Forex scalping is a trading style used by forex traders in an effort to make a profit by purchasing or selling a currency pair and then keeping it for a short period of time. A forex scalper, taking advantage of the minor price fluctuations that are common during the day, tries to make a large number of trades. Although scalping attempts to capture small profits, such as 5 to 20 pips per deal, by increasing the place size, the benefit on these trades can be magnified.
Usually, Forex scalpers keep trades for seconds to minutes, and within a single day, open and close several positions.
How is it really done?
Usually, Forex scalpers use leverage, which makes greater place sizes, such that a small price shift equals a respectable profit. For eg, on a $10,000 position (mini lot) a five pip benefit in the EUR / USD is $5, while on a $100,000 position (standard lot) the five pip movement equates to $50.
Strategies for Forex scalping can be either manual or automated. A manual system requires a trader sitting on the computer screen, listening for signs and knowing whether to purchase or sell. In an automated trading system, programs are used based on input parameters to tell the trading software when to buy and sell.
In the moments after important data releases, such as the U.S. jobs report and interest rate announcements, scalping is popular. This is because, in a short period of time, these kinds of high-impact news releases trigger large price movements. This is perfect for the scalper who needs to easily get into and out of transactions. Place sizes can be scaled down to decrease risk because of the increased uncertainty. While a trader may attempt to normally make 10 pips on a deal, they may be able to catch 20 pips or more, for example, following a major news announcement.