Scalping is one of the controversial issues between forex investors and brokerage houses. Some investors are pro scalping. There is even an investor type called “scalper”. This term is always creating confusion among forex traders with questions as to what is scalping in trading and how is it done? We explained everything about scalping in trading.
Forex is a market with a daily trading volume of around $7 trillion and has high advantages and opportunities compared to other currency markets. Forex trading is getting more and more popular among new investors. When you want to invest in this market, it is necessary to learn the features and advantages of the forex market to make higher profits and make the right investment.
Some advantages of forex are including being able to perform two-way transactions, being open 24 hours a day, 5 days a week, having a leverage system and trading orders. It is also possible to perform scalping with the leverage system and orders in forex.
What is Scalping?
Scalping is a process that is done to profit from small price changes at frequent intervals. Scalping investors are called scalpers. In order to be able to perform scalping transactions in the Forex market, traders should have a good knowledge of forex and be good at fundamental and technical analysis. In addition, it is completely beneficial to learn the factors that affect the changes that may occur in the prices of the products you will invest. Because if you determine the trading points and open positions according to the changes that will occur in the prices, you will be more likely to make a profit.
The reason for scalping in Forex is that it is possible to gain profit by trading in short time intervals by using the advantage of leverage. When performing these transactions, the amount of investment entered into the transaction is usually high, as the transaction will be closed as a result of small increases or decreases and profit will be made from small changes.
Even though the possibility of making a profit in scalping transactions is high when proper analysis and examinations are made, the risks also increase as the transactions are entered with high amounts. That’s why we see that scalping operations are generally done by experienced investors. These transactions generally take place under 10 pips.
What Are Scalping Techniques?
No matter what kind of path is followed in scalping, the purpose of all of them is to make a profit. Nobody takes action to lose. The most preferred method of scalping is to open a position in the buy or sell direction by predicting the changes that may occur due to the breaking of support or resistance points in a market that is moving at a horizontal level. Of course, in such cases, a good analysis is very important. Otherwise, losses may occur.
While scalping, we recommend you to do your transactions during the active hours of the market. Because there will be many opportunities as there is a lot of mobility in these time periods. I think you should have a good reflex in sudden price movements. Of course, this is something that will happen with experience. You should determine the direction of movement of the prices, make an instant decision accordingly and open a position. For this, you should also follow the factors that affect price changes, important announcements, economic calendars.
One of the most important points in scalping operations is the leverage system. Because scalping is used with leverage. In order to profit from small price changes, it is necessary to deal with large volumes. In this case, leverage also helps the investor to invest large amounts. Therefore, we can say that scalping and leverage are complementary to each other. If you are wondering about forex companies that give high leverage, you can check our rankings and reviews.
One of the points you should pay attention to while scalping is that sometimes price providers may refuse the scalping process. The most important reason for this is to prevent some investors who invest in the world’s largest market from cheating. When a malicious transaction is detected, price providers can decline the transaction to protect the market. This is not the case with forex companies. You can think of this as the same precaution that banks take when they catch malicious transactions.
Problems arise during the rejection of some scalping transactions. Some of the scalping complaints among investors are as follows:
The investor did scalping and the company cancelled some of them but did not touch the rest. Therefore, the investor asks the reason for the cancellation. At this point, forex companies may sometimes not be able to respond because they may not know either.
Since price providers cannot deal with each event individually, they run scenarios just like banks create scenarios. If the following events occur, the relevant scalping type is safe, and in these scenarios, the relevant scalping type may be malicious. Now I don’t know what these scenarios are. I don’t think Forex companies will know all of them very clearly. For example; if it was known in what scenarios banks refuse transfer transactions, bad actors would exploit this vulnerability a lot. Therefore, unfortunately, situations, where the forex company cannot respond, is normal. There is nothing to do at this point. If they provide traders with their main investment with some profit, there is no problem.
How to Do Scalping?
We have learned what scalping is so far. If you are asking how to do scalping, it is better to explain with an example. For instance, we are trading in EUR/USD without leverage. Get 1.2010 USD in Euro. When we make a transaction of 0.01 lot (1000 euro), we make a transaction of 1201 lira. In this case, when the euro price reaches 1.4010 from 1.2010, we will make a 200 USD profit. But if we are scalping, the system will work differently. We trade in Forex and the leverage that our company provides us is 1:100. In this case, again, our capital is 1000 dollars, but since we have 100 leverage, you will be able to enter the transaction with 100X1000 = 100,000 dollars. In other words, we are entering a transaction of 1 lot instead of 0.01 lots. We can think of the euro as 1.2010 again. When you enter such a transaction, when the price of Euro rises to 1.2030, you will again make a 200 USD profit.
One of the controversial issues of the industry is the issue of scalping in the transactions of Bitcoin and other cryptocurrencies. Cryptocurrencies quickly became popular and many investors turned to them. However, the system is not well settled yet. By the system, We mean the formation of prices. Different prices can be seen everywhere and there can be serious differences.
It is easier to make malicious transactions in cryptocurrencies as the systems of price providers are not yet established. Therefore, a significant portion of forex companies do not allow or cannot allow scalping in cryptocurrencies. So far, most of the complaints come from bitcoin transactions.
SEE MORE: What Is Margin in Forex Trading?