Forex scalping basics

The forex market is the most liquid of todays exchange, trading in excess of 1.6 trillion dollars daily. This is roughly greater than 5 times the daily trading volume of the U.S. Treasury Bond Market, and 160 times the average daily volume of the U.S. Stock Market. This extreme liquidity gives forex traders an edge in the art of lightning fast execution and the quick trade method referred to as scalping.

Forex scalping is considered as the art of using high leverage and a large number of short term trades to steadily increase an account. Usually, only 1 to 5 pips are targeted for each trade. This type of trading appeals greatly to day traders and those looking to minimize the risk involved in trading currencies. Next to money management, risk control is the single most important trait to a surviving (and thriving) currency trader. The small amount of time that is spent in the market limits much of the risk in exposure in comparison to a longer term system. Also, the freedom involved in a speedy forex scalping system in such a liquid market is a magnet that drives many traders from other markets to try their hand in currency. A disciplined and steady scalper could seamlessly double or triple an account, and spend only a fraction of the time in the market as a common day trader.

Effective forex scalping strategies take advantage of extremely slight price fluctuations (sometimes only 1-3 pips) many times in order to steadily build an account. Because of the smaller number of pips gained per trade, larger than normal leverages play a key role in a successful forex scalping strategy. By leveraging much more than a standard day trader in a liquid environment, a very skilled scalp trader is able to make just as much money as the day trader in a shorter period of time. However, this is an obvious double-edged sword. The market can just as easily move against you on a high leverage, which could produce substantial blows to your account.

Also, it is important to take into consideration the physical and mental speed of a trader who will only stay in the market for seconds to minutes. Executing a scalping strategy by hand can be extremely difficult considering the quick amount of time you must be in and out of the market for your strategy to be affective Many successful forex scalping strategies are built to be automated; the rules to the system are coded into a trading platform to automatically perform scalp trades around the clock. Though it is completely possible to trade a forex scalping strategy manually, the majority of todays traders would agree that automating the process based on a set of rules would be the best way to ensure speed and reliability. When choosing a platform to automate your scalp strategy, it is extremely important to stick with those platforms that allow the execution of your system on every tick (such as MetaTrader 4). This ensures that your entrances and exits will be on a per-tick basis, and will give you a much higher probable rate of success than those platforms who will execute your code more periodically.

Though forex scalping may seem like a preverbal holy grail at first glance, there are still many unseen hurdles that surround the controversial method of trading. If you do wish to add scalping to your trading toolbox, it is extremely important to pick a broker who can support a scalpers system. You will quickly find that many brokers do not allow scalp trading, as the method of quickly entering and exiting trades may actually cause the broker to lose money at the dealing desk. Forex scalping also does not give the broker a means to trade against their clients. Out of the hundreds of online forex brokers, only a handful support (and sometimes encourage) scalping.

Forex scalping can be a good method of growing an account quickly, but should not be looked at as the holy grail of trading. Most brokers do not support scalping, and a consistently profitable forex scalping strategy can be very difficult to engineer. However, if much time and effort is spent in system optimization and setting up a good relationship with a scalp supporting broker, the benefits could be well worth the time spent.

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1. Lowest spreads in the market with 0-1 pips in 10 pairs, no commissions, no swaps and instant account Activation.

2. Scandinavian quality with Swiss precision, funds secured and local agents in 18+ countries.

3. ForexGen offers Forex trading in the major currency pairs and crosses.

4. Low capital start, with $250 as a minimum account size.

5. Liquidity and 24/5 availability are the characteristic factors of the Forex market compared with other financial markets.

6. ForexGen offers a free trial Forex demo account that allows you to test your skills and practice without risking real money.

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Popular forex scalping strategies

Forex scalping involves opening and closing a trade within seconds or the most, a few minutes. Forex scalping is increasingly becoming more popular because of the opportunity to book fast profits within a matter of minutes. Thought forex trading using scalping strategies results in smaller profits and comes with its own share of risks, if done correctly the profits can add up tremendously over a period of time. Adhering to the fast exit strategy is the key to making small gains compound into larger profits.

Forex scalping can be profitable for traders who use it as a primary strategy and also for those who use it as a supplementary one. However to gain profits from forex scalping, it is important that this kind of strategy should also match the trader’s own personal style of trading.

Although forex currency trading using scalping strategies is entirely legal, the only reason it is frowned upon and discouraged by brokers is the fear of going out of business because of the success of forex scalping. This only endorses the fact that there is indeed huge money to be made in fx trading especially if it is done using scalping strategies.

While forex trading is usually done manually, powerful trading platforms such as the MT4 and technology advancements have given rise to a different kind of forex scalper- the automated scalper. Also called system traders, these forex scalpers create partially or fully automated forex robots that are of great help towards increasing available trading opportunities as well as improving the efficiency of execution.

Some of the reasons why forex currency trading is so popular include:

• Ease of trading at the forex trader’s convenience: Forex trading in done 24/7 around the world, which allows traders to buy and sell when the price is right. The booked profits do not depend on market closing times. Also, many fx trading platforms provide real time news, chart and quotes free of charge, boosting forex trading ease and efficiency.
• Inexpensive cost of trading: Many forex currency trading companies do not charge traders any commissions, but get their compensation from the pip spread.
• Limited capital loss risk: Forex trading does not include any margin calls for the trader to worry about.

Different forex scalpers practice different strategies with varying degrees of success. Here are a few scalping systems that have proven to be successful in fx trading:

• Look for news that is going to be released and which has the potential to influence the forex market. Try and ascertain which pair of currencies is likely to be affected. Buying a few minutes before the news is released and selling soon afterwards is sure to gain you a small profit.
• Constantly monitoring the price movements of various currencies is important, but keep in mind trading sessions of the major markets, which include London, Tokyo, New York and Sydney. Recognizing the highly active sessions as well as the sleeping sessions can help forex scalpers gain profits from good price moves.

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Market Commentary With ForexGen

Nothing too exciting with mostly month, quarter, fiscal year end activity dominating market movement. Euro-zone inflation jumped to record highs, IP in Japan continued to fall taking the Nikkei with it down 2.3% on close of Japanese fiscal year.

JPY - It was all about the fixing. Closed soft in New York on Friday, continuing into the Sydney open, dipping below 98.85 before Japanese fixing demand drove it 140 points to print 100.16. Exporters were at the ready once again above 100 and things are now just a tiny bit higher than where we left them on Friday. Topside offers are expected to remain in place although on this rally a few specs took advantage and light stops have gathered 100.30-50; downside, little to support until low 97s. Eurjpy continues to hover around the 55d, with offers above 158 still capping.

EUR - Record highs in inflation data will add weight to the ECBs concern and gave them more to worry about with Euro. EURUSD has set higher lows over the last week and a short term pivot on the hourlies would be 1.5760. Below there we would expect a look back to 1.56 but still maintain a dip buying mentality while the ECB remains in this dilemma. 1.60 is just a matter of time and with good stops gathering above the old highs it could be sooner rather than later.