Primarily there are two trading styles in forex trading: Short term and long term. Short term trading is done when positions are opened and closed on an intraday basis. Long term trading positions may span a few weeks or a few months.
Scalping is one of the methods to trade forex on a short term basis. It is a trading style where small price gaps created by bid/ask spreads are exploited. It normally involves opening or closing a position within a few minutes or even second.
Scalping takes advantage of the fact that most of the time the market is ranging. Ranging means there is no significant price movements or volatility. The aim of a scalper is to make 2-5 pips per trade.
Scalpers look for the period when the market is consolidating and ranging like when between the closing of the US currency markets and the opening of the European currency markets. During this period forex markets tend to range for hours without much movement. This is the time when scalpers like to trade.
If you are interested in scalping then you need to make more pips per trade than the pips spread offered by your broker. The spread is your cost of trading. So if the spread is 4 pips. You need to make more than 4 pips for each trade just in order to break even.
You cannot become a successful scalper without understanding technical analysis well. You should have clear concept of over-under brought, support and resistance levels, trendlines, trading channels etc before trading any position.
Most of the forex brokers hate scalpers. Since the brokers are most of the time trading against you, a successful scalper can take profits away from the brokers. No doubt many brokers try to ban scalper from trading.
Since scalping means a few pips per trade, in order to make 20-50 pips per day, you will have to trade many times. Dont forget these 20-50 pips are after you have subtracted the trading cost.
Since scalpers are looking for capitalizing on very small gains like a few pips per trade, the profits obtained per trade are small. So scalping requires you to use high leverage.
Leverage is dangerous. It is a double edged sword that cuts both ways. Leverage helps you if market favors you but it will destroy you if the market does not favor you. So beware of using too much leverage while trading.
