Scalping in Forex is a trading style used by traders who buy or sell a currency pair within minutes. The purpose of scalping is to make a small profit within the minutes of holding the position.
Even though the profit is small, but Forex scalpers often open a large number of trades in order to morph small wins into a substantial profit. By capturing the small price movement, Forex scalpers only need to bear a lower risk in each position.
How it work?
John bought EUR/USD at the price 1.1844. After holding the currency pair for 3 minutes, the price goes up to 1.1847. He executed the position and earn himself a 3 pips of profit.
Despite the small amount of profit, this trade only took John 3 minutes of attention. Therefore he now has more time to buy and sell in the trading session he wants, accumulating small profits into big gains.
On top of that, Forex scalpers often embrace the market fluctuation that major financial releases bring. This is because financial releases like FOMC and interest rate announcements cause high-velocity price moves in a short amount of time, favouring scalpers who open and close a position within minutes.
To conclude, to scalp in Forex, traders have to have the temperament for this fast, intense yet mind-rattling process. Forex scalpers need to love sitting in front of the computers for the entire session, and enjoy the intense concentration that it takes. Always do your homework before the session starts so you are able to ‘pull the trigger’ when the time is right.