Forex Trading For Beginners | The Art of Scalping Trades in the Currency Markets

If you are brand new to forex trading, then chances are you have never heard of scalping trades. However, if you have been around the block on the forex circuit, then chances are you have run into the notion of scalping forex trades as a way to be profitable. In this tutorial of Forex Trading For Beginners, I am going to introduce you to the art of scalping.

What is scalping in relation to trading currencies?

A forex scalper is basically a trader that will enter and exit a trade quickly, usually within a minute of the trade being made, and take the 4-5 pips in profit and move on to the next trade. A typical scalper will exploit small price movements and usually deals with the lowest time frames possible. In other words, while most forex traders will look to enter trades with a potential for large bulk profits (50+ pips), a scalper is only looking for small profits. As you probably can guess, the scalper will need a lot of these small trades to make it worth his while and he will prevent a reversal of fortune by placing tight stop/loss points in his trades. Typically, a successful forex scalper will have a very disciplined system in place when making trades. For example, if the scalper thinks they will make 5 pips, he will typically take the profits regardless of whether the price is moving in the right direction.

However...there are some problems with scalp trading...

The first and probably the biggest problem with scalp trading is that most brokerage firms don't like this. The reasons are really two-fold.

1. First, opening and closing trades for something as small as a couple pips is a big time waster for a brokerage firm. Not only that, but most of the second tier brokerage firms need time to actually make the trades. If you are opening and closing trades in just a matter of seconds, you are essentially just taking money from them.
2. Secondly, most forex brokerage firms actually make money betting against you. What I am trying to say is that alot of time the forex firms will take your trade then open a trade against your own. Once again, time becomes the key factor here. If you are opening and closing trades quickly, they won't have enough time to profit from you.

That said, in an ideal environment, scalping trades in the forex currency market can make you money. However, be aware....if your brokerage firm is not letting you out on canceling trades (since they are short term) or give you a montage of excuses as to why you weren't able to exit a trade, then perhaps you should look for a different firm.

Okay, now that we got that out of the way, let's look at what to expect from scalping the forex market....

• Don't be unrealistic with your numbers- When you are scalping, you should aim for no more than 6 pips a day in profit. Not quite the numbers you were expecting, right? Well, add it up....6 x 30 = 180 pips for the month which is likely better than 97% of the folks out there. Is that a consistently attainable goal? No. But it is a good spot to aim for.
• High leverage is the best way to make a small forex account larger- I know, I know..I have spoken fairly negatively about leverage in the past but I don't believe that leverage in of itself is a bad thing...I think that since most forex traders who are beginners don't understand leverage, they risk way more than they should. Use your brain and stop dreaming....I normally risk 7.5% of my bankroll per trade. This way, I can lose 9 times and still retain half of my equity. And although losing 9 forex trades in a row is unlikely, anything can happen. The main reason why I advocate high leverage in scalping strategies is because typically you stop/loss is tight and the profit is so small.
• Only Scalp Trade using volatile currencies- The market should be liquid and volatile with a high daily average in range (average possible range divided by bid/ask price) The Eur/USD is a great currency pair to scalp trade.

What you can expect....

Like I said before, you shouldn't expect a windfall of pips on a daily basis but rather a small stream of pips profit daily. And this adds up. Once you get the average daily range of the currency, you should aim to make 5-10% of this. Like I said, not a lot but it is steady profit.

One more thing before I end my rant on how to scalp forex trades....if you think that scalping trades can be a part-time job, think again. Scalping the forex market requires vigilant attention to the trading platform and those thinking about scalping should keep realistic expectations about what can be made. Oh...and yeah, you do need to know the fundamentals of forex trading and preferably have your own system in place before attempting to go this route. Forex trading is fun, y'all. But it ain't easy. Until next time....