What is Scalping and Pipsing?

These two terms are often heard on the Forex market. Scalping and pipsing are kinds of trading strategies which are used by traders in order to make profits from the fluctuations of the currency courses within the day. Such orders are conducted in a very short period of time, sometimes even in several minutes. When you use this trading strategy your earnings from every order can be very small, but the whole profit can be high enough because of the big amount of the orders.

Scalping and Pipsing

Pipsing is considered to be very short term trading, which usually lasts up to 2 minutes. Scalping – short term trading, which lasts 4-10 minute. But the principle of these strategies is the same.

Forex traders can execute such kind of orders within all day and by the end of the day the level of 200 points may be reached. By fast order closing in case of negative market influence, scalpers (pipsers) try to reduce the losses, to have positive trading results. Wherein, the risk of losses losses risk is minimized.

It’s not a secret, that Forex has a big volatility. Within the day prices increase and decrease with the certain periodicity. The price may pass more than 100-150 points within several minutes in case of the important news release. Exactly due to such market changing frequency, it’s possible to increase profit. Such trading strategy is very popular among the traders.

Newbies without experience use this strategy and think, that scalping doesn’t require certain knowledge. But trader has to understand, that every trading strategy needs additional knowledge and practice.

Disadvantages of Scalping and Pipsing

If you use Stop Loss, the placing of it takes some time, which is essential for the scalping strategy, this may lead that each delay may reduce possible profit.

Some traders see the solution in refusing to place Stop Loss, but such method holds the risk of loosing profit, for example, in case the price changes in the unfavorable direction for the trader. In case this happens, the price correction to the previous level may take long term.

It should never be forgotten that the pipsing means executing of big amount of orders in a short time period – it requires from the trader maximum concentration on the charts and track of the market movements. If the trader doesn’t have required level of reaction, he may not be in time for the order opening at the desired price which will cause to not receiving the desired profit. The same situation is with the order closing.