Posted by forex at 4:19 AM
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1. Select a FOREX broker that allows scalping. Many brokers have 'anti-scalping' protocols that do not provide access to the small changes in prices scalping requires. You will need an electronic communication network (ECN) broker that has direct access to FOREX market makers. You can find scalper-friendly brokers through Internet searches and trading forums. Most ECN brokers provide an online trading environment that allows a scalper to rapidly enter and exit orders.
2. Await a fundamental signal to start trading. To be of value to a scalping trader, the signal must generate volatility in the FOREX markets. A fundamental signal is generated by some news event that affects the price of a currency pair. For instance, governments often schedule announcements regarding interest rates, inflation, trade figures, etc. Any surprise stemming from an anticipated announcement can generate a fundamental trading signal, as can sudden political or economic events.
3. Identify your first trade based on technical signals. Scalpers use technical analysis -- the use of previous prices to predict future ones -- to detect price trends and support and resistance levels. When prices of a currency pair become volatile due to some fundamental event, a technical analysis method should correctly identify trend direction and suitable points to enter and exit positions.
4. Enter trades. Each trade order has an entry price (the price you are willing to pay), a take-profit price that closes the position for the specified profit amount, and a stop loss which quickly closes out a losing position. Scalpers are looking to earn a modest profit on each trade, perhaps five to 10 pips. They must earn enough to pay for any spreads or commissions charged by the ECN broker. A scalper aims to enter a sequence of trades that each generates a small profit. By using leverage -- borrowing from a broker to finance most of the trade -- scalpers increase the amount they can trade and thus boost returns; however, risk is also boosted by leverage, so stop loss orders are essential for downside protection.