Here is what you need to know about scalping trades

Scalping is the skill of setting up very short time trades that usually last up to a total of 20 minutes. By scalping you aim to scoop a few pips as fast as possible within an opportune time provided by the market. However, very few Forex traders ever access the right information about scalping while many of them do not believe in it. Here is all you need to know for a start about scalping from the start.

Scalping is completely technical

Scalp trades are based on technical interpretation of the chart and not the fundamentals of the market. In this sense it is all about the psychological aspect of price and how it all gets represented on the chart. Here price formations are analyzed at point and trades are placed on these findings.

Few profits add up in the long run

Scalped trades usually rip just a few pips, sometimes only 5 pips to a maximum of 15 pips. These trade setups are executed in high probability sessions and aim at a considerably high return on investment ratio. If consistency is applied over a long period of time the small profits taken in form of pips with a high return on investment ratio will surely be realized as significant profits.

The spread factor

Since scalping aims to secure very few pips there is always a need to consider the broker with the least spread requirement. If you get to take in just 5 pips for instance, your spread will be charged from these pips so the remaining adds up to your margin.

Trading platform affects profits

Every time you place a trade on your chart it is relayed to the server of your broker therefore involving transmission of data. This data takes time to travel to and fro between the broker server and the MT4 platform running on your computer as there is some notable distance to be covered between the two parties. The result of it is some extent of delay, which is professionally referred to as “Latency”.

This is where the trading platform sometimes fails you and affects your profits. When there is a large influx of trade orders to be relayed to the broker server and at the same time the market experiences high volatility, your MT4 platform will fail to respond to your requests. In addition, latency will come at play and you will experience it when your market orders get a re-quote, requiring you to update these orders with the current price value.

If you are the kind of trader that places market orders in your scalp trades you will miss your target or get it too late when there are only a few pips left to scoop. Usually the market moves quite fast during high volatility sessions but due to latency the price represented on the chat from which you place your trades is already a few milliseconds late. You therefore cannot execute your trade at the right time hence you get a re-quote. Soon the opportunity will pass you but if you catch up with it, there will be less to benefit from. That is how the trading platform might affect your scalp profits.

The rest will be handled by your trade strategy

Your trader strategy guides you on the skill set aspect of trading forex. It sets the rules on which you operate your trades for example, the best sessions for your scalps and on what time frames to operate. it also states when you should likely exit trades and so on. There are many strategies on the internet that focus on scalping, which you can study if not develop your own during exercise.

Lastly, it is important you note that scalping is a skill that needs consistent practice.

 

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Categories: Tutorials

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