Forex Scalping - Some Potential Problems You May Face

Forex scalping is basically where you target lots of small price moves over the course of a particular trading day. It is quite a popular way of trading currencies but the drawback is that you will face a number of potential problems.

The first problem you face when forex scalping is that by targeting small profits from each trade, you also have another cost that will eat into your profits and that is of course the spread. For example if you are scalping the GBP/USD pair and are targeting say 10 points profit per trade, then you may find that 3 or 4 points of that profit will be eaten up by the spread. The spread will obviously depend on your broker but it is still a significant factor in your overall profitability.


Another problem is that a lot of forex brokers do not like their customers scalping the markets and so if you do a lot of very short-term trades you may find that your broker will take action to ensure that you do not do this in the future. For instance, they may cancel your account or may increase the spread in the hope that you will adopt longer term trading tactics.

So the life of a forex scalper is certainly not an easy one. Of course even if you do find a broker that will allow you to make lots of short-term trades, you still have to actually come up with a trading system that will actually generate profits, and this is easier said than done.

Technical analysis is not really that reliable on the short-term charts such as the 1 minute and 5 minute charts so this can be a real challenge. You will find that prices move in quite a random fashion over the short time intervals so it is hard to find yourself an edge. It is still possible to succeed as a scalper but it is a lot easier trading the longer term charts such as the 1 hour, 4 hour or daily charts.

By: James Woolley

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