Understanding how Forex Scalping Works

While there are many different forex scalping strategies that are available, one of the most popular and easy ways to scalp forex is trading during significant economic news releases. The fact that the currencies tend to fluctuate quite a bit during such economic releases, makes it one of the easiest ways to scalp the forex markets even for complete beginners to forex.

One of the important aspects of scalping forex during economic news releases is that it involves the use of technical market analysis as well as identifying how the particular markets tend to move as a result of the news, be it positive or negative. The volatility in the pricing arises out of the fact that the news which is being released very rarely comes out to meet the market expectations. This is due to the many variables that come into play which is quite hard for the average economist, let alone a forex analyst to take into account.

The discrepancy thus gives rise for traders to take advantage of the situation and thus set up a robust scalping strategy.

Often, during economic news releases, the prices that fluctuate is largely on account of trader sentiment and the initial reaction. If you observe closely, there are three stages during economic news releases. The first being the instant reaction where the prices tend to fluctuate quite a bit. This is usually triggered by too much buying or selling immediately upon the news that is being released. The second stage is when the markets tend to correct itself and close the discrepancy. Most often, traders with an eye for trading opportunities tend to take advantage in the first step as it usually results in a breakout of the trends and thus placing a proper buy or sell order alongside a stop loss can be quite beneficial.

The third stage is usually when investors digest the information and take into account the news from a larger perspective. In most cases, it is during this stage that the right trends come into play. For example, upon releasing a certain economic news, it could trigger a panic selling, which is later corrected by the markets itself and eventually when the dust settles, traders make the right choice, which is either to buy or sell or hold on to the currency.

The ideal way to scalp the forex markets during news releases is to take up your positions 10 or 15 minutes ahead of the news releases with the right stop losses in place so as to minimize your trading losses in the event the market goes against you. Following a 15 minute chart is ideal in such cases as it enables you to properly monitor the trends in the pricing and place your trades accordingly.

There are many automated systems that tend to scalp the forex markets on your behalf. Such tools, indicators or even EA's does the same job of analyzing the markets and identifying potential trading opportunities. Bear in mind that not all forex brokers allow you to scalp the markets. In fact some brokers do not encourage trading during news releases. For a list of brokers that allow forex scalping, click here.

Scalping itself does not yield instant returns but once you find a discipline and a pattern it can become almost second nature to scalp the forex markets for a few minutes in order to gain a few pips in profits.

Is a Forex Managed Account Right for you?

In the ever changing investment landscape managed forex accounts continue to be at the forefront and at times are the preferred choice of investment. Irrespective of your investment strategy or style, smart investors follow one simple rule, which is to diversify. Putting all your eggs in one basket, or in context, investing all your money into the same kind of stock or mutual fund can prove to be dangerous. The advantage with diversifying your investment portfolio enables you to manage your risks better and at times can help you offset any losses you might incur in other investments.

When it comes to diversifying your investment portfolio, the first things that comes to mind is mutual funds, stocks and bonds. To the average investor these might seem different, but there are subtle underlying factors that are common to all three and it would be naive if you would think you have a good diversified portfolio by investing in just mutual funds, stocks and bonds.

Alternative investment options, such as forex managed accounts is one investment product that should be considered. The reason why many investors hesitate to go ahead with a managed forex account is the large prevailing myth that you can end up losing your money or perhaps the managed forex account you deal with cannot be trusted much. Fact is that when speaking about losses, the same risks holds true whether you invest in a stock or in the bond markets.

Agreed, that investing in a managed forex account takes a bit more time and research compared to mutual funds or other relative products. The reason is because the other investment products are so common that it has become a large playing field for just about any investment company. When you look at the forex managed accounts landscape on the other hand, its still in its infancy, which could substantiate why it takes a bit more than usual when it comes to researching into a good forex managed account.

Forex is perhaps the largest financial market ever with stagerring numbers if you look closer and it is also one of the most volatile and dynamic markets. Within forex there are lot of sub categories such as commodities trading, indices and/or CFD's.

If you are looking to invest in a managed forex account, here is a great article to learn about the basics of investing in managed accounts in forex.

To conclude this article, we leave with some basic tips if you are considering a forex managed account investment.

Research into the forex managed account company. Its ideal that the company is legally registered and also take time to read through the terms and conditions.

Find out how much the minimum investment is required. Some managed accounts offer a low entry point of $2000 and upwards. However, the returns you see on such investments is quite low. On the other hand, this would minimize your risks and also give you time to evaluate on how your fund manager is operating.

Never give your money directly to the fund manager. The most safest route is to sign up with the forex broker your fund manager works with and to fund your own account. You can then sign the Limited Power of Attorney to authorize your fund manager to trade on your behalf.