subject: Forex Scalp Strategies: Do You Know This Trick? [print this page] For foreign currency traders who practice forex scalp strategies, knowing as many scalping techniques as possible is vital. You want to be able to move in and out of the market as fast and as often as you can, and at the same time, maximize your profits from each trade. Even the tiniest improvement in your fx trading technique can make a huge difference to your bottom line. So here is a little trick that can help you make the most of a winning trade.
It is a well known fact that one of the quickest roads to ruin in forex scalp trading is to hold onto a trade that you should have closed, hoping and praying for bigger and bigger profits. Eventually it is going to turn around and bite you where it hurts. At the same time, it can be an absolute killer when you close out a trade with your planned gain amount achieved and then see the price continue on and on in the right direction. In that situation it is only human nature to be discontented with what you came away with and feel that you closed the trade out too early.
Fortunately there is a way to take advantage of those bigger movements without abandoning your forex scalping system completely. It can be used by any trader who is trading more than one lot or whose broker accepts fractional lots.
This strategy involves waiting until the price reaches your preset profit target, and then closing half of the trade. So you take half of the profit, and at the same time, move your stop loss and set a new limit order.
The limit order will of course be set for a new profit target. This may be the same as your original profit target over again, or it could be a little less, but do not make it more. Either be satisfied with that or, if your position size allows it, repeat the strategy and close out half again when the new target is reached.
There are two possibilities for the new position of the stop loss. Firstly, you can move the stop to your original entry position less the spread, so your worst case would be that you would exit with the half profit that you have already taken and break even on the other half. Secondly, you can move the stop half way between your entry point and the original setting of the stop.
The question of which stop position is best will depend upon your system and its profit target position. Clearly you do not want to move the stop so close to the current price that it will be triggered by any fluctuation. But that is something that you can easily test.
Of course, you should never mirror this strategy with losing trades by hanging onto half of your losing position. Always close out a losing trade entirely. This forex scalp strategy is designed to maximize your wins and you certainly do not want to maximize your losses!
by: James Roshwood
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