The very first strategy that most
traders will most probably learn is to ride a very short momentum. It
means that they would close the deal once a profit shows itself.
Since they are still testing the waters, cautious ones would
immediately closed their deals. Greedy ones would most probably see
their trades through until it reaches a loss, hoping up to the last
minute that their luck would suddenly turn the situation around.
From the above mentioned concept,
scalping was formed. Scalping or sometimes pipsing is a strategy
meant to open very short deals intended to catch only small profit
from fluctuations. It is expected to only last a couple of minutes
and though the profit might be insignificantly small at first glance,
it will be compensated by the number of deals. The profit is
accounted at the end of the day, balancing the number of deals which
resulted as a loss over those that gained profit.
The Pros and Cons
Scalping is a strategy that even those
who had just started trading can employ. It won't need any deep
understanding of forex, thought it would be of great help, in order
to carry things out. It also won't need any indicator to aid you if
whether it's time to open trades or that a reversal will soon take
place. A simple yet dangerous strategy.
Seldom brokers allow this strategy and
traders caught engaging on this activity usually suffer losses due to
a sudden termination of deals. Not only that it was reprimanded, the
risk is also high because of the number of trades which usually
accumulates to hundreds per day. The emotional factors also comes in
because often traders only trade with their instincts which may make
them prone to close their deals to soon.
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