified gambling”.
You see, when you scalp, you have to ignore risk and money management rules. Most of the time scalpers trade without a stop loss, or they trade with too big a stop loss. If you don’t know what a stop loss is, don’t worry – it’s basically the brakes that keep your account from crashing and burning.
When you’re scalping, you’re fighting against the markets, the spread and your broker. That is a pretty big battle, and you do not stand much chance of winning. So definitely scalping is not part of the best Forex trading system.
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Brokers hate scalping!
Well, there is something else you need to know: most brokers hate scalping. And here you have one of the most important reasons to avoid scalping if you are looking for the best Forex trading system.
Many of them use sophisticated software to identify which of their clients is using scalping methods. So, even if you find that your scalping robot is making profits, your broker may be coming after you.
The real problem with scalping came about with the development of sophisticated EA’s that were designed to “beat the spread” in a scalping situation. And this can only be done with some kind of program. You cannot manually react quick enough to do it.
And the problem here is that you can beat the broker out of his commissions with these programs. And of course this is not acceptable. For the last couple of years trader programmers have been trying to come up with a way to prevent or block these programs.
An important factor you should check while choosing the best Forex trading system is to analyze skills and experience of the developer or programmer, especially about scalping.
In order to be able to scalp 1 or 2 pips you MUST account for the spread so the coding for a t/p function is to take the Ask minus the Bid and then add the pips you want. This is necessary whether you try to do it manually or with an EA.
I have recently come across a new broker who is supposed to allow scalping with 0 spreads.
And if what they say is true then it might be possible through them. They somehow are not going to take commissions on the spreads and create a “currency pool” from which to execute trades.
To learn more about this important issue you can check my main article Forex Trading System
