DEFINITION of 'Forex Scalping'

A trading strategy used by forex traders to buy a currency pair and then to hold it for a short period of time in an attempt to make a profit. A forex scalper looks to make a large number of trades and earn a small profit each time.

BREAKING DOWN 'Forex Scalping'

Forex scalping generally involves large amounts of leverage so that a small change in a currency equals a respectable profit. Forex scalping system strategies can be manual or automated. A manual system involves a trader sitting at the computer screen, looking for signals and interpreting whether to buy or sell. In an automated trading system, the trader "teaches" the software what signals to look for and how to interpret them.

It is thought that automated trading takes human psychology out of trading, which is important in forex scalping because the fast-paced environment can be hard for traders to stomach.

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