What is forex scalping? What is the difference between Scalping and Day Trading?
– Get the 30$ trading bonus for FREE (No deposit required). Click here
Scalping is a trading method that many traders love. This trading style has short opening times, with associated profits usually as little as 5-10 pips or even three pips. So what is forex scalping? What is the difference between Scalping and Day Trading?
What is forex scalping?
Scalping is a form of forex trading done in a brief period from opening order to closing a mandate to find a small profit. Compared to other forms of trading, scalping is an action that is repeated continuously during the day. Positions are usually only open for a few minutes. Therefore, even when the market is sideways, scalpers still make profits because only a tiny movement of a wave running three pips -10 pips is enough for them to make a profitable position.
Why is forex scalping popular?
Scalping traders usually try to make a profit of 5-10 pips per trade. By opening many positions, they can earn high profits. So scalpers enter and close orders continuously throughout their trading session. In this strategy, traders use relatively high leverage and look for a few profitable pips at a time.
In general, a standard lot has an average value of about 10 USD per pip. Therefore, for every five pips profitable, the trader can make 50 USD. If traders can generate profits several times a day, they can make tens to hundreds of dollars in one trading session.
However, scalping is a trading method that requires traders to grasp news, read price charts and execute quickly and decisively. So forex scalping is suitable for traders who love to trade, have the ability to focus, and have a high degree of patience to make small profits.
Advantages of trading forex scalping
The trading system is not too complicated.
Scalping is a simple strategy that does not require too much knowledge of the financial markets in general and forex in particular. Therefore, those who are new to forex trading can also use it.
Low level of risk
Forex scalping is done on short time frames such as m15 or m30, sometimes m5 or m3, and never overnight orders. So it can limit dangerous situations dimension due to the influence of external objective factors. Some news such as currency pairs affected by interest rate news, the statement of a high-ranking official like the US Federal Reserve Fed…
Can increase the win rate
The scalping trading method usually makes an insufficient number of pips. If the trader takes advantage of the right timing, he can close the position in less than 5 minutes and earn the desired profit. That is why even when the market is on the side, traders still make money.
Use high leverage
Traders can use high leverage in scalping to open prominent positions and earn attractive profits for trading. Traders should manage capital properly to prevent risks when using high leverage.
* See more: The complete guide XM from a to z
Risks of trading according to the forex scalping method.
No one form of trading works for everyone. A scalper must have the ability to concentrate, especially need to have quick reflexes to make timely decisions.
Too many transaction fees
Because of the high volume of trades executed throughout the day (sometimes hundreds of positions), commissions or spreads are often very high. So if a trader wants to avoid these fees, they should choose an ECN broker, only a very competitive spread commission, suitable for forex scalping.
The price can reverse at any time.
Just because they are scalping orders, the time to enter and exit orders are sometimes terse. Non-experienced traders are easy to lose because the price goes against the direction of the position.
What is the difference between Scalping and Day Trading?
Scalping and day trading are both short-term trading styles. Many traders find these two methods similar. However, they have many differences. Here are some key differences:
|Trading volume||Large trading volume.||Trading volume is medium or sometimes also trading with high volume.|
|Trading experience||Inexperienced traders may not fully understand the rules of the market.||Professional and experienced traders grasp market trends|
|Risk level||Take high risk||The lower level of risk.|
|Transaction time||The transaction time is short, averaging from 1 to 2 minutes, even 30 seconds.||The transaction time is longer, about 1 to 2 hours, or it can be as long as half a day.|
|Time to get results||Traders see the result as loss or profit immediately||Day traders take longer and sometimes have to wait until the end of the day.|
Scalping has proven to be an extremely effective trading style. However, forex scalping is not for everyone. That is why many people avoid it and prefer long-term trading.