Scalping in trading is a strategy. Many new traders ask “What is Scalping?” In simple terms, scalping is a strategy whereby a trader picks a trend as it forms and leaves it as it reverses. With this trading strategy, a trader can make plenty of repeated profits on small market movements.
When searching for What is Scalping, you will find that the traders who use this strategy in trading, place many daily trades. This could be anywhere from a handful to hundreds of trades in a single day. Scalping is not about making big profits. It is not about sitting on your profits and watching them grow. Scalping is about catching small market moves. Scalpers as traders who do this type of fast trading are known believe that it is easier to catch small trends than larger ones. Scalpers believe that taking many small profits will easily turn into large profit compounds. The most crucial factor about scalping is knowing when to exit a trade. Strict strategy when to exit a trade is important to scalping. If it is not well implemented a scalper can incur huge losses.
A Trend Is Your Friend Until the End – George Soros
What is Scalping? Scalping Explained
Have you ever watched the movie “Fast and Furious?” Well, Scalping is like that sort of action movie. It is the equivalent of trading, that adrenaline junkies get from “The Death Train” in roller coasters. It is fast and gives you the jitters from excitement. Trades using the scalping type of trading can be from just a few seconds to a few minutes at the very most! As such the objective of scalpers is to grab as many pips as possible in a very short time span.
The advantage of scalping when asking what is scalping, is that you can compound multiple small profits into large profits. The disadvantage of scalping is that a trader needs to be focused and literally glued to his screen and watch his trades like a hawk. So back to the question of what is scalping? Scalping is a trading method that will require your 100% attention. It will be a trading style that will get you married to your charts.
Scalping requires discipline and focus in order to achieve success. If you are looking at making big wins at any one time, then scalping is not for you. If on the other hand, you are looking at pulling small profits repeatedly, then you are on the right page when you look at understanding what is scalping.
Pros and Cons of Scalping
What is Scalping Explained – Do You Have What it Takes to be a Scalper?
You are set to be a scalper – here is what it takes to become a professional scalper
#1 You enjoy the excitement of fast trading, Scalping will give you a joyride
#2 A Professional Scalper has the time and mental capacity to focus for a number of hours each day scanning charts.
#3 If you like to see quick results and do not like to wait for long trades to see capital growth you can be a scalper. A scalper likes to see his spare profits in his pockets fast and grow the profits in his bank account rather than by riding on a single long trade.
#4 In order to become a good scalper you need to have fast reflexes. You need to be able to make quick decisions and close trades or change tactics at the drop of a hat.
#5 You need to be clinical in your thinking and never be emotionally involved with your trading.
On the other hand, this is what you cannot have if you want to be a scalper!
#1 If you get easily stressed from changing environments you are not cut out to be a scalper
#2 If you are a person who loses focus quickly and cannot commit to long hours glued to your screen, then you should not be asking what is scalping?
#3 As a trader you prefer to see long trades with big profits – then scalping is not your trading style
What is Scalping – Important Considerations
If you are considering scalping as a system of trading here are some very important considerations to make.
a. Look for liquid currency pairs that will give you maximum trading volumes.
Example if you trade the Euro against the U.S Dollar or even the Sterling against the Euro or the Dollar, you are looking at currency pairs that give you very tight spreads. Picking on assets with very tight spreads is extremely important when you are entering and exiting a trade very quickly. You do want to make some pips over the broker in order to see some spare change.
b. Successful Scalpers look for trading sessions that are very active.
Therefore whichever session you trade on, you must always look for the busiest time of the day to trade successfully as a scalper. The best times are those where two sessions example Tokyo Session and European Session overlap. The overlap gives you more volume of trading (see a. above).
c. Keep track of your spread and make sure that you factor it in your profit sheet.
When you are trading fast and furious in scalping, you must remember that the first couple of pip profits “your spread” goes to the landlord i.e., The Broker!
d. One Step at A Time.
What is Scalping if not a Speedy Gonzales kind of trading? If you are new to trading and are considering becoming a scalper, it pays you to focus on one currency pair at a time. Understanding the relationship between a currency pair can give you a better chance to become a professional scalper. You will learn the pace. Once you familiarize yourself with one pair, you can look at adding a new pair to your team.
e. Breaking News and Major Updates Can Wreak Havoc in Your Scalping Trades.
Make sure you consult with the Economic Calendar for any news updates. The anticipation of News Updates can easily change trends and throw you off track. You do not want to see a beautiful North trend you just picked head south! This can easily happen when important updates are about to be announced. Therefore be prepared to anticipate this by checking news time frames.
f. Be Disciplined. Be Focused. Exercise Proper Money Management.
Although this kind of advice applies to any style of trading, it is even more important in learning what is scalping. If you are going to be taking multiple trades during a day you must always stick to your Money Management.
What is Scalping? Conclusion
If you want to understand how the best Scalpers make money you should read “The Alchemy of Finance” by George Soros. Soros is considered to be one of the world leading Scalpers and has singlehandedly “Broken the Bank of England” and made $1 Billion in a single day of Scalping.
Scalping can be a very creative way of trading strategies. It can be racy, exciting and a good trading strategy. However, it requires discipline, focus and nerves of steel.