Forex scalping is a style of forex trading used by traders who hold on to a currency pair for short period of times in order to make profits. In other words, with forex scalping traders take a few pips as profit from their positions. The key to successful forex scalping is by generating large volumes of small winning trades. Forex scalping is easy to understand and use and has thus become a very popular style of forex trading within the trader community.
With forex scalping, profits can be built up quite quickly. Forex scalpers make use of technical and/or fundamental analysis as well as analyze charts in order to identify potential positions they could take in the markets in order to profit from the price movements. Forex scalping offers traders with a great potential to make money in short periods of time as scalpers typically look for small movements during the trading day. Forex scalping includes the following two types:
- Open a trade for a very short period of time
- Open multiple trades at the same time, only to close within the short period of time
Forex Scalpers Not Welcome
Forex scalping is easy and it takes a little bit of experience and good knowledge of market analysis in order to become successful. Which is why most forex brokers do not allow scalping on their systems. This is usually the case with Market Maker type of forex brokers. Considering that in fast moving markets, scalping can be real quick, this can pose a potential threat to the market maker brokers who take the opposite side of the trader’s positions. Check out any Market maker today and you will notice that forex scalping or trading during news and economic releases is not allowed. Some market maker type of forex brokers might indeed allow scalping, however you can notice a lot of re-quotes taking place while you scalp the forex markets.
Another factor is that market maker forex brokers offer fixed spreads in most cases. For some currency pairs, the spreads can be on average about 3 pips. Forex scalping in such situations of high volatility could prove adverse for the forex brokers.
Forex scalping with ECN Forex brokers
ECN Forex brokers do not have any issues with forex scalpers. If you read this article about how ECN forex brokers work, you will notice that the ECN forex broker only charges a commission and not on spreads. Furthermore, an ECN forex broker connects their traders directly to the liquidity providers, thus having no interference to the trader’s positions in the market. Thirdly, ECN forex brokers offer spreads that are close to zero. This is because the best spread combination is often displayed based on the number of liquidity providers available with your ECN forex broker.
Taking into account all the above factors, forex scalpers are always welcome to trade with an ECN forex broker. While traders might think that close to zero spreads might not be enough for them to make profits, bear in mind that ECN forex brokers offer one of the fastest executions in the market. Factor this with trading during key economic releases and traders can notice considerably difference in spreads. It is during this times that forex scalpers truly shine. Opening either multiple short positions or opening single consequent trades one after another, based on the volume of trades, it is easy for forex scalpers to build up a huge bankroll within a short span of time.
The forex markets are volatile and if you check with the financial calender, there are atleast four to five key economic releases made on a weekly basis. This information alone is enough to equip the forex trader to scalp the markets.
Forex scalping, while easy to understand is a science unto itself. If you dig deeper, you will notice that there are many different forms of scalping the forex markets and strategies as well. Of course, there are some commercial forex EA’s and robots that will do all the hard work for you, but where is the fun when it comes to taking profits without involving yourself into the excitement?
Sign up with any of our ECN Forex Brokers and get ready to scalp the forex markets.