Scalping (very short-term trading) is for those who intend to trade on 1- 5 minutes charts using as a context for trading 15-30 minutes charts. Sometimes this approach also calls as “Intraday” trading, but short-term trading also could be intraday, even if you trade on hourly chart. This is just the question of when you will close your trades. Scalpers (traders who trade in such manner) as a rule close positions by the end of the day. Advantages of scalping trading are: - No overnight risk, since you close positions by the end of the day; - A lot of possibilities. You may make for instance 10 trades per day and that is not the limit; - Smallest demand for trading account – stops are very tight; - Possibility to trade with much greater position volume with the same level of risk, since stops are tighter; - If in general, if you’re profitable trader, you will get fastest results; - You do not need fundamental analysis. Disadvantages of scalping trading are: - You have to think very fast and frequently change your opinion; - You have to do a lot of preparation work, since you will not have time to do it when the market will break some level; - A good broker becomes extremely important; - you have to get superb knowledge of market mechanics; - You will have to take money from pit traders and market makers. That’s really tough work to do; - Transaction costs will be much greater - All your time will be spend on trading; - Your stress level will be the highest among other types of trading. But whatever time frame you will choose, it has to be suitable for your personality. That’s the major factor. When you will find yourself comfort and calm in decision making and the trading process, that will be the starting point of further trading journey and use of multiple time frames for market analysis. That’s why we strongly recommend that you to try any trading on demo first. But I have to say that the combination of daily/hourly time frames is suitable for a large percentage of traders. The reason is simple. It’s not so boring to trade – if you see something interesting, you may sit a bit in front of screen and make your trade during 1-2 hours. IF you see nothing – you may place orders using daily time frame as context and hourly time frame for levels estimation. So, this is some kind of compromise between all time trading and small time trading. In other words, your initial task is – find your preferred time frame. The shorter the time frame you live in, the tougher your work becomes. P.S. This lesson was written by Sive Morten, who has been working for a large European Bank since April of 2000, and is currently a supervisor of the bank's risk assessment department. Sive's knowledge of forex market and banking industry is vast and quite complete. If you have any specific questions about forex, banking industry, or any other financial instruments, please post them on the next page and Sive should answer soon. Note: FPA ranks are earned in the battles against scam, not in the classroom.