Forex Scalping Trading Systems
Forex Trading in many ways is very much like other types of trading or activity where you put money in and expect to get something in return. Things like sports betting and poker playing are very similar to Forex Trading in as much as the actual movement of money is concerned. Because all of these types of money making endeavors involve putting money in to get hopefully more money out there are strategies that can be learned and taught in order to make this type of thing easier to do. These strategies are usually referred to as systems and when you are dealing with a Forex Market, there are any numbers of systems that you can apply to it. One large category of systems is known as scalping and this article explains exactly what that means.
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Forex Scalping Trading Systems
Scalping is a term that is used in a number of different types of trading and it means virtually the same thing in each circumstance that it is used. Forex trading revolves around following pip changes in the currency pairs and capitalizing on those pip changes in order to make money. Pip changes are usually occurring in the thousandths decimal place which is why it is necessary to trade huge amounts of currency in order to make any amount of money. Forex scalping trading systems revolve around the principle that a larger number of smaller trades is a sounder method to use than the normal long term day trades that many people utilize. Forex scalpers will only try to make 5-15 pips per trade and initiate many more trades each day as opposed to trying to make 40-50 pips per trade with a smaller amount of trades in a day.
Advantages of Forex Scalping Trading Systems
The main advantage of Forex scalping trading systems, in a theoretical sense, is that they are easier to pull off. One of the major problems with Forex trading in general is that it tends to be very frustrating because trends can reverse so quickly. The advantage of scalping is that since it is only going to be used for a very short period of time, the scalper is able to close the trade and make their profit before the actual trend reversal actually happens. Many people have been very successful using scalping as a method, so there is some proof that it is effective if used properly.
Disadvantages of Forex Scalping Trading Systems
The risk to reward ratio of Forex scalping is very low. Because the profit per trade goal is so much lower, it is quite easy for one bad trade to literally wipe out the profits for a day. This means that a person will either a) have to be very careful with where they set their stop loss and b) might have extremely frustrating days where they end up with a profit of 20 pips by the end of the day and then end up losing it all in one bad day. Forex scalping can be a very good strategy, but it will also test your discipline as a trader from time to time.