Forex Scalping - The Benefits And Risks Involved
Forex Scalping is very popular among traders because of the quick profits that can be made. There are millions of traders who do only scalping. Here are some of the most common reasons why...
1. Scalping Trades do not last long, so you can make a quick profit and then safely bank it.
2. You have the potential of placing multiple trades a day. Since you are targeting only a few pips per trade, there are multiple times you can place a trade.. Also, you can use the scalping techniques on multiple currency pairs.
There are some specialized scalping systems and software programs available, like Delphi Scalper and Forex Scalping Blueprint which make it even easier to make money. Still, you have to keep in mind that scalping can be risky also. Here it is why...
Forex Scalping is about making a small profit on each trade but, as per good trading principles, it requires some realistic stop loss value to protect against the scenario of a trade going in the opposite direction. So, the risk per trade is high, but the reward is low.
Infact, there are certain trading systems that require a 50 pip stop loss for 10 pip profit. So, imagine you have 4 profitable trades and 1 trade with a loss, which is an 80% success rate, still you would end up losing 10 pips after 5 such trades. Such scalping systems should never be traded in.
At the same time, you also need to consider your own trading psychology. Are you mentally ready for scalping? Do you have the attitude to make trades instantly or are you the kind of person who likes to take time to understand the market and also requires some time to make a trade? How fast is your broker in accepting trades? This is important since if the broker takes even 10-15 second to place a trade, the scalping opportunity in some cases may be gone.
This brings up the next point - that any scalping system or software should be highly accurate and should give clear cut signals about when to open a trade and when to close a trade, since in scalping speed is everything. If you are delayed in opening the trade by even 30 seconds, you had better pass up on that scalping opportunity.
Article Source: FxTradingStock.com
About the Author
Visit my site for a review of Delphi Scalper, which is Jason Fielder's new forex software. On my site I have also included an amazing Delphi Scalper bonus, which should not be missed by anyone interested in forex.
by: Mark Walters
Total views: 66
Word Count: 392
Date: Thu, 15 Apr 2010
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