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A guide for forex scalping
Forex scalp trading, or scalping for short, is a popular trading strategy characterized by short time frames between the opening and closing of a trade.
Forex scalping strategy works by going in and out of positions several times to gain small but consistent daily profits. [/vc_column_text][/vc_column][/vc_row][vc_row][vc_column][vc_message color=”success” message_box_color=”success” icon_fontawesome=”fas fa-check”]This system is usually based on signals extracted from technical analysis charting tools.[/vc_message][/vc_column][/vc_row][vc_row][vc_column][vc_column_text]Scalpers must be highly trained and decisive decision-makers to succeed as gaining profits using forex scalping strategy requires tremendous expertise in the area. Many technical trading systems exist to aid in scalping, most of which are offered directly by online brokers or exchange platforms.[/vc_column_text][/vc_column][/vc_row][vc_row][vc_column width=”1/2″][vc_column_text]
This article will explore what forex scalping strategy is, how you can make money with it, and cover all necessary bases that you should know to start scalping. In the end, we will offer you tips and tricks of the trade to maximize your chance of success using this strategy.
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What is a forex scalping strategy?
Forex scalping strategy is essentially a day trading strategy, in which traders buy or sell currency pairs in a brief time and try to make a series of quick profits. In the forex scalping strategy, scalpers try to take advantage of small price movements throughout the day. While having a 5 pip scalping strategy or a 20 pip scalping strategy might seem insignificant, the profits can be magnified by increasing the position size.[/vc_column_text][/vc_column][/vc_row][vc_row][vc_column][vc_column_text]
Scalpers typically hold positions…
[/vc_column_text][/vc_column][/vc_row][vc_row][vc_column width=”1/2″][vc_column_text]For as little as a few seconds to a few minutes to minimize the risk associated with time. They use leverages to gain a respectable profit, which helps make their position size bigger.
There are numerous forex scalp trading strategies; however, they usually fall into broad categories, as follows:[/vc_column_text][vc_single_image image=”142″ img_size=”full”][vc_empty_space height=”350px”][vc_single_image image=”146″ img_size=”full”][/vc_column][vc_column width=”1/2″][vc_single_image image=”140″ img_size=”full”][vc_column_text]
These strategies involve entering in the direction of a trend and attempting to capture a profit if the said trend continues. Famous strategies such as the super trend scalping strategy fall into this category.
Countertrend strategies
These strategies are more challenging and involve taking a position in the opposite direction of a trend. The countertrend strategies are usually used when the trader expects the trend to reverse or pullback.
Range strategies
These strategies include a closer look at support and resistance areas in a chart. Traders try to buy near support or sell near resistance; that way, they are profiting from oscillating price action.
Statistical strategies
These strategies are based on looking for patterns or anomalies that occur given specific circumstances. Statistical traders might buy/sell and hold the position for five minutes if a specific chart pattern appears at a particular time of day.
It is essential to have in mind that forex scalping requires skill and practice, and there is no shortcut or a secret simple and profitable forex scalping strategy. The best forex scalping strategy is one you have practiced with and mastered. [/vc_column_text][/vc_column][/vc_row][vc_row][vc_column][vc_column_text]
Is scalping profitable in forex?
The short answer is YES. Forex scalping can be a profitable strategy. However, gaining consistent profits in forex scalping requires strict exit strategies, having enough experience, and making split-second decisions.
So if you know your strategies and can perform well under pressure, forex scalping can be a great and profitable strategy for you. In fact, the salaries of forex scalpers in the US range from $23,830 to $58,720, with a median salary of $38,250. The middle 60% of scalpers make around $38,250, with the top 80% earning $58,720.[/vc_column_text][/vc_column][/vc_row][vc_row][vc_column][vc_column_text]
How to do scalping in forex?
[/vc_column_text][vc_message color=”success” message_box_color=”success” icon_fontawesome=”fas fa-check”]To start using the forex scalping strategy, you should first set a few things straight with yourself:[/vc_message][vc_single_image image=”158″ img_size=”full”][/vc_column][/vc_row][vc_row][vc_column width=”2/3″][vc_column_text]
Your currency pair
You should pick a currency pair that has enough volume not to be manipulated with few players yet has enough volatility that you can profit from.
Your time frame
You should pick a time frame and stick to it for forex scalping. Favourite time frames are 1 minute, 5 minutes and 15 minutes.
Your exit strategy
Last but not least, you should have a firm exit strategy, meaning when you’ve gained your goal profit, which you should set beforehand, you need to close your position.
The same goes for your maximum loss, meaning when you’ve reached a certain percentage of loss, you should close your position to avoid further losses.
And your time frame, as mentioned above, is your cue to close your position on time and do not hold a position out of greed or fear.[/vc_column_text][/vc_column][vc_column width=”1/3″][vc_single_image image=”160″ img_size=”full”][/vc_column][/vc_row][vc_row][vc_column][vc_column_text]
What are forex scalping strategy indicators?
In addition to broader strategies that we covered earlier, here are the top 6 indicators for forex scalping strategy:
- Simple moving average (SMA): Short-term averages respond quickly to changes in the underlying security price, while long-term averages are slower to react. In scalping, you usually use short-tem moving averages.
- Exponential moving average (EMA): It’s a moving average (MA) that places a greater weight and significance on the most recent data points. Again, much like SMA, you usually use short-term moving averages in scalping.
- Relative strength index (RSI): It’s a momentum indicator used in technical analysis that estimates the magnitude of recent price shifts to evaluate overbought or oversold situations in the price of a currency pair.
- Bollinger Bands: They are indicators that show if prices are high or low on a relative basis. Bollinger bands are used in pairs and in conjunction with a moving average (MA).
- Stochastic oscillator: It’s another momentum indicator that compares a particular security closing price to a range of its prices over a specific time frame.
- Parabolic SAR: It’s a technical indicator that determines how a currency pair moves. This indicator is also known as a stop and reverse system, abbreviated as SAR, and helps identify probable reversals in the price movement of currency pairs.
Volatility in forex scalping
Volatility is the rate at which the price increases or decreases. If the price fluctuates rapidly in a short period, hitting new highs and lows, it is said to have high volatility.
Volatility is advantageous when trading derivatives, as it allows traders to profit from rising and falling market prices. However, it’s essential to have a risk management strategy to minimize losses, especially when using leverage to open a position.
Scalping is most profitable when markets are volatile, so the best time to open a position is during the session’s open and close.
Liquidity in forex scalping
Liquidity is the volume of orders that take place simultaneously in the market.
The liquidity of the market is of high importance. The more liquid a market is, the more orders are filled precisely, and therefore, the more profit will be.
Remember that currency pairs with low liquidity aren’t suitable for scalping, as fewer orders can be filled at an exact price. The same logic applies to markets with low liquidity, such as the cryptocurrency market.
What is the best forex scalping strategy?
As we mentioned before, the best forex scalping strategy is one that you’ve practiced with and mastered. By using our top 6 indicator picks, one at a time or together, you can find the forex scalping strategy that works best for you.
However, forex price action scalping is a strategy that is popular amongst many traders. Price action scalping works without an indicator, and those who use this method only focus on price and its analysis. This can be done by observing candlestick charts and being aware of support and resistance levels and other trendlines to extract the necessary information to trade.
Using leverage is another excellent strategy when scalping, as it helps make greater profits. However, using leverage magnifies the losses as well. So use leverage with caution.
What is the best timeframe for scalping?
While trading in small portions and closing every position fast might sound simple, it requires advanced skill and experience.
Seasoned traders have their own favourite time frames and are familiar with their benefits and drawbacks.
On the one hand, shorter time frames limit the manoeuvre time and require fast decision-making while minimizing the risk associated with time.
On the other hand, longer time frames allow scalpers to manoeuvre their trade better and have a little time when making decisions while they encounter the risk of overturning trends and pullbacks.
Some of the most famous and popular scalping time frames are 1, 5, 15 and 30 minutes.
1-minute forex scalping strategy
1-minute time frame is probably the most popular one in scalping. Since the time is limited, there is a limited number of opportunities to open positions. Therefore scalpers tend to focus only on one specific signal or indicator.
To perform well within the one-minute time frame, you need to set a goal for how many pips you look to gain in a minute; the usual answer is three; if you reach your target, you need to exit the position. You need to also define a strict rule for your losses as well.
This time frame is best for people who perform well under pressure and have short attention spans. But don’t be fooled by its name; in order to make consistent profits in this time frame, you need to allocate at least three hours of your day.
Here are a few tips that can help you gain better results in 1-minute forex scalping:
- Start during the most volatile sessions, like London or New York.
- Scalp in major pairs as they are more suitable.
- 50 and 100 EMAs are the most popular indicators for 1 min scalping strategy.
- Use Stochastic Oscillator with periods 5, 3 and 3, as that’s another popular indicator in this time frame.
- Use both aforementioned EMAs and Stochastic and open positions when both indicators agree.
5-minute forex scalping strategy
The 5-minute scalping strategy is very similar to the 1-minute scalping strategy. All the risks and considerations that you need to make for 1-minute time frame scalping also apply here as well.
The major difference is that the 5 minute scalping strategy mainly focuses on capturing momentum, so the indicators that show overturning in trends are most popular in this time frame. The common pip goals in 5 min scalping strategy are 10 to 15.
This time frame is best suited for people who perform well under pressure yet like to analyze a few indicators before opening a position.
Here are a few tips that can help you gain better results in 5-minute forex scalping:
- Use stop losses and trailing staps in 5 minute time frame to help you cut down on further losses.
- Use 20-period exponential moving average in 5 minute time frame.
- Try using the MACD indicator (Moving Average Convergence Divergence) at its default settings which are 12, 26, and 9.
15-minute forex scalping strategy
Some scalpers favour 15 minute time frame over other time frames, as they have more time to analyze and act upon their analysis. However, since more information is visible and available in this time frame, operating in it requires a higher level of knowledge and expertise.
The 15 minute forex scalping time frame is best suited for traders that have practiced their skills enough in smaller charts that have fewer confusing data. However, you can always use 15 minute time frame to zoom out and see the overall situation of your open positions from a broader perspective.
30-minute forex scalping strategy
The 30-minute charts in scalping are also another excellent time frame to zoom back and assess your open positions in a grander scheme of things.
As you take positions in smaller time frames such as 1 min or 5 min, it’s a wise idea to take a step back and look at the bigger picture.
While some might say that large waves rarely affect scalping strategies, it’s a smart decision to know the overall direction of your upcoming trades.
This time frame is a tool that every scalper can use to gain a broader perspective on what’s happening in the market and what is going on.
Pros and cons of forex scalping
Now that you’ve gained some information and insight into the world of forex scalping, it’s time to take out an old yellow legal pad and list some pros and cons. So, without further a due we present you with pros and cons.
Let’s start with the pros:
- Perhaps the biggest advantage of Forex scalping is that it allows scalpers to open and close several positions a day.
- Scalping can bring in small but regular profits.
- Forex scalping shows its results soon, and while in other strategies, a position might not close for weeks, you can know the result of your trades within minutes.
- If you have a good exit strategy, the likelihood of making money every day is high in the forex scalping strategy.
- Forex scalping does not require huge market movements to make a profit.
- Forex scalping can be exciting and exhilarating for many people due to its volatility.
- Scalping is the best strategy for those who like to be constantly involved in the market.
- Opening a small size position and only risking a small amount of your capital each trade is an excellent way to avoid significant losses.
- Since your goal is usually to gain a few peeps, your target is always in sight, and it minimizes the risk of getting greedy and chasing after a trend.
And for the cons:
- The difficulty of prediction is undoubtedly the biggest disadvantage of the forex scalping strategy.
- Predicting what the market will do in the next minute or five is much harder than predicting the overall market trends.
- You need to be a consistent winner to be able to make profits in forex scalping and gain large returns.
- You need to put in the time every day to make profits.
- Scalping requires a lot of knowledge and expertise.
Now that you have all the information, you can make an informed decision that will increase your likelihood of securing profits.
When to avoid forex scalping
There are times that good traders know that they should avoid scalping. Here they are:
Major news releases
Since major news can cause a 20 or 50 pip swing in a matter of seconds, scalpers try to avoid trading in super volatile situations.
Several losses in a row
A good trader knows that several losses in forex scalping mean they are analyzing something wrong, and therefore they need to take a step back.
Several wins in a row
A good trader does not get greedy. There’s a concept called “hot hand fallacy,” which simply means people who have won quite a few times in a row have higher confidences, making riskier judgements that can lead to a disaster.
When it stresses you out
Always ask yourself why are you trading? Most often than not, the answer is to make money. And money should bring you freedom and peace of mind, not stress. So if it causes you sleepless nights and stress, you should take a step back.[/vc_column_text][/vc_column][/vc_row][vc_row][vc_column][vc_column_text]
When scalping, focus on one currency pair or position at a time to have better chances at success. When trading multiple positions, you can lose focus.
Risk-reward ratios of 1:2 or 1:3 are easy to spot and trade, and that will allow your capital to grow.
It is advisable only to trade currency pairs with high liquidity and volume. Major currency pairs are the best.
Study Japanese candlesticks—Forex scalping strategy with Heiken Ashi candlestick, Ichimoku Kynko Hyo indicator, Doji candles, etc. They are an excellent source for understanding the charts.
Scalping is a risky business, so only proceed if it sits well with your stomach.
Ask for help, tutoring and take classes. Forex scalping requires knowledge and expertise.
If you find yourself googling “proven forex scalping strategy” or “easy forex scalping strategy,” you are not ready for scalping yet.[/vc_column_text][/vc_column][/vc_row][vc_row][vc_column][vc_column_text]
Is forex scalping a suitable style for you?
It’s time to be honest with yourself and acknowledge the limits of your knowledge and expertise. Scalping is not for everybody, Some traders will thrive with it, but others perform much better over more extended time periods, such as swing traders.
To be a successful scalper, you need to have enough capital that allows you to have moderate risk tolerance. You need to have enough time to allocate to day trading because it will take up 3 to 4 hours of your day. You also have to be able to perform well under pressure and make split-second financial decisions.
Another important quality of good scalpers is their ability to follow strict rules for opening and closing positions that allow them to manage their fear and greed.
So if you have the abovementioned qualities, by all means, scalp away.[/vc_column_text][/vc_column][/vc_row][vc_row][vc_column][vc_column_text]
What can Aron groups do for you?
[/vc_column_text][/vc_column][/vc_row][vc_row][vc_column width=”2/3″][vc_column_text]Aron Groups is a Forex Broker that can make scalp trading easier for you. You can deposit and withdraw easily and with no commission and wages, using Visa, Mastercard, PayPal, etc. You can also enjoy a 2% cashback by depositing USDT.
You can open up different accounts such as standard, VIP, Nano and Cash, and use the most up-to-date MT5 trading platform.
Aron Groups provides you with security and great customer service that cannot be matched by any other broker.
To register with Aron Broker, Click Here, Or you can read about frequently asked questions here.[/vc_column_text][/vc_column][vc_column width=”1/3″][vc_single_image image=”164″ img_size=”full”][/vc_column][/vc_row][vc_row][vc_column][vc_column_text]
Forex scalping in a glance
Forex scalping is a profitable albeit not easy strategy in forex. Forex scalping strategy is a day trading method at its core but in small time frames.
The most popular time frames are 1 and 5 minutes which are more beginner-friendly as they contain less information, and 15 and 30 minutes are great for taking a step back and assessing the overall trend of the market.
Many forex scalping indicators can help you navigate your way in the world of scalping but using moving averages, RSI, and MACD have proven to be effective in this regard.
The bottom line is that forex scalping is a risky business and requires someone to handle the stress and risks associated with this trading style. If you find yourself to be in possession of these qualities, scalp trading is made for you.
We wish you the best of luck! And may the odds be ever in your favour![/vc_column_text][/vc_column][/vc_row]