What Is Scalping?
Scalping is a well-known trading strategy, by which a trader tries to gain a minuscule amount of profits from small changes in the price in the market. A scalper usually open and close hundreds of positions within a single day.To get more news about
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By rapidly buying and selling a financial instrument, they aim to make a small profit each time, but those small profits add up to make a substantial amount by the end of the day.
A Forex trader using a scalping trading strategy is often called a “scalper.”
Scalpers or traders who employ scalping trading strategies believe that directional movement of price of financial instruments (i.e. currency pairs) is difficult to gauge in the long-term. Hence, they try to profit from small changes in the price which is based on price momentum in the short time frame.
For example, in the Forex market, when a trader buys the GBP/USD at 1.5200 and within a few minutes, he or she sells the positions at 1.5215 with a 15-pips profit, it would be classified as a form of scalping.
Since the rapid transactions and large volume of trades made by scalpers creates pressures on the broker’s servers and network resources, many small brokers actively discourage using scalping strategies.
However, the large transactions created by scalpers also create additional liquidity in the market and a lot of large brokers actually encourage scalpers.
It is worth remembering that scalping is very different than a computer algorithm based high frequency trading. High frequency trading requires split second trading decisions and human traders will never be able to mimic a high frequency algorithm.
Forex robots that trade based on algorithms can be programmed to trade the market as a scalping bot, but usually the computational power of a personal computer or even a hosted solution would often lack the resources to execute a successful high frequency bot.
What Is Scalping?
