Many of the literature and media are aware of scalp hunters. At the mention as a rule, usually rises the image of Indian prairie and half-naked savages depriving pale-faced scalps. Forex market also has its own scalp hunters, only unlike Indians they don ‘t deprive anyone of their skin on their head. They do scalping cutting off the market as thin a layer of profit as possible. This article will deal with scalping and its varieties.
What Is Scalping
Scalping is a form of intraday trading, the essence of which is that the trader closes the transaction having made a profit of only a few points (pips). The duration of such transactions is from a few seconds to a few minutes. Such trade has both a number of advantages and a number of disadvantages.
- Transactions are not transferred to the next day the trader is in tension for a limited period of time;
- From the opening of the transaction to the moment of its closing;
- Low risk of losing the entire deposit.
- For good earnings with one deal you need a large deposit;
- From the moment of opening until the closing of the deal it is necessary to constantly monitor the market, which is difficult enough mentally and physically;
- Requires extensive trade experience to successfully trade.
Despite the fact that to date advisers for forex scalpers have been developed, they should not be heavily relied on because scalping involves largely manual work.
Types Of A Scalping
Scalping can be divided into types on different grounds, it all depends on the goals that need one or another classification. Most often scalping is divided into types by the duration of the deal stay on the market. It is distinguished: scalping, medium-term scalping, conservative scalping. Let’s take a closer look at each of them:
1. Scalping – is the highest-yielding type, but as much as it is high-yielding is just as risky. Traders trading such scalping use the smallest – one-minute timeframe. Hunting for a profit of 1-2 points they have to use a giant credit shoulder reaching 1:1000. With such a credit arm, income at 1-2 points is already felt even when using its own small deposit. Naturally, the risk of losing a deposit, with such a credit shoulder, is as great as the expected earnings.
2. Medium-term scalping – is not as high-speed and risky a kind of scalping as the first. Traders using this method, work on the time frame of the М5, with the duration of the deal being up to 10 minutes. Since it is possible to collect more points and get a normal income, there is no need for a giant leverage and it usually does not exceed 1:200, which significantly reduces risks.
3. Conservative scalping – is the safest kind of scalping. When used, its traders use a fifteen-minute timeframe. The duration of the deal here is up to 30 minutes, which allows to collect up to thirty points of profit. Used timeframe allows you to work with a leverage of 1:100. There is less risk of losing the deposit, less psychological burden on the trader, but also less income.