What does Scalping mean?
Scalping is a trading strategy that the trader try to make many small profits with small price changes, the Scalper will place from dozens to hundreds trades in a single day because it’s believed that the small price moves are easier to catch than larger moves. It based on an observation that the most of the price movements goes in the trader direction for a while of time before it goes in its trend direction!
In the Forex world a lot scalpers say “If I make a 20-25 pips per day by scalping the market and with a proper money management I might double my account balance every month”.Theoretically, true! But what about the real? What about the risk of scalping the market?
Scalping risk:
While it seems profitable method when scalping the price movements, however the spread you pay when you open a trade makes the riskreward more risky than the long term trading (trend trading). For example if your broker charges you 5 pips spread for opening EURUSD position and your target is 10 pips and 10 pips stop loss; the price have to move 15 pips (5 pips of spread + 10 pips your target) to take the profit while it have to move only 5 pips (10 pips your stop loss – 5 pips of spread) and stop loss level will be reached. So, the risk-reward ratio in this case is 2-1 which means a very dangerous and risky method to scalp!
Another risk in the Scalp is that one large loss could eliminate the many small gains that the trader has worked to obtain. So it needs a very good exit strategy to decrease this risk!
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Comments
No pain no gain. In business you play small you got small. Lower risk mens lower profit. that how it is
if its a calculated risk, and willing to do it…you’ll never know the outcome until you try. also, if u lose the cash, still gain the experience!
There are some excellent automatic software robots that are programmed to take advantage of small changes like those described above. The Fap turbo has an excellent record of ’scalping’ the USD/EUR market with an average accuracy of about 80%. It’s quite something. Worth a look.
Thank you for your informing post here.Every coin has its two sides.