Scalping The Forex Markets - Some Common Problems
Topics: forex, forex trading, currency trading, forex currency trading, scalping, forex scalping
Forex scalping sounds easy enough because all it involves is identifying lots of small price moves which may be as small as a few points per trade. However the reality is that it is extremely difficult and comes with a whole host of potential problems.
The first problem is that the majority of forex brokers are not happy about their customers placing lots of short-term trades because it causes them problems and it’s not very profitable for them either. As a result it’s not uncommon for them to increase their spreads to try and put you off scalping or to give you a friendly warning not to do it again. The worst case scenario is that they will return your funds to you and cancel your account.
So just finding a broker that will allow you to scalp the forex markets is a problem. If you can do so, however, you’ve still got the problem of the spread to consider. For example if your chosen broker has a spread of 3 or 4 points on the EUR/USD pair, for instance, then a profit target of say 5 or 6 points would not be sufficient to generate any decent kind of profits because the spread would really eat into your profits in the long run.
So if you are serious about becoming a profitable short-term forex trader then you need to not only find a broker that will allow you to scalp the markets, but you also need to come up with a system that will generate enough points to overcome the spread. This is certainly not easy because price moves can be quite random and unpredictable over these short term frames, even if you use conventional technical indicators.
It is certainly possible to make money trading the 1 minute or 5 minute charts, for instance, and looking for say 10 points from each trade, but it is extremely difficult and only a tiny percentage of people who attempt to do so will actually succeed. I personally prefer to focus on the 4 hour and daily charts because technical analysis is generally a lot more effective on these longer time frames.
Short term trading is very stressful because although you can make decent amounts of money in a matter of minutes, you can also lose a lot of money as well. You’ve got the spread to deal with and the hassle of finding a broker that will allow you to scalp the markets and then of course you have to actually trade a profitable system, all of which can make scalping a stressful and frustrating activity.
Click on the following link for free forex tips and strategies, including the exact 4 hour trading strategy that James Woolley uses himself to trade the markets:
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