Forex scalping and short term trading

There is a very fine line between these two

Forex scalping is a style of forex trading in which the trader aims to make profits on extremely small price movements. Forex scalping strategy involves keeping a close watch on the movement of prices and getting in and out of trades quickly, booking small profits at a time, which could add up to huge over a period of time.

Though this may sound risky, forex currency trading using scalping strategies can be rather low risk if done correctly. Forex scalping requires strict discipline in keeping to pre-determined strategies. Since it involves making a profit from numerous small movements, it is important to keep the downside risks to a very tight range. Implementation of an inflexible exit strategy could help prevent the risk of one large loss eliminating the many small profits that have been obtained. Risk management and knowing when to exit bad trades is critical.

The Difference between Short term trading and Scalping

There is a very fine line between short term forex trading and forex scalping. Fx trading using scalping strategies involves buying and selling the chosen currency within minutes, sometimes less than a minute. Any trader who keeps positions open and trades within a minute or less, can expect resistance from brokers, who would first warn the trader and could even close the trader’s account if he continues scalping. However, the forex trader would likely not encounter any problems with the broker if he manages to hold the position for more than a few minutes.

The trick in forex scalping is to be able to hold on to your market positions long enough to meet the requirements of the broker while at the same time remaining within reasonable risk limits for each trade.

Forex Scalping and Brokers

Although there is nothing illegal about forex scalping, many brokers are known to be against this practice. They refuse to deal with forex scalpers, asking them to either find another broker or to change their trading habits. These restrictions are not imposed because of any legality but only because of the brokers’ fears of going out of business if scalping is openly endorsed and accepted.

Trading Forex Profitably

Here are a few basic yet essential things that anyone involved in forex currency trading should know.

• Forex scalping and forex trading are not as easy as they may appear. Booking profits from forex trading requires absolute discipline, a lot of dedication, hard work and practice, an insight into the currency market psychology and sharp money management knowledge. • Forex currency trading is not about gambling or making wild guesses about price movements. It is only beginners to forex trading that make this mistake. Instead, fx trading requires analytical and logical calculations that are based on technical as well as fundamental analysis of price movements. • For successful forex trading, it is important to have a solid plan and to consistently follow the plan. Taking losses when needed, having good trading discipline and sticking to a plan that has been proven successful will eventually yield profits.

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