Is Forex Scalping Less Risky?

Crosta

Trader
Sep 29, 2021
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Is scalping really safer than day trading or other trading methods? The most appealing aspect of scalping is that it allows the trader to limit the amount of time that the market risk. Still, only experienced traders can make good use of these techniques for profit.

In scalping, traders usually ignore the actual trend of the market, they only need to pay attention to price fluctuations in a very short period of time, and then trade quickly and exit after profit. Such traders may use the crossing of the two moving averages to guide entry and exit after a few points in profit.

In fact, scalpers often get out of the market after making as little as 1 pip in profit. Therefore, to be successful in scalping, the trader must enter the trade multiple times. However, such frequent transactions can also bring some problems.

Broker's spread problem

Scalpers need to constantly face the problem of spreads, and this is a lot easier for day traders. Therefore, the spread is a major cost drain for scalpers.

Suppose you trade an average of 10 scalping trades per day, and the average spread per trade is 2.5 pips. If you trade every day, you will face a spread fee of 6,500 pips over the course of a year.

In the same case, if a day trader trades an average of 3 times a day, he only needs to make 1,950 pips in a year to pay the broker's spread. It can be seen that the spread cost brought by these two trading methods is very different.

In the above example, the average scalper trades only 10 times a day. In fact, most scalpers trade more than 10 times a day, and some even reach hundreds of times a day, so the spread fee is higher.

risk reward ratio

When using the scalping method, traders often ignore the risk-reward ratio. For example, a scalper will exit the market with a profit of 1 point per trade, which means that his risk-reward ratio cannot reach the target of 1:2.

This means that scalpers can lose more than they gain. This explains why inexperienced traders are often unprofitable in scalping.

Scalping can bring the best trading results for the skilled trader with the lowest risk. However, it is very difficult for a novice trader to make a profit with this trading method. Therefore, scalpers will choose trading platforms with low spreads, such as ECN platforms.

Source: Forex Rebate https://www.forexrebateking.com