Thursday, May 28, 2009
Forex Scalping
What is Scalping?
There are basically 3 major ways that a forex player can use to play in the forex market. One very profitable, powerful but risky way is called scalping. Scalping is when a player watches the market closely, using daily 5-minute, 1-minute or even 5-second charts. He will see opportunities to try and capture 5 to 10-pip movements using big lots and profit just like that, in a matter of minutes.
Generally, scalping can last for about seconds, usually when the market is fast, or until about an hour if the market is slow.
From my experience, scalping is quite profitable, so to speak. I have developed a scalping system called Time Blaster. It has an excellent record of 11 wins and 5 losses, and the pips captured in a win far surpass the pips lost in a loss. The first week of scalping increased the capital by 16%. The second week yielded 12%. However, I abandoned the Time Blaster system because of several reasons, mostly the disadvantages of scalping.
Disadvantages of Scalping
Scalping needs lots of practice. Everything happens so fast, and before you know it, the market might have moved against your direction before you could do anything about it.
Scalping requires the player to glue his or her eyes on the screen to look out for opportunities. That is why, most successful scalpers cannot leave their computer. And some need to rely on automatic scalping forex software.
Scalping is costly. Every time you trade, you will need to pay the broker in the form of spreads. Some scalping systems may require multiple trades a day.
Scalping is risky. Very risky. When you scalp, you have no idea when the market can immediately turn against you, in the form of random noise. Anything can happen when you play in very small timeframes. And sometimes the broker may increase the spread, causing you to hit your stop loss although you are winning.
Why do people scalp?
Most people do not have patience. They want to see cash coming in. And they want to see it fast. Therefore, they do not mind the risk. So, they scalp.
And some people just like to scalp. They treat scalping like a game, just like Dota. Some people treat it like a sport.
My humble opinions
I personally think that scalping can be very profitable, but scalping should only be practiced when you really have the experience. I tried scalping before, but after 2 weeks, my brain burned out. When I shut my eyes at night, I was still able to see the candlebars. It wasn’t a pleasant feeling.