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  • by Ulkar A
  • Jun 07, 2022
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THE FOREX TRADE STRATEGY OF THE FUTURE: SCALPING STRATEGY

Most beginners and experienced traders ask this question: Scalping trading is profitable and the best trading strategy for the future?

The answer is Yes. We are going to explain questions about scalping trading. Why do the traders prefer a scalping strategy?

Forex scalping tactics might help traders profit. Even if the return is low, you could make a lot of money over time. Scalping may be quite beneficial for traders who use it as their primary technique or to supplement other methods of trading. Following a tight exit plan is essential for compounding small earnings into significant returns.

 

What is Scalp Trading?

Scalping, which is an eye-catching method for experts and novice investors, is called making a profit by buying or selling a set amount at short intervals. Scalping, which is an effective method in the Forex market, is also among the rising trends in the crypto money market.

Scalping, a term popular in the Forex market, is the name given to the types of operations that open in large volumes and close in short promises of 5 to 15 minutes. Those who use this strategy in investment are called "Scalpers".

 

Is scalping trading illegal?

Scalping is a legal method of trading. Although it is not illegal, not all brokers will allow it. This is usually a matter of broker preference because it entails placing a large number of traders in a short period of time.

 

Why brokers do not allow scalping? 

Scalping is one of the most profitable trading strategies. If a broker doesn’t like the idea, it prohibits it. Not all brokers, however, limit trades to under a minute, and some brokers don't care how much money you make on their platform as long as you pay your trading fees. The simple fact is, that brokers have no time to place the actual trade within the market when traders scalp. As a result, if a deal is opened and closed in a matter of seconds, the broker is responsible for the trade's costs.


If you place a trade and it opens during a period of high liquidity, there is no problem because the broker can execute the position (hedge or against) your trade within seconds. If you place a trade during a period of low liquidity and it opens and closes in a very short time span (scalp), the broker is responsible for the loss because they failed to place an actual position in the market. 

Is a scalping trading strategy good for beginners?

Scalping is extremely difficult to do as a beginner. You are focused on the lower timeframes where there is noise and uncertainty. In the beginning, you will experience all of the emotions that come with trading, referred to as trading psychology, which will work against you if you are unable to correct it, which can take years.  If not learned properly, a scalping strategy in forex trading can result in huge losses for beginners. But if you get the required knowledge, there you would be able to earn a lot of profits as scalping is a rewarding strategy that is also safe if the basics are clear.

 

Is "scalping" a risky day trading strategy for beginners?

Scalping is no doubt a risky strategy. To be a good scalper, one must have a lot of information and abilities. Markets can be too random to trade at times; you must have a thorough understanding of charts and how to analyze them in order to profit from little movements. Those who cannot focus on charts properly better go for other trading styles and risk management is important.

 

Advantages and disadvantages of scalping trading strategy

There are fewer disadvantages, but more advantages if you are a fast-decision maker. Swing trading is a good option if you prefer to make judgments slowly and based on considerable research. Scalping allows you to make a lot of money in a short amount of time. Scalping tactics operate best when the intraday tape is strongly trending or range-bound; they don't function as effectively when there is disagreement or confusion. Scalp traders can meet the challenge of this era with three technical indicators custom-tuned for short-term opportunities.

You can see other advantages of scalping strategies:

  • You don't need to wait for a significant trend to begin; it's simply not necessary with this method
  • At the end of each trading day, you can close any open positions, pocket your profit, and walk away without worrying about what the market is doing or whether it will swing against you

The only disadvantage is you have less time to focus on the deeper intensity of that particular trade. You may not know what could happen in the next second. So, we should play wisely around scalping trading strategy.

Click the more information about the pros and cons of scalping

 

Why is the scalping trading strategy more profitable than other trading strategies? 

 

Differences Between Scalping and Swing strategy

We'll lay into scalp vs swing trades and why scalps are superior before we get into why scalps are better. A scalp trade is when a trader or investor makes a series of winning deals based on modest price changes, but in a short period of time. You're essentially going in and out quickly. Swing trading is when traders/investors keep a trade open for a day or more in the hopes of making a profit.

Two of the most common short-term trading approaches are scalping and swing trading.

Scalping allows you to make smaller but faster deals, whilst swing trading allows you to make larger but longer trades. Swings and scalps both demand concentration, but scalps require a higher level of concentration and real-time technical analysis than swings. When trading, swing transactions have a significant risk, whereas scalpers trade with reduced risk.

Swing trades are ideal for people who are new to trading as well as those who are experienced. Both trades have different levels of stress; scalps have a higher amount of tension than swings, which have a moderate level of stress. The reason for this is that scalps necessitate extremely accurate plans, whereas swings necessitate modest strategic preparation and are less "predictive" than scalps.  

 

Differences Between Scalping Trading Strategy and Day Trading 

Although daily trading and scalping transactions are similar concepts, they are not the same. All scalping transactions can be considered as day trading, but not all day trading can be categorized as scalping. 

Daily transactions can be kept open for as long as possible between the time periods when the exchanges are open. But scalping trades usually open and close within a minute or second windows.

In summary; scalping is the shortest form of daily trading, which requires serious discipline, can be automated with computer programs, and where transactions are made on a minute or second basis. The most important requirement for scalping is to know a sufficient level of technical analysis and to set targets well. In addition, it should always be considered that increasing the savings with small gains is one of the main objectives.

Learn about other Forex Trading Strategies

 

Is scalping trading strategy profitable for the future?

Scalping may be extremely beneficial for traders who utilize it as their primary technique or as a supplement to other types of trading. The key to turning little profits into enormous gains is to stick to a disciplined exit strategy.

"Scalping trading approach should only be adopted by the most successful traders, as the danger may surpass the potential reward on occasion."  This means they must win almost 70% of the time, which is impossible for anyone except the most skilled trader. Because that is the reality, you should presume that you will never be that good.

Keys to being a good scaping trader in future:

So, in conclusion, if you want to be among the successful traders in the long run if the following requirements are met:

  • You are a great trader.
  • You must win roughly 70% of the time.
  • You must trade a certain amount of volume.
  • You only trade two or three of the best setups per day. 
  • You are prepared to study the market for hours and conduct a trade swiftly if one of the rare, brief setups occurs.

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