3 Frequent Scalping Issues As Well As Their Solutions

Scalping strategy is a very rewarding quick Fx trading technique but associated with several issues. Read on to learn about these problems and how to overcome them.


Basically scalping in Forex is a very simple trading strategy that involves taking advantage of very small changes in price movements to make profit. The small increment in currency prices is usually experienced soon after opening a trading position. Instead of waiting for a big price change, the trader bags these small increments to become profitable soon the trade is initiated. Scalp trading strategy aims to capture the small price increment when still less than 50 pips. Forex scalping is indeed a quick trading strategy. In addition, it sounds to be a very easy Forex trading strategy to use. Below are common mistakes which Forex scalpers use.

1. Opening numerous trades

Normally, Forex traders would think that they can increase the profit levels by opening so many trading positions. As this might be true, there are high chances it will increase the risks exposure. A greater percentage of your fund is subsequently exposed to the market uncertainties by opening many trades thus increasing the prospects of losing massively if the market does respond to your wishes. Placing too many short term trades is the first common problem affecting so many scalp traders. In addition, the Forex broker would be totally unhappy about this move even though they have little control to the number of trades that can be opened at any single time. To react to this and keep off scalpers, the Forex broker can decide to increase spread. Most Forex brokers use this method to overcome this problem. They can also decide to give a friendly warning not to continue opening many short term trades.

2. Large spreads

The actual difference between the ask price and the bid price is known as spread. In actual sense, this difference is the commission or fees that broker firm charges for every trade initiated on their platform. The Fore scalpers, the profit level is lowered when the spread is increased. This is because a scalper needs an increase in currency price that would massively exceed the spread value to make significant profit levels. When trading in real time, it might take too long for prices to achieve this massive increment. For example, if your broker provides a spread of 4 for say EUR/USD pair, then an increment of 5 or6 points wouldn’t be profitable enough. Most Forex brokers offer large spread making scalp trading less profitable. To avoid this problem, look for a firm that offers lower spreads.

3. Broker-trader interests

Scalping puts a trader at a better position of being highly profitable but that causes more problems with the broker. You may be happy to make more profits within minutes but your Forex broker may not be happy with this. This leads to another conflict of interest with your broker firm. The broker may not be happy and would want you to use the long term trading methods rather than scalping. The broker thus may resort to use repressive tactics to hunt scalpers such as increasing their brokerage fees indirectly. The trader will thus be forcefully dissuaded from using scalping strategy. It is advisable to understand your broker’s nature of business so as to avoid conflict of interest and over-scalping.

Conclusion

Forex scalp trading is one of the most profitable trading strategies but is associated with many issues in the market including conflict of interests between a trader and a broker. There are many other common issues associated with this strategy such of unreliability, security and safety of the traders’ funds. To design a good and workable scalping strategy to use, it is pretty important that you understand all these issues and look for the appropriate ways to overcome them.

There are several aspects to know before you do scalping effectively, find out more about this on scalping strategies. A suitable broker also necessary to help your trading, read Trading Point details for the details of a STP brokerage with low spread, rapid execution, and no-requote scheme.