Online forex trading becomes almost directionless when one is doing scalping. The methods used in scalping are more about preparation than actual live trading.
Why Scalpers Work Outside Online Forex Trading Active Hours
Online forex trading tends to be most active, in terms of volume, during particular time zones. And this is when most breakouts typically occur. But scalpers being directionless in their view of the markets. They only want to see flat trading action, where the market seems to be going nowhere. This ensures that the risk of a breakout is significantly reduced. Most wise scalpers use an online forex trading platform which offers maximum possible efficiency. And for wise traders this is always a CFD trading platform. Because only that can offer maximum possible liquidity, best filling prices, and linearity. Leverage helps magnify tiny market moves, of anything between 5 and 30 pips. And this turns tiny market moves into significant trades. But it is the linearity of CFDs that actually makes efficient scalping possible. Because CFDs follow the actual market very closely. So closely, that other trading instruments never can.
Online Forex Trading Becomes Profitable through Scalping
Online currency trading is very difficult for most beginners. Because they tend to get stuck on the losing side of the market for too long at a time. Resulting in heavy losses, and uncertainty about market direction. Moreover, beginners don’t know how to handle risk and properly assess their losing trades. Scalping is better in that regard, since the trader only has to trade small moves either in one or in both directions. But over the span of several hours, they are totally directionless. One hardly needs to fully learn forex basics when they engage in scalping. All the preparation for the scalping session is very basic to slightly complicated. So anyone can at least understand it fast. Basically, it’s all about identifying the few hours when a currency pair will be most inactive, and least volatile. This will be the out of hours trading time zone. So, someone wishing to scalp the EURUSD pair for example, can do so during the late US and early Asian trading session. Especially the Asian session best suits EURUSD scalping. But the same logic can be applied to many more pairs. The potential profitability of scalping is enormous, and in the case of CFD trading accounts, as much as $300 per scalping session. This figure is based on medium size, accounts of around $2,000 to $3,000, moderate leverage and careful day selection. The risk of a breakout is still there, but traders use stops to limit this risk. The losses from bad trades can be recovered very fast too. In actual trading tests conducted by average traders, it was possible to have 30 winning trades in a row. These were small winning trades, but they amounted to a very good monthly sum.
The Trickiest Part in Scalping is Determining the Price Baseline
Scalpers don’t have to worry abut market direction, that’s for swing traders and position traders to worry about. Scalpers only need to identify the most quiet days, and specific time zones. And to also determine the price baseline in any given scalping session. All losing trades in scalping arise from poor judgment of the baseline and overall expected volatility. As the market may seem to trade flat at a given level. But then it may jump higher, and trade the rest of the scalping session, flat at the new higher level. Believe it or not, it is possible to dig deeper into market data and assess both volatility and price baseline a lot better. Once the price baseline has been determined. The scalper then simply repeatedly sells rallies above the baseline, and buys dips below the baseline.