Forex scalping, sometimes referred to as quick trading, is a method used by some traders to make a high volume of trades for very small profits. In most cases, a scalper will hold on to a currency for less than one minute in an attempt to make a very small profit. The sheer volume of trades however allows them to make potentially big profits throughout the trading day.
The main benefit to the scalper is that whilst the potential returns are very minimal, just a few points at best, the risk is also minimised. By acting quickly when a currency is showing a clear upwards trend, the scalper is taking the best step possible to ensuring some form of return. By hanging onto a currency for longer, he risks the possibility of that currency dropping.
For example, if a scalper begins with a trading position of 100 000 units with GBP/USD, he will earn around $10 for each pip. If he closes at a 3 pip profit, his return is $30 - all within less than a minute.
Whilst scalping isn’t prohibited or illegal in any way, many brokers do take a dim view on it. After all, they don’t want to be paying out on almost every trade that an individual makes and some brokers will ask traders who they suspect of scalping to “change their trading habits”, or close their account down in more extreme cases. Other brokers have introduced a delay to the initiation of an order and its actual filling. This allows them to offset that trade and ensure that the broker does not lose out on a trader that closes in profit.
The main benefit to the scalper is that whilst the potential returns are very minimal, just a few points at best, the risk is also minimised. By acting quickly when a currency is showing a clear upwards trend, the scalper is taking the best step possible to ensuring some form of return. By hanging onto a currency for longer, he risks the possibility of that currency dropping.
For example, if a scalper begins with a trading position of 100 000 units with GBP/USD, he will earn around $10 for each pip. If he closes at a 3 pip profit, his return is $30 - all within less than a minute.
Whilst scalping isn’t prohibited or illegal in any way, many brokers do take a dim view on it. After all, they don’t want to be paying out on almost every trade that an individual makes and some brokers will ask traders who they suspect of scalping to “change their trading habits”, or close their account down in more extreme cases. Other brokers have introduced a delay to the initiation of an order and its actual filling. This allows them to offset that trade and ensure that the broker does not lose out on a trader that closes in profit.
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