Forex scalping is a high risk strategy in which the trader enters multiple short term positions with the expectation that the small gains made in each trade will in time accumulate to justify the time and effort devoted to the task. Scalping is a popular method because of its ease, and the psychological comfort it provides to traders. We like seeing our gains realized as soon as possible, and holding a position for the longer term is stressful and difficult for the inexperienced person. With scalping these issues are avoided, as trades rarely last more than five minutes, and the multiple short term profits ensure a version of the instant gratification sought by the modern man in almost every endeavor.
Scalping is a technical method, since fundamental tools rarely work at the timeframes involved in this type of strategy. While applying technical strategies in scalping the only problem is caused by the spread. The shorter the timeframe, the smaller the potential profit, and the larger the proportion of the spread to any potential profit. Although technical methods work equally well at every timeframe, whether it is 5 minutes, or five hours, the problems caused by the spread mean that the scalper is always at a disadvantage in comparison to the long term trader: he must create a better performance just to break even.
The best way of profiting from a scalping strategy is employing the method during quite market conditions. Since at those times the market tends to fluctuate aimlessly around a central point, it is possible to profit from tiny aimless movements with the scalper’s favored entry-exit habits. On the other hand it’s hard to use this method at times of maximum volatility, such as after and during news releases, or during the peak hours of the day.
The most suitable time for low intensity scalping is between the close of banks in New York, and the beginning of forex trading in Japan. As banks across the U.S. shut down their trading desks, trading comes to a halt, and volatility falls across the board, creating the aimless, trendless conditions favoring low intensity scalping.
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