Currency basically refers to a global foreign exchange market where currencies from the global community are brought and then sold for a profit. Currency scalping is a trade in which a trader looks to buy a currency pair for a very short time period, usually for a few minutes, and then sell it for a profit. The basic aim of a Currency scalper is to make lots of trades at once and make little profits from each.
What is a Currency Pair?
When you buy or sell currency, what you basically do is to buy one currency and sell another. The currency listed before the slash in a currency pair is the base currency – this is the currency you intend to buy or sell – the one after the slash is the quote currency – this is the price you pay to buy one unit of the base currency e.g. EUR/USD pair.
The Currency Scalping System
In currency scalping, after going through a technical analysis to know if the price of a base currency will go up or down, the Currency scalper either buys or sells the currency. This technical analysis may be manual where you look for “signs” and predicts whether a currency is to be bought or sold, or use a software program to look for and interpret these signals.
Factors Affecting Currency Scalping Strategies
- Market Liquidity: The liquidity of a market for trade is crucial for Currency scalpers as they aim to cash in on very short term trades immediately, an essential strategy for successful Currency scalping.
- Volatility: It has a directly proportional relationship with effective currency scalping; the more stable a market, the better it is for Currency scalpers, who benefit from short term fluctuations in the market.
- Time Frame: As Currency scalping is all about timing, it involves quick and successive trades where the right time frame can make all the difference and a primary scalper tends to utilize only on one-minute charts.
Is Scalping for you?
Scalping requires you to concentrate on one or two minute charts, so you have to make quick decisions and must not regret quick losses too. If you are someone who likes to examine and take your time to make a decision, this isn’t a good option for you.
You Need to Pick a Broker
Before you find a forex broker, make sure you go for a Tax ID application first. Once you find a reliable broker, read the trader-broker agreement carefully to know your responsibilities and the obligations of the broker.
This is currently one of the most demanding trade strategies. It requires the fusion of several factors working efficiently, quickly and adhering to strict rules, and where management of money is crucial. It can prove to be highly profitable when you become experienced enough. This requires the identification of personal strategies, handling trades with small time frames and discerning patterns in the Currency market. If you master this skill, Currency scalping is a surefire way of success in the world of foreign exchange.
James Hendrickson is an internet entrepreneur, blogging junky, hunter and personal finance geek. When he’s not lurking in coffee shops in Portland, Oregon, you’ll find him in the Pacific Northwest’s great outdoors. James has a masters degree in Sociology from the University of Maryland at College Park and a Bachelors degree on Sociology from Earlham College. He loves individual stocks, bonds and precious metals.