Scalping is a very popular trading method in the Forex market. It provides a unique profit-taking opportunity within a short period. If you learn to scalp the market like the pro trader, you won’t have to think about your financial freedom. Many naïve investors in the UK have mastered the art of scalping by learning from their mistakes. They have worked day and night just to develop a perfect scalping method. Though this strategy provides a unique profit-taking opportunity to retail traders, the associated risk very high. Unless you have excellent risk management skills and complete control over your emotions, you should never try to scalp.
Scalping requires many advanced skills. But to survive in the lower time frame trading strategy, you must follow three essential rules. These are –
- Trade with a low leverage account
- Trade with the major trend
- Focus on your risk exposure
Trade with a low leverage account
Those who scalp the market with a high leverage trading account are losing most of the trades. They become emotional after losing a few trades and blow up the trading account within a few weeks. Due to the access to a high leverage trading account, naive traders can execute the trade with a big volume. But if they started to scalp the market with a low leverage trading account, they won’t have the ability to open big volume trades. Most of the time, they would have received a pop message “Not Enough Money”. Automatically, they will be trading the market with low-risk exposure.
Well-reputed brokers like Saxo capital markets never offer insane leverage to the retail traders. They know the dangers of high-risk trading strategies. So, make sure you are not trading with a high leverage account or else it’s just a matter of time until you blow up the trading account.
Trade with the major trend
When you start dealing with the CFD market, you must understand the importance of the trend trading method. Trading the market with the major trend during scalping gives you a unique edge. Since the market is trending most of the time, chances are high you will be winning most of the trades. Some new investors don’t have the skills to find the overall trend of the market. They are trying to trade the minor trend lines and losing money. Before you start scalping the market, try to learn about the trend trading method. This is by far the most efficient way to reduce the risk factors in trading.
The trend trading strategy might not have anything to do with the scalping strategy since you can make a profit in a minor retracement. But trading retracement is only for the highly skilled traders who have years of experience. So, stop fooling yourself and stick to the market trend.
Focus on your risk exposure
As a new scalper, you must have very good risk management skills. Naive investors think taking a 2% risk in each trade is enough to secure their trading capital. But things are not as easy as they seem. Being scalper you will be opening multiple orders on the same day. So, you must use a 1% risk in each trade. Never open more than two trades at a time since it kills the risk management process. When it comes to setting up the profit factors, make sure you are gaining at least a 2% profit from the trade. If you trade with a negative risk to reward ratio, it will be a tough task to make a bigger profit. You won’t be able to recover the loss.
Managing the risk factors is like managing the trades. You need to create such a unique strategy that will help you to create the perfect edge in this market. Think about the long term goals when you scalp. Stop trying to become a rich trader overnight.