Scalping the forex market describes a particular type of day trading. It is a method of dealing where traders open and close multiple trades throughout a trading session. The objective is to seek out small profits during that period where they are attentively observing the market. The good thing is that they will not fall asleep from boredom. There will be plenty of action. However, the downside is that the market is likely to shred their accounts to pieces.
Jordan Lindsey, the founder of JCL Capital, advises traders to think big. That advice applies especially to the subject of the number of pips traders seek to extract from the market. The problem with scalping is that the spread is a significant percentage of a trade where you may be targeting a four pip move. Couple that with the volatility on even the most efficient currency pairs and you begin to reason that scalping is the most difficult way to try to extract profits from the forex market.
With a typical spread of 1.5 pips which most brokers offer on the EUR/USD, you are profiting 2.5 pips from a four pip move in your direction and losing four pips when the market goes against you. In other words, your losses are near twice the size of your gains. That will not get you to the 7% monthly growth rate Jordan Lindsey has suggested as your target. If you could reverse the math on your profit and loss results, it would make sense to be a high volume scalper. However, without a crystal ball that is impossible.
All scalping trades rely on signals from shorter time frame price charts. The truth is that you are fifty-fifty to win or lose on these trades. Since you are giving up nearly double what you earn, each time you lose, scalping will eventually consume your account. So, unless you have a very lucky charm, I recommend keeping all of your trades to signals coming from one-hour price charts or better, and you should target profits of 30 pips or more per trade. Remember, as Jordan Lindsey has asserted “Think Big.”