Forex Scalping – Introduction to Forex Scalping

Introduction To Forex Scalping

Have you heard of Forex scalping? There is a lot of debate amongst Forex traders about the exact definition of what really constitutes scalping, but generally the term is taken to mean a “quick” opening and closing of positions for a small profit or loss. Now, “quick” can vary for different traders depending on their timeframe, but generally scalpers in the Forex markets are characterized by entering and exiting their trades in less than a minute.

You may wonder why it is that people actually bother to “scalp” the markets, after all we’ve all heard the old adage “cut your losses short and let your profits run”. Scalping just seems like you’re cutting your profits and your losses at the same time, and you would be correct in making that observation. However, most traders would consider Forex scalping as “safer” than range trading or even trend following! So how does that work?

Forex Scalping The “Safest” Trading Style?

So how does entering and exiting a position in little under a minute translate to being a “safe” trading style? Well, Forex scalping advocates would argue that because their exposure to market forces is far less than that of a trend follower or range trader, their risk is vastly reduced by comparison. In essence, the scalper would only worry about the bid/ask spread and not much else, since there aren’t many other factors that would affect their position in the next minute of trading.

So how does a scalper actually make money in Forex? Well, it certainly isn’t a strategy for most traders, because it requires immense amounts of patience and discipline. Forex scalping requires traders to accumulate a succession of small profits. For traders who are used to trading the trend this may be hard to understand, but essentially you are giving up large, infrequent gains for small, frequent ones when you practice scalping. If you lose concentration for a second as a scalper, you risk blowing away hours or even days of profit. Well, it’s never easy to make money in Forex, is it?

If you fancy yourself as a Forex scalper, you should make sure that you are comfortable with being in front of your computer getting in and out of positions over and over again without suffering from any drop in concentration. You will need to be extremely disciplined to ensure that none of your positions exceed the short holding timeframe or move into great loss. Most importantly, you need to make it okay for yourself mentally and emotionally to give up those big gains for tiny ones that you collect over time.

Forex Scalping Brokers

One major consideration you need to take on board if you decide to pursue Forex scalping as your trading strategy is to select the right broker. Not every broker will allow you to enter and exit positions within a minute, because only a select few brokers have the execution capabilities to keep up with such a rapid turnover of your positions. In some cases, scalping will actually cost your broker money or open them to risks that they otherwise do not account for, and therefore you can expect that they will take some kind of action to stop you from doing so sooner rather than later.

There have been quite a few cases where a broker has decided not to honor profits earned from the practice of Forex scalping, so you would do well to investigate beforehand and ask your broker the question before you proceed with spending hours upon hours going through this very intense trading strategy. You can simply send them an e-mail and ask them whether they have any problems with you entering and exiting positions within the space of one minute. If you just ask them if they allow “scalping”, most of the time they would not know what you mean.

Personally, I’ve asked a few brokers the question, and the following gave me a favorable reply that they indeed allow scalping. Feel free to check them out and open an account with them if you’d like to do your Forex scalping through them:

Forex.com

FX Solutions

Interactive Brokers

CMS Forex

MB Trading