What do these two terms mean? This type of trading allows traders to gain profit from intraday currency fluctuations in the market. Transactions like this are not open all day, but only in minutes. One pipsing and scalping transaction will not make a big profit for you, therefore the main principle of this type of trading is to have as many positions as closed. The number of transactions made by pipsers and scalpers is 200 per day.
However, it is not wise to expect all transactions to be profitable. The results sought are a positive balance at the end of the trading day. To achieve this target, a trader needs to set a stop-loss level near the opening price. This will help to minimize losses if prices reverse direction. It is a well-known fact that Forex is the most liquid market in the world. Prices in the Forax market vary, fall and rise, following the cycle. If the price passes around 60 points a day, the difference between the highest and low levels is quite large. Trading based on hourly price fluctuations (highs and lows) guarantees greater profit.
Therefore, pipsing and scalping are very popular among traders. Forex beginners might argue that with this kind of trading, large profits might be obtained. The number of trades imaginable can even surpass real limits, given the opportunity to re-invest. This kind of belief is hard to come true, even though the internet is spreading stories about some lucky traders who can add their deposits to multiple. In fact, this strategy will not guarantee any success. Let’s discuss the reasons for this. First, the stop-loss level that approaches the price increases the likelihood of experiencing a loss at the smallest fluctuation if the estimated strength of the bulls and bears is wrong, even though a further trend is expected.
It is much easier to make mistakes in determining the direction for a short period of time (1-2 hours), compared to determining the direction of the price for a full day. The simplest way to avoid execution of an order with the risk of loss is not to take the order. However, then there is a risk of losing many sources after a strong movement against you. This happens when the price moves away and is unlikely to return to its original position in the near future.
If a trader maintains a larger portion of his deposit as a margin and does not set any stop-loss level, he will get a margin call and then lose all funds in the account. Second, the majority of traders become nervous and anxious when dealing with real money. According to regulations, this type of trading is tested first on a demo account, because there is no real money involved in it, therefore there is no risk of wasting money. So, the emotional attitude of a trader in handling an account actually becomes bad every pip if the price moves in the wrong direction.