The more you trade in forex, do you know what kind of trader you are? There are mainly 4 types of traders – scalper, day trader, swing trader, and position trader. Here, we will explore a greatly popular style called scalping.
What is it?
Scalping is a technique that requires the trader to enter and exit the positions very quickly, generally within 3-5 minutes and as quickly as 1 minute.
Scalping has gained in popularity because this style is being seen as a safer way to trade forex. Because the positions are only open for a very short period of time, the exposure to market movements is much less than the conventional trading methods.
How does it work?
This technique works by riding on the short periods of volatility. Since the market risk is low, it also means the returns are low too. Scalpers trade very frequently to make up for the small returns per trade. They trade potential high returns from long trend runs for smaller but more frequent gains. For example, if a scalper buys 100,000 units of GBP/USD which gains 3 pips before the position is quickly closed, the gain is only $30.