Scalping Forex pips has become more and more popular as more and more Forex traders look to squeeze the last bit of profit out of every one-minute move in the Forex market. Scalping is defined as taking a quick, small profit on every trade. This can be anywhere from several pips to as little as one pip.
It certainly makes sense that it should be easier to grab a small, short-term profit rather than wait for a larger long-term profit. It also seems logical that there are many, many more small profit opportunities available during the trading day. This is exactly what Forex scalpers look for. They simply want to get in and out of a trade as quickly as possible while taking a little profit with them.
There are advantages and disadvantages to scalping Forex pips. First let's cover a few of the advantages:
Numerous profit opportunities — There's no doubt that there are numerous opportunities to grab small short-term profits during the trading day.
Can have limited risk — Because scalping involves profit targets that are so close to the entry price there is typically a large likelihood that that small profit target will be reached. The scalper's philosophy is that the smaller the amount of time they are exposed to the market the smaller the risk they take.
Builds confidence — When scalping it is possible for a trader to have numerous consecutive winning trades. Being able to grab a quick profit and do so over and over again gives the Forex scalper trading confidence.
Scalping Forex pips also has a number of disadvantages associated with it. Here are a few of them:
Risk reward ratio — When scalping the trader definitely needs to have their risk reward ratio well thought out. One potential huge disadvantage is that one big loss can wipe out a lot of consecutive wins. This is because when scalping each winning trade can be small relative to the size of the losing trades.
Must have tight spreads — In longer-term Forex trading the spread which is also the transaction cost is not as great of a concern as it is a shorter-term trading. In Forex scalping you must have tight spreads as you are looking to gain small profits as well as trading with more increased frequency than in long-term trading. For instance, let's say you are looking to scalp 3 pips per trade in the Eurodollar US dollar. If your broker spread is 3 pips then you will have to have a 6 pip move to make a 3 pip profit.
Let's look at another example. Let's say you're a trading a Forex pair that currently has a spread of 8 pips. For you to make that same three pip profit you will need an 11 pip move in that Forex pair.
Scalping Forex pips can be done successfully and is being done successfully by experienced Forex traders around the world. Remember that your risk reward ratio must be such that one single loss will not be catastrophic. With a good trading strategy and excellent risk control you can make scalping Forex pips profitable for you.
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