PREMISES OF SCALPING
There are a few main premises of scalping that are useful to keep in mind to understand the logic behind these techniques. Smaller moves are easier to gain – In my previous eBooks I mentioned that the larger your target pip gain the higher the possibility that the target won’t be reached. I have been known to say that it is easier to catch 20 pips than 200 simply because in the time that it would take to reach that goal the market sentiment could change due to unforeseen circumstances. As a scalper it is reasonably easy to determine a small movement in a particular direction and to capitalize on a few pips before the market will likely reverse. Smaller moves happen more frequently than larger ones – Even during relatively quite market conditions there are numerous smaller movements that can adequately be traded. Thus you can easily trade within what appears to be a stagnant consolidation or range as seen on larger perspectives. Limit risk due to limited exposure – An active scalp trade typically lasts for a very brief duration. This reduces the likelihood that unforeseen news or a Fundamental Announcement will negatively affect the trade. Profit from trending sentiment – Currency pairs tend to trend or bounce around in the absence of any news or relevant events. Currency virtually never remains at a constant price but fluctuates and trends to market sentiment. These small movements create opportunities to scalp trade. Cumulative small gains equals large rewards – Scalpers often engage in numerous trades in a single day. Most trades will only yield a small profit, but cumulatively they add up to significant gains.
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