Scalping, Spread and Technical Analysis

What do brokers mean by scalping?

In this method, the trader places several trades in smaller amounts and with the use of a tight stop loss. Usually these trades are placed within a short period of time and result in smaller profits, but since they are multiple investments, the sum of the profits also adds up. Although the Forex market is active 24 hours a day, not every hour is suitable for scalping. Most of the day there is almost no movement and the currency rates do not show any changes, which is not advantageous for this Forex strategy. The scalping strategy needs a volatile and liquid market to deliver the best results. In Forex trading there are 4 headquarters: New York, Sydney, London and Tokyo. For scalping trading to be effective, traders need to learn the exact behavior pattern from the selected currency pair and delineate most active sessions. For certain currency pairs, it is even possible to narrow down specific hours in which a good price can be snatched.

Spread at Forex Broker?

The difference between the current bid price and ask price is called the spread. This is displayed as a series of dots and refers to the last large digit in the price quote. The spread is basically easy for traders to calculate, as it represents the earning margin for the broker and is the amount that the trader will eventually have to pay him.

How does technical analysis work?

The goal of technical analysis is to forecast future price trends based on historical data. Any private investor can have an access to the tools of technical analysis in order to better calculate his trading decisions. Nevertheless, these tools cannot eliminate unreliable estimates. Technical analysis has been used for decades and the hypotheses derived from it, based on experience and long observations, are considered very reliable.

There are basic requirements for technical analysis that should be considered carefully. All factors that have an impact on market movements must be considered. Each price movement serves a specific purpose and history and certain occasions repeat themselves continuously. These statements contribute to the view of technical analysis as a purely mathematical analysis of historical data. Technical analysis is based on the fact that there are certain directions and patterns for price movements, but it is not used to find out the reasons behind such movements.

Which currency pairs offer the best trading opportunities?

The majority of forex trading is done with the US dollar against other currency, as the American economy is the largest in the world. Other currencies also serve as a basis for trading, such as the Japanese yen, Swiss franc, the euro, and the British pound. There are two main reasons for buying and selling currencies. About 5% of the daily turnover in foreign exchange trading is carried out by various companies and countries that buy or sell products and services in a foreign country. Profits also need to be converted from the foreign currency to the local currency. These processes are part of Forex trading and are carried out daily all over the world. The remaining 95% of Forex trading is performed solely for profit and speculation. The best trading opportunities for traders are those with the most frequently traded currencies, the so-called major currencies. More than 80% of all transactions involve trading currency pairs within these groups. These major currencies include the US Dollar, Euro, Japanese Yen, Swiss Franc, British Pound, Australian Dollar and the Canadian Dollar.