If you are like me, when you first started trading you realized quite quickly that if you make XX pips on each trade, then one of the easiest ways to increase your profits is to increase your trading frequency. If you trade more often, you may profit more often. Now, obviously, this assumes that you will be able to consistently profit with your trading system.
Most traders define scalping as trading for small, quick profits. These scalps are usually quick trades, most scalpers open and close trades during a trading session and do not leave positions open overnight.
The Pros and Cons of Forex Scalping
- Scalpers are often flat after a trading session. Most scalpers do not leave trades open, so forex scalpers do not have money at risk while sleeping.
- Scalpers can quickly compound a trading account. It is possible to grow a trading account quickly while scalping.
- Scalpers can trade over short trading sessions. Scalpers may “work” for only a few hours each day.
- Scalping requires great concentration skills. Scalping requires a trader to do the same thing over and over again, and this may be difficult to do for many people.
- Scalping will not capture the very big moves in the market. This can be very difficult, psychologically, to endure. Scalpers will always have trades that they wish they had held onto longer.
- Scalping profits may quickly diminish if transaction costs increase. Scalping involves only a few pips in profit, so wide spreads or slippage will cut into profits.
I have found that trading longer term charts, such as daily charts, is easier for me. Years ago I tried to scalp and I found that if my execution was not nearly perfect I had difficulty finding consistent profits. For me, trading the daily charts is much easier. Trading the daily charts means I can spend more time away from the computer. Scalpers are nearly always stuck in front of the computer while trading. Trading the daily charts means I may have trades that make hundreds of pips (or lose hundreds of pips), while many scalpers may be looking for only 5-10 pips of profit. Trading the daily charts is ideal for those traders who are working another job.
Most traders I know have found it much easier to move to scalping only after mastering a trading system on a higher time frame chart. In other words, it is usually much easier to scalp after becoming consistently profitable with slower moving charts. Scalping can be intense, and decisions must be made very quickly, it is imperative that the scalper is decisive and ready for action, it is much more difficult to trade successfully as a scalper.
I wish you the best with whichever trading style you choose to adopt!