Short-term trading in currencies is unlike short-term trading in most other markets. A short-term trade in stocks or commodities usually means holding a position for a day to several days at least. But because of the liquidity and narrow bid/offer spreads in currencies, prices are constantly fluctuating in small increments. The steady and fluid price action in currencies allows for extremely short-term trading by speculators intent on capturing just a few pips on
each trade.

Short-term forex trading typically involves holding a position for only a few seconds or minutes and rarely longer than an hour. But the time element is not the defining feature of short term currency trading. Instead, the pip fluctuations are what’s important. Traders who follow a short-term trading style are seeking to profit by repeatedly opening and closing positions after gaining just a few pips, frequently as little as 1 or 2 pips.

In the interbank market, extremely short-term, in-and-out trading is referred to as jobbing the market; online currency traders call it scalping. (We use the terms interchangeably.)

Traders who follow this style have to be among the fastest and most disciplined of traders because they’re out to capture only a few pips on each trade. In terms of speed, rapid reaction and instantaneous decision-making are essential to successfully jobbing the market.

When it comes to discipline, scalpers must be absolutely ruthless in both taking profits and losses. If you’re in it to make only a few pips on each trade, you can’t afford to lose much more than a few pips on each trade.

Jobbing the market requires an intuitive feel for the market. (Some practitioners refer to it as rhythm trading.) Scalpers don’t worry about the fundamentals too much. If you were to ask a scalper for her opinion of a particular currency pair, she would be likely to respond along the lines of “It feels bid” or “It feels offered” (meaning, she senses an underlying buying or selling bias in the market — but only at that moment). If you ask her again a few minutes later, she may respond in the opposite direction.

Successful scalpers have absolutely no allegiance to any single position. They couldn’t care less if the currency pair goes up or down. They’re strictly focused on the next few pips. Their position is either working for them, or they’re out
of it faster than you can blink an eye. All they need is volatility and liquidity.

Retail traders are typically faced with bid/offer spreads of between 2 and 5 pips. Although this makes jobbing slightly more difficult, it doesn’t mean you can’t still engage in short term trading — it just means you’ll need to adjust the risk
parameters of the style. Instead of looking to make 1 to 2 pips on each trade, you need to aim for a pip gain at least as large as the spread you’re dealing with in each currency pair. The other basic rules of taking only minimal losses and not hanging on to a position for too long still apply.