Scalping or short-term trading involves making dozens or hundreds of trades a day, trying to scalp a small profit from each trade by exploiting the bid-ask spread.
Scalping works because not all currency pairs remain on the move at all times. Scalpers generate profits from these non-moving pairs or turn around and sell for a profit those pairs that fluctuate in a positive direction. This way, they receive a small profit. This profit quickly adds up.
Some advantages to scalping include less exposure to risk (because it doesn’t have the time in one position to be effected), easier-to-obtain moves and more opportunities to realize a small profit.
Of course, there are no perfect strategies. Many forex trading platforms prohibit scalping and will charge a fee for making more than ten trades in one day. Therefore, it would benefit the trader to find out if this practice is allowed on their particular platform.
However, for a short-term trading strategy to be profitable, it requires larger capital. Leverage is also necessary to magnify profits from small price moves.
It is important to have an exit strategy set up before trying to scalp, as it would only take one large loss to eliminate an entire day’s positive profits.
Utilizing a one-minute chart will give the trader a better idea of what trades to make and which to shy away from.