Forex trading, which was set up to promote international investment, is a form of investment committed to betting on the fluctuation of exchange rates. Since exchange rate fluctuates every day, forex traders make money by converting one form of currency into another form of currency with the hopes that it will increase in value.
Forex traders differ greatly by their strategy and forex scalping is the most popular strategy of many forex traders. Forex scalping is a trading technique that was evolved in the forex market. Traders can capitalize on the short term movements in the exchange rates. It involves opening a FX position and closing it within a few seconds with the intention of speculation.
Forex scalping is a low risk strategy that keeps the trader sitting on the sidelines most of the time. Scalpers use technical indicators like stochastics to find out the best time to jump into a trade and gain a few pips profit.
Stochastic Oscillator was developed by George C. Lane in the late 1950s. It is a momentum indicator that compares a security’s closing price to its price range over a given time period. The oscillator’s sensitivity to market movements can be reduced by adjusting the time period or by taking a moving average of the result. In short, it helps to identify overbought and over sold conditions.
But there are also traders who use a different set of strategies and make 10 or more trades a day. For example, some traders rely on support and resistance. This helps them to get a few pips on the bounce. At the same time, there is a chance to lose money if the trader does not have the right scalping skills.
There are also times when the market becomes very difficult to scalp because of high volatility.
So success with scalps can only happen when the trader is highly disciplined. Therefore the trader should do proper analysis on the key support and resistance levels before buying any opportunity that comes along. Moreover, he should also see that only very high probability trades are placed in the market.