Modern trading technologies on Forex market allow players to choose those methods and strategies that suit well every trader and fulfill the necessary requirements of risks and profitability. Some traders prefer working with long-term tendencies, while others on the contrary seek to carry out the deals as often as possible, operating in the narrow timeframe.
Scalping – is one of the varieties of short-term interdaily trading. The essence of scalping strategy is in conducting a significant number of deals, each of them is directed at getting little profit. As a rule there are several points. The risks on all the deals is minimal.
Special attention should be paid to choice of the tool for scalping. It has to be pretty volatile, be rated with minimal spread and have low transactional costs.
Despite the fact that scalping strategy is a full-valued and independent method of market trading on the market, it is also divided into several categories:
1. Trend scalping. Here the trader is choosing appropriate indicators that identify current trend and works in this direction, trying to open positions at the moment of correction.
2. Contratrend scalping. In this case we have a reverse task. We open positions when we assume that the trend has to conduct the correction. Or we simply trade at the market without the trend, sell ascending impulse, buy the descending ones.
3. Time scalping. Work in similar style implies virtually arbitrary choice of direction when making deals. The entry into the market is conducted and the wait time is several minutes. As soon as there is some profits – the positions closes.
Pros and cons of scalping strategy
As any other strategy scalping has its positive and negative sides. Among positive sides we should note:
- there is no need to conduct fundamental analysis
- conceptual simplicity
- smooth trends of trade results
- there is almost always some work
But there are also some cons in scalping strategy. They are the following:
- necessity to always control the process (the exception is using trading robots)
- psychological stress connected with a high quantity of one-type transactions
Finally, we should mention the universality of scalping strategy. Due to it this strategy suits very well beginning traders, who are just starting in speculations and are trying to find their trading style.