What is Forex Scalping and Why I Use It

What is Forex Scalping and Why I Use It
February 26, 2021 Market Traders Institute

What is your favorite style of trading? There are four basic types: Position, Swing, Day and Scalping. While all four types can still be very useful, I strongly believe that scalping has significant benefits over other trading methods.

My name is Tyson Clayton, Senior Currency Strategist for Market Traders Institute. I’m a master Forex instructor with over 20 years of experience teaching student traders how to take ultimate control over not just their finances, but their lives.

Here are the four different styles of trading and why I prefer to use a scalping strategy.

1) Position
This style of trading is the one most people are used to doing — think of 401ks, IRAs and other retirement accounts, where you buy a stock and hold it for the long term.

2) Swing
Swing trading is similar to position trading. For example, you buy a stock or a currency, but you don’t plan to hold it for as long as in position trading. You may take trades that last multiple days, weeks, or even months instead.

3) Day
With day trading, I’m typically going to get into a trade and plan on holding it for 24 to 48 hours in exchange for a chance at bigger gains. Day traders are willing to go through more of the price swings and possibly expose themselves to more risk.

4) Scalping
Scalping is different from other types of trading in that I will always get in and out of a trade on the same day. The idea behind scalping is to enter and exit a trade as fast as possible.

Here’s an example: There is a strategy called the London Daybreak, which is based on multiple banks in the world opening up at around the same time and creating big volatility in the market. So, there are many trades that we can get into and out of within one to five minutes, which could give us the potential to take fast profits.

Scalpers aim to trade around fundamental announcements when we know the market is going to move. The goal should be to get paid as fast as possible in order to protect against taking on any unwarranted risk.

If I choose to be a position, swing, or day trader, I must hold trades potentially open overnight while I’m sleeping. However, I lose control over what goes on with my trade during those hours. As a scalper, I can make fast trades and avoid having such after hours risk exposure.

For more tips and strategies on successful Forex trading, visit MTI’s YouTube channel at www.youtube.com/c/Markettradersinstitute/videos

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