Scalp trading style is more different than other trading styles like swing trading or day trading in the foreign exchange market. With scalp trading, you will trade more often by closing trades in a short period of time.
As a forex trader when you trade on a shorter time frame, you aim to reach fewer more pips and you will be less exposed to risk. You will have to use the time frames in minutes to trade using the scalping strategy.
The volatility of the forex market will be much reignited and it can give you plenty of currency pairs to trade the foreign currency market.
But there are some factors that can affect trading forex as a forex scalper. And in this article, we will go through the advantages and downsides of scalp trading.
What are the advantages of scalp trading
When you open trade to scalp them, the market will be more volatile on the shorter timeframes. Compared to swing trading or day trading, you trade the forex by using a higher time frame. But the scalp trading method focuses on shorter time frames like 1-minute, 5-minute, 15-minutes.
That means that the trades you have opened and your trades can reach your goal in a quicker time. The market will be much more paced with zones on the lower timeframe that can give you the best results in the foreign exchange market.
You will aim to earn fewer pips compared to day trading or swing trading as a forex trader. Because of that, you can trade currency pairs more often since the number of pips is not enough for your trading style.
The swap (commission) will be lower or free with some trades. With swing or day trading a commission applies when you hold trades each day. But as a scalp trader, you close trades under an hour and so you will have lower commissions.
And the most positive factor in trading is that your trading systems are less more exposed to losses.
Since you trade with a style that gives you less more pips to trade, in situations when you close trades on losses, the impact on the account balance will be lower.
In general, some of the advantages of the scalp trading style are:
- You will be less exposed to risk
- The volatility of the market is more intense
- You can open more trades
- The swap of trades is lower
What are the downsides of scalp trading
Besides the positive factors that can happen when you trade the market as a scalp trader, there some other negative factors that can affect your trading.
When you close trades because of the volatility, it’s risky when things do not go according to your plans and your trading strategy. In shorter timeframes with currency pairs that have more volatility, the forex trading market can be unpredictable sometimes.
You will have to react quickly because any delay can have consequences in your trades. Some market patterns can be less important because they cannot be traded every time because of the shorter time.
And if you’re a day trader or swing trader, market patterns and other price action factors occur less often but are more “trustable”.
Forex scalping requires you to stay in front of the charts when you hold your trades. The reason for that, it’s that you need to look for any movement that can decide your trades direction because of market conditions.
And that can affect your popular trading strategy and psychology in general because staring at charts very often can affect your mentality. When you close the trades quicker, you’re safer as the loose impact can be much lower in pips.
But since you close trades quicker with smaller moves, then you need to open more trades because the small profit is not enough. This can affect your technical analysis, psychology, and emotions in general. And you would need to try different strategies too.
Greed can be decisive if you don’t control your psychology and emotions according to your rules. The greed can also affect your risk management rules.
In general, some of the disadvantages of forex scalping are:
- The forex market can be “unpredictable”
- Your emotions are more intense
- You have to stare at charts many hours per day
Hopefully, the details that we explained in the article can help you decide if becoming a scalp trader can work for you or not.
As a summary, forex scalping has advantages and disadvantages that can affect your forex trading performance
And the forex scalping style is suited for experienced traders. Because it requires more experience in the forex market as different factors are involved in the scalp trading style.