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Beginners love to scalp retail forex – can you succeed

One of the most common trading strategies that novices like to start off using on retail forex platforms is scalping. This strategy attempts to take frequent profits on very small price changes. The aim is to gain just a few pips profit on many trades during the day. Novices love this type of trading because it gives them plenty of action and makes them feel like “real  pro traders” and they also can use relatively small stop losses.

With retail scalping you would typically be trading time frames within the range M1 to M5 and often looking to generate maybe just 5 or at most 10 Pip profit with a stop loss set often just a handful of pips away.

Is such a trading method viable for retail traders ?

The general simple  answer is “not the way they are doing it”.

Often novice traders will try to scalp the markets through one of the spread betting companies. It is almost impossible to make consistent meaningful profits scalping in this manner. The reason quite simply is the spread and what is also known as the price slide on the execution.

With spread betting companies or indeed any market makers the spread and slide often represents too greater proportion of total profit earned to give the trader any real chance of consistent meaningful success. In other words such traders are getting plenty of action but generally end up  running to stand still.  The only real beneficiary of this practice is the spread betting company that is of course skimming  the spread on every transaction. So in essence  the retail forex scalper is actually being scalped by the spread betting company !

Please do not fall into this trap.

To have any meaningful chance of long-term success in scalping  you absolutely must get the best possible execution of your trades. Without doubt your broker should definitely offer STP or ECN execution which levels the playing field somewhat.

Your chances of success will improve if you stick to just the most liquid pairs such as the EUR/USD, GBP/USD, USD/CHF, and USD/JPY as these tend to have the highest trading volume and lowest spreads.

Trade only during the most liquid times of the day which tend to be the overlaps between two trading sessions. This is typically from around 7 am to 9 am (Asia/Europe overlap)  and from 1pm to  4pm (Europe/USA overlap) London time.

Look to aim for an absolute  minimum  profit of around  three times the spread and look for your average winning trade to be at least equal to your average losing trade (risk to reward ratio of 1:1 minimum).

Remember that generally the easiest money is made trading the longer term time frames and as you move down the time frames trading becomes more difficult and also more volatile and uncertain. So my advice is by all means attempt to scalp the markets for fun and practice but also look at longer term time frames trading for larger individual trade profits where spread becomes a much less significant factor.

Generally novice traders would be far better off using one of the several very simple methods taught on the beginners/intermediates course as these methods whilst still  allowing short term holding periods if required  have been properly designed and formulated to ensure that the trader is playing on a much more even playing field than the novice scalpers are.  We should be trying to swim with the flow not against it our trading systems ensure that you are doing just that.

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