How Scalping Technique is Reshaping Forex Trading

Forex scalping is a forex trading technique where a forex trader participates in vast trade niches to consolidate the different profits earned.

It allows a trader to risk on many forex trade pairs thereby increasing chances of widening the profit base. Forex scalping has both pros and cons and is completely dependent on what the forex trader aspires.

This article attempts to look at various facets of forex scalping to fully understand the underlying concepts.

Merits of Forex Scalping

Widened Profit Base

Forex scalping allows a trader to increase his or her profit base. This allows a trader to focus on diverse trading niches without specifically narrowing it down to a single trade pattern.

It allows a trader to rely on varied chances instead of setting dependence on s single trade. Traders who participate in forex scalping take high-risk chances, unlike specific traders. With a good stop-loss order, a trader can maximize his profits in forex scalping compared to other forex strategies.

Higher Profit Chances

Forex scalping allows a trader to reap big from wins generated on various niches. With diversification, the likeliness of a forex trader reaping immensely is increased.

Forex scalping is more likely to favor a forex trader because trading is always volatile. This means that out of the set trading markets a trader invests in he or she is assured of some profits in the long run.

Capitalization

A forex trader is able to capitalize on finances created from high liquidity and volatility levels. Capitalization is important to a trader because forex trading moves out quickly in a set bar from initial to completion stages.

The rapid trade movements mean that a forex trader is able to capitalize on the trades and make high returns.

Low Loss Risk

Forex scalping has low-risk chances. This is possible due to the breakdown of trade to segments that are independent of each other. Even if losses are generated on some trades, in the long run the forex trader has high chances of reaping profits from forex scalping.

Demerits of Forex Scalping

Just like any other forex strategy, scalping has several disadvantages associated with it. The most common disadvantage of forex scalping includes

Diverse Information

Because forex scalping is a technique that involves short margins trades, a forex trader needs to fully understand the timings to place the trades. Failure to understand the underlying trading information can lead to disastrous losses.

Forex scalping trading relies on sharp volatilities that are common on major currency pairs. For example, during major financial announcements, a nation’s currency might quickly flop or rise for short periods before stabilizing.

These are requirement trading points where forex scalping can be applied. When a wrong interpretation is made on the financial-economic ripple effect based on the major announcements huge losses could result.

Short Timeliness

Forex scalping is suited for traders who invest shortly on trades and pull out of it. This means that a trader can suffer setbacks associated with failure to find diverse information to trade.

In most scenarios, the trader does not use various technical indicators to make judgments because of time limitations. This could result in devastating losses most of the time.

The short timeliness prompts forex traders to use high stakes when pitching up on the trade pips with aim of making profits. In the long run, making losses on the high stakes can be detrimental to the forex trader.

Cumulative Trading

Forex scalping requires that the trader be always on the watch out to invest. Additionally, in order to maximize the profits, the trade uses profits earned to invest on more volatilities and trade pips.

In the long run, the time breakdown can be emotionally stressful to the trader because it requires a trader’s complete timely involvement over time. The final profit in forex scalping is mainly calculated after the timely breakdowns are over.

Forex scalping because of the volatility levels means that a trader cannot be on the trading sphere for a long time. This calls for keen trading chart analysis.

Conclusion

Forex scalping has both pros and cons. Its prevalence depends on the forex trader’s choices. It is equally important to understand the timing variations in order to fully utilize forex scalping.

Technical analysis on USDJPY, AUDUSD and EURGBP: 22th January -27th January

USDJPY technical analysis: 22th January -27th January

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USDJPY daily chart

In the last trading week, the USDJPY pair dropped initially but the pair managed to recover in the final part of that last trading week. The pair dropped to 112.56 level and the pair rebounded from this critical support level. For the next trading week, the initial bias for this currency pair is bullish. We might see a test of 115.62 resistance level this resistance level is also the 50 % Fibonacci level (swing high 15th December 2016 to sewing low 17th January 2017) .which might restrict the upside trend. If pair manages to break this resistance level then we might see another bullish run in the currency market. The pair might hit the next resistance level at 116.32 which is the 61.8% Fibonacci level for this currency pair. If we look at the chart there is not much resistance after 116.32 level so if buyer manage to break this level we might see a strong bluish run in the market. Many professional traders’ looks forward to buying this pair if pair manages to breach the 61.8 Fibonacci level then The price might touch the top price of this currency pair which is at 118.60 level.

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Dollar bulls losing their steam prior to the new trading year

In the last year, the dollar bulls have shown an immense amount of strength in the global market and pushed the dollar higher against its all major rivals. The green bucks gained its first bullish momentum in the market during the U.S presidential election held on 8th November 2016.Mr. Trump surprised the whole world by becoming the new U.S president and he gave the dollar its first boost by stating that they are going to increase the fiscal spending in the very beginning of the next year. Most importantly he also stated that they are going to initiate tax cut policy to give a better standard of life to their citizen. Such an optimistic statement from the newly elected president create extreme positive consumer confident in the U.S consumers. The long anticipated rate hike decision was finally implemented by the FED in their last FOMC meeting minute as they hike their interest rate on the basis of 25 points. The green bucks became broadly stronger against its major rivals in the forex market. However, most of the investors are thinking that the dollar will lose its strength in the near future.

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