Trading Forex Using The Scalping Method
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Method of scalping is very popular among the Forex traders. It is used by traders who get the profit from the price fluctuations during one day. Usually the time between the position opening and closing is very short and may be only few minutes. Accordingly the profits gained from these positions are low too, but the total earning achieved by the large number of the positions can be high enough. Some traders may do up to 200 positions a day.
Of course not all of positions that traders open bring them profit, the target is to reach the profit in total, means that most of the positions must be with the profit. While making scalping the stop-loss order is placed closer to the price of position opening in order to guarantee the reduction of losses if the market changes its direction.
All traders know about the liquidity of the Forex market. Even the price within one day moves on a certain cycle with its ups and downs. If during one day the average price change is about fifty points, the difference between the minimum and maximum prices will have much greater value. Once you capture a small fluctuation, you will have a chance to significantly increase your capital.
Newbie traders often get a false impression of the fantastic opportunity to increase their capital as there is an opportunity of reinvestment. Unfortunately this first impression may be deceptive as without any experience and proven strategy, this tactic is doomed to failure. First of all you need to know on what level you place the stop-loss orders. Because if you put it too close to the price of opening, it increases the risk of losses in the market during the noise even if you can predict the direction of trend correctly. In order to avoid this risk, we recommend you to avoid placing the stop loss if you make scalping. But you must always be in front of your computer and watch your positions. In case of a strong movement against you that there is no opportunity to roll back to initial levels in the next few hours, you must close the positions, otherwise you may lose more. More than that, if you have a large investment and trade without the stop loss, your total deposit may be lost and you will get a margin call.
The second reason of the beginners’ failure might be called the emotional side and the tension that arises when trading with real money. We recommend all beginners to try scalping trading on a demo account first, since there is virtual money and that’s why there is no fear of loss.
If a Forex trader is doing scalping, he must constantly be on the market that causes a pressure and stressful condition. Due to his emotions he can make wrong and irrational actions that will have negative influence on the trading. This tactic is good for the experienced traders who learned to stay calm and emotionless while trading.
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