Scalping is probably the most popular style with new traders. It basically involves taking lots of small quick profits throughout the trading session, and aggressively reducing the risk in each trade also.Scalping is completely unconventional in the sense that it relies heavily on a very high win/loss ratio whilst only utilising a very small risk reward ratio. The reason that a high win/loss ratio is attained lies in the fact that profits are taken quickly and trades are not left open in the hope of large moves occuring.
The fantastic benefit of scalping is that a trader can risk a very small portion of their account on each trade (i.e 1% or less) but because there are many trades during the trading session, the potential is there to take many wins, thus increasing the balance of your account by 1% or maybe 2% each and every day. This is a phenominal return if one can attain it.
So why isnt everyone in Forex making themselves millions from scalping?
The answer is two fold: First of all many new traders that try and scalp become disheartened very quickly because their account balance is so low that 1% or 2% profit each day has a really low cash value, and when you factor in losing days this value is diminished further. For example for someone with a $5000 account 1% profit would equate to $50, and when you factor in one or two negative days the cash value of a decent weeks worth of scalping would be maybe a couple of hundred dollars at best. This in fact would be a return of around 4% in one week, which in the real world is staggering, but because the trader has unrealistic expectations and they have been “working” solidly all week, $200 just doesnt seem worth all the stress.
The second reason that most new traders cant find success through scalping is the fact that it is a very intense form of trading, and many new traders just arnt prepared for the levels of stress that sclping poses. Many traders also neglect the aspect of risk control and when a string of losses does occur it tends to wipe out all of their previous profits, which again can become disheartening.
In summary, scalping is probably the most profitable form of trading but it is also by far the most advanced technique to master and so i would really only recommend that a new trader attempt this style once they have already proved themselves consistent and profitable in another, easier, form of trading.
