| How does a Forex Scalping Strategy Work? |
 If you want to get consistent profits, then a forex scalping strategy will have to give you a high win-to-loss ratio and a safe stop-loss mechanism. Many scalpers use small pips or price changes in points, making their profit targets along with large stops and high win-to-loss ratio. Such formulas also have the reverse possibility that will force your forex scalping strategy to give you poor risk-to-reward ratios. A forex scalping strategy is a method to trade using the shortest time frames available that are also known as ticks ranging from thirty seconds to five minutes.In forex scalping, you have to focus on very small price fluctuations and escape high volatility as a base point to consider. You will have to seek positions of trade which will allow you to do even multiple trades in very short time spans while targeting small profits of maybe one to five pips on each trade. The main aim of a traditional forex strategy is to go over maybe two trades per day with a target of one hundred plus pips on each trade while a forex scalping strategy will try and attempt about fifty such trades within the day with target of two to five pips each time. The traditional strategy could give you a maximum profit per day of maybe three hundred plus pips while the forex scalping strategy could give you profits of approximately even five hundred plus pips. In forex scalping, you may have to risk your money more on a pip than the traditional strategies so that you get worthwhile returns. So, when you are risking a great deal more of your total equity, you are actually violating the main premises of major risk management strategies. A forex scalping strategy will normally allow you to try and trade during the quitter periods when the trading patterns are likely to be of a predictable nature and there will be lower levels of volatility. Usually, the time selected for such type of trading is between 1700 and 2100 Eastern Standard Time. During this time, the major countries like the United States of America, the United Kingdom and the European Zone do not publish or take out important economic news on a normal basis. The question that is then raised is whether it is worth it to build a forex scalping strategy if it is ultimately going to give you a poor risk-to-reward ratio. The answer to that could be that it is possibly worth it. For example, let us do a simple calculation. You select a profit target of five pips and a stop-loss of one hundred pips per trade. Let us say that your forex scalping strategy is giving you a 97:3 win-to-loss ratio. Considering that your risk-to-reward ratio is 100:5, you will still achieve a profit that will be equal to (97x5) – (3x100) giving you a profit of one hundred and eighty five pips. This may sound impressive but you have to be careful while planning this because any additional losses will then completely change the result and they may practically level out all your profits in the bargain. |
| Related articles: |
|---|
International Association of Forex Traders
Company: International Association of Forex Traders
Number of participants: 30,000
Amount of payouts: 1,500,000$
Number of partner-brokers: 62
Number of payment systems: 8
eToro Forex Broker
eToro Broker Reviews
Notes: Weekly Championship
Min Account: 50$
Spread: 2 Pips
Plus500 Forex Broker
Notes: No commissions! - fixed spreads
Min Account: 100$
Trade Stocks, Forex, CFDs, Indices, Oil and more
FXCM
FXCM Review >>
Notes: FOREX and CFDs
Min Account: $25
Max Leverage: 1:100
AskoBid
askoBid Broker Review
Notes: Simple and new broker
Bonus: 30% reward on first deposit
Search
