Though the main principle of scalping trading is clear and very simple, there are few approaches in applying this Forex trading strategy among Singapore Forex traders. In this article we will look into the trading on the news using scalping.
The most significant news breakdowns that occur almost every day in the Forex market are usually taking place after the important economical news releases. Moreover, the news itself should not be very important. The essence of trading on the news is the initial strong movement of the market that lasts for a few hours or so and generates fluctuations.
The main difference between scalping on the news from other news Forex trading strategies is in the size of a stop-loss, the average duration of the transaction and the risks control.
Despite the similarity of this Forex trading approach to fundamental analysis of the news, in reality, a scalping trader approaches the issue only technically. Scalper is not interested in the real nature or significance of the economical news. The market’s reaction is at its strongest only during the first 10 minutes after the news release that is why it is recommended not to start scalping immediately after the news release. It is also worth to know that very often the statistic data is reviewed, and these figures may significantly differ from the original one, which may create strong pullbacks in the market.
Why scalper should not trade during the first 10 minutes after the news release? First, some Forex brokers broaden the spread, so it becomes complicated for scalping. Second, it is difficult to define market direction in the first few minutes of the news release. But traders are quickly restore liquidity of the market as the big players use this time to adjust their positions. In few minutes after the news release brokers return spreads to normal, the market direction is defined and you can begin to scalp. Therefore it is better to wait a little (10 minutes or so) and then start trading in the Forex market.
How to scalp after the news release? We are waiting for 10 minutes, during which the direction of the market determines, and then scalp in a certain direction.
The stop loss order is based on time. For example a trader takes a rule to close a trading position in 2 minutes after it was opened disregarding on the current price. Since we do scalping, we are not intending to hold positions open for a long period of time. It is quite possible that the price will not move either to the Stop Loss, or to Take Profit, and hence, increases the risk that it will move sharply against our position. A stop loss based on time helps us avoid the dangerous and chaotic market.
Scalping on the news is often very profitable, because this Forex trading strategy has all the ideal conditions needed for successful trading. By this we mean strong movements after the important news release that last during a short period of time that suits the trading strategy of scalping.