Forex Scalping

Forex means Foreign Exchange and it describes the worldwide market which deals with trades between the free currencies of the world. Just like it’s the case with any other market, on the Forex market the currencies are bought and sold. The actual mechanism is not trading though, it’s more of a barter, since there are no goods involved and the currencies are traded for one another. The currency itself is the focus of the market, so treating it like something you buy and sell is not 100% correct. The market functions with the help of a simple principle, which is the fact that the currencies have differences in price and their value fluctuates. The conversion rate changes from day to day and even from minute to minute, so it doesn’t take long to make a profit or to lose money when you invest in Forex.

Forex scalping is a term which describes a strategy which involves investing based on changes of exchange rate in the short term. It’s considered short term trading and it allows its users to get a profit immediately, instead of blocking their investments in currencies for a long period of time.

When you’re looking to invest in currency, you can use one of the two main ways of doing it, either by investing short term or long term. With long term you have to observe and invest over long periods of time, with the sale of the currency occurring only when the trend gets to its highest point. The short term way of doing things is known as scalping. With scalping, a trader will try to benefit from even a small deviation or fluctuation of the market. With the smallest fall or rise, a trader can make a small profit, when he’s using the scalping strategy. There is one drawback with scalping though, the fact that a trader has to monitor a big number of transactions simultaneously.

The more transactions you do, the more profit you get from it. The difference which has to appear between the buying and the selling price can be extremely small, even half a percent (50 pip) in some cases. Investors which use a scalping strategy look at the opening cost of the market, the closing cost and the levels that were lowest and highest. Since the news tends to have an effect on the currency rates, investors which use scalping will usually keep an eye for any news which might provoke small fluctuations in the value of the currency. As for the methods of scalping, an investor can look only at the trend of certain economies, like those which use the Euro, or they can look only at the economies from North America, and so on.

Using a scalping strategy is quite hard and a beginner should stay away from it if possible. There is quite a bit of analysis of trends which needs to be done and the investor needs to have experience with Forex before he can make money on a regular basis with scalping. While it might appear so to the outsider, Forex scalping is not about luck, it’s about skill, and in the long run you will make a profit only if you’re good at it. There is a lot of hard work and time put into trend analysis and unless you’re willing to invest that kind of time, you should not get started with Forex scalping.

The basic principle of Forex trading is to buy cheap and sell when it’s expensive. It’s the same basic principle as with any other type of trading. An example would be buying a currency when it’s at a low price and when that country’s economy improves, or when some sort of good news appears, the price will go up. At that time you can trade back your currency and the difference in price will be your profit. It can take just one day for the exchange rate to shoot up or it can take months. It’s up to the investor to predict how the currency exchange rate will evolve and how long it will take before he can make a profit from it. It takes a lot of experience and practice before you learn how to properly do Forex trading and it’s not something which can be done without understanding all the mechanisms.