Is the market good enough for scalpers right now?
In Brief
Let’s evaluate current market conditions and assess if the current market is conducive for scalpers.
Scalping has come a long way since financial markets’ inception. Scalping can be an extremely attractive trading method for its promise of many small returns throughout the trading session. In the world of financial trading, scalping refers to quickly opening and closing a trading position for swift gains. However, for the effective performance of scalping strategies, certain market conditions need to be present. Let’s evaluate current market conditions and assess if the current market is conducive for scalpers.
Scalping explained
Scalping refers to trading strategies where traders hold trading positions for extremely short periods. Scalpers typically open and close trading positions in a matter of minutes or even seconds. The main characteristics of scalping strategies are their reliance on lower time frames of 5 minutes or 1 minute, technical analysis, and super low spreads and commissions. Without these conditions, it would be difficult to implement an effective strategy that quickly capitalizes on short-term price movements. Scalpers often use technical analysis to make sense of current market conditions and execute trading positions. However, some traders might also use news trading and await high-impact news to scalp quick gains in a matter of seconds when major economic indicators are released.
To successfully implement a scalping strategy, the required market conditions must be aligned. These strategies will work better when markets are volatile and the price covers some distance in the short term, allowing scalpers to make profits in a short period. If markets are slow and volatility is lower, then the scalping strategy might produce fewer profits and even lose money because of spreads and fees. There are a plethora of scalping strategies available online and a guide to the best scalping strategy to try out will prove useful, as it is difficult for beginners to filter out bad strategies from working ones.
Current Market Conditions
Current market conditions are indicating changing dynamics across the globe, with uneven economic growth across regions. Central Europe and specifically countries like Poland and Romania are expected to outpace the growth of Western Europe because of lower labor costs, improving infrastructure, and integration benefits from recent geopolitical events. On the contrary, countries like Germany are experiencing significant economic challenges, with forecasts confirming the contradictory period ahead. South Africa also faces economic pressure due to supply-side constraints in electricity and logistics sectors, leading to lowered growth expectations. Global growth projections from IMF are at 3.1% for 2024 which is moderate. The inflationary environment is one of the main contributors to this lowered expectations. This scenario of moderated growth and inflation will present a tricky scenario for scalpers to navigate.
The importance of market volatility and liquidity in scalping
Volatility is important, but liquidity also has the almost same level of importance, as scalpers need higher execution speeds to catch the desired price. If there is not enough liquidity it will take more time to open a trading position which might result in a worse entry price. Higher execution speeds, therefore, play a crucial allure in scalping.
Low spreads and fees are a must
Other essential factors include low spreads and low commissions. Scalping relies on quick small profits which can easily be evaporated if the spreads are high. For example, when trading with a 1 standard lot (100,000 units of a currency) 1 pip movement is typically around 10 USD. IF your strategy is generating 2–3 pips per trade, then 1 pip spread can easily eat up 20 USD from your profits, rendering even a profitable strategy useless.
Who can be a scalper?
Scalping strategies require traders to look for short term price movements and react quickly to catch the setups. This kind of strategy is different from trend trading or swing trading methods, where it is possible to track the price on higher time frames. Scalpers have to react fast, and it requires a certain personality to employ fast-paced trading methods. However, after due diligence and preparation almost anyone can become scalpers, also depending on the personality the learning curve will be different. The most viable approach is to learn any of the scalping strategies and try to trade on a demo account to see if it suits your personality and trading style.
Disclaimer
In line with the Trust Project guidelines, please note that the information provided on this page is not intended to be and should not be interpreted as legal, tax, investment, financial, or any other form of advice. It is important to only invest what you can afford to lose and to seek independent financial advice if you have any doubts. For further information, we suggest referring to the terms and conditions as well as the help and support pages provided by the issuer or advertiser. MetaversePost is committed to accurate, unbiased reporting, but market conditions are subject to change without notice.About The Author
Gregory, a digital nomad hailing from Poland, is not only a financial analyst but also a valuable contributor to various online magazines. With a wealth of experience in the financial industry, his insights and expertise have earned him recognition in numerous publications. Utilising his spare time effectively, Gregory is currently dedicated to writing a book about cryptocurrency and blockchain.
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Gregory, a digital nomad hailing from Poland, is not only a financial analyst but also a valuable contributor to various online magazines. With a wealth of experience in the financial industry, his insights and expertise have earned him recognition in numerous publications. Utilising his spare time effectively, Gregory is currently dedicated to writing a book about cryptocurrency and blockchain.
