The specifics of the Forex market are that small movement of several points in one direction or another are much more frequent than large and tangible price changes. If you trade on such movements, BUY/SELL positions can be opened literally every second and if the circumstances are successful, you can get decent results by the end of the working session. Consequently, scalping is one of the most popular methods of trading in the Forex market, the essence of which is the short-term opening and closing of positions. In this context, the term "short-term" will not sound quite accurate, because in trading it is usually applied to 3-5-minute time intervals, while the enormous bulk of scalpers will keep their trades open no more than one minute.
Forex Scalping Strategy Definition
Scalping is trading on small timeframes to extract a small profit from each market movement. Such trading is aggressive - trades can be placed within a few minutes and closed when the profit reaches several pips. To get enough profit, an investor has to make dozens of deals during the day to maximize the profit. Scalping, due to its riskiness, is not very popular among professional traders. However, if its peculiarities are taken into account and clear rules are worked out, scalping can become quite successful. Thus, successful transactions can bring daily profits up to 10-30% of the deposit size. In scalping there is no need in deep study of the basics of technical and fundamental analysis - for trading, it is enough to use the rules of entry and exit from the position. A positive characteristic of scalping at Forex is free entry into the market - there is no need to determine the trend or wait for it to start. Trading can be carried out on any market.
Compliance with the basic principles of scalping helps to reduce risks to the maximum extent possible:
The shorter the time in the market and the lower the volatility of the instrument, the safer trading is;
the profit should overlap the spread with the reserve - for a spread of 2 points it is necessary to increase the rate at least 3-5 points;
work on M1 timeframe - it maximally reflects the slightest market fluctuations;
use the maximum leverage - its size will significantly expand the opportunities for a trader. So, for example, with a deposit of $20 you can already open deals with the volume of 0.1 lot;
clear execution of the management rules.
Following these rules and effective indicators for scalping is the basis of successful scalping strategy
Apart from that, the disadvantages include very high trading risks. Any trade opened randomly, in the absence of clear entry and exit criteria can bring a loss that crosses out all previous results. For scalping, you need to choose a broker that provides a minimum spread. Besides, when processing an order by Market Execution type (a position is opened at the market price), its value should be regularly monitored. Naturally, a high spread, with minimal values of profit, can make any trade a losing one. If the broker receives commissions from open trades instead of the spread, therefore it is necessary to compensate this commission.
Forex Scalping And Strategies
A number of traders on the market is equal to the number of scalping approaches.
Each of them focuses on his or her own experience, in particular on successful trades, and his or her strategy.
Method 1: Pipsing
It is also called a pip. Pipsing is considered the most high-speed and high-frequency scalping system. Pipsers work for 5 minutes, or even 2-3 minutes, trading as fast as a person on the exchange can work manually. They practically do not count, because of the number of mistakes they make as much as possible within the limits of profit-making. Pipsing is considered one of the riskiest methods. But novice traders often start with that, because it requires almost no knowledge.
Method 2: Classic
This technique is used by more experienced and careful traders. It includes surface technical analysis. In fact, a trader evaluates supply and demand, looks for trading indicators on charts and uses one or two indicators to get signals about effective market entry points. Indicators in scalping signal minimal price spikes, which do not matter for the trader's position. On average, traders using this approach to open positions roughly every 6-12 minutes.
Forex Scalping Signals And Indicators
There is one important requirement for Fore scalping indicators - they should not be complicated. If you are constantly in the time deficit mode, there is no time left for complex technical analysis tools, and the simpler the algorithm, the faster you can decide on entering a position. The expressions "direction of movement", "trend" used in the indicator descriptions do not imply a trend in the market, but the situation on the working timeframe. ForexTurboScalper indicator is used on M5-M15 timeframes. It is designed to determine the trend direction at the initial stage. It has audio notification about the change of direction and the appearance of a signal at the input. Colored lines of the indicator are located in a separate window: blue lines are an ascending trend, red lines are a descending trend, yellow lines are a flat phase. The disadvantage of the indicator is the occurrence of poor-quality trend reversal signals. ParamonScalp is used on EUR/USD and GBP/USD pairs and M15 timeframe. The algorithm calculates the trading range for the pair and displays its recommendations for entering the market on the left side of the chart field. Trading is carried out with pending orders when the price goes outside the range - daytime minimum and maximum. According to investors, the indicator algorithm is developed on a professional level and is one of the most effective in scalping. The tool for full scalping at Forex is the indicator 100 pips today scalper. It belongs to multicurrency instruments and works on timeframes from M1 to M15. Visually, the indicator is a moving average painted in one of two colors, depending on the direction of the current trend. Red color means a downtrend, yellow - an upward trend. The current trend is additionally indicated by the captions in the chart field - Up or Down. The indicator notifies the trader about the change in the trend with a special signal and enables to make an effective and safe entry into the market. The abundance of existing indicators for scalping shows the popularity of scalping indicator trade. Scalpers recommend using several such indicators simultaneously.
Forex trading has always been considered a risky way to earn money. Scalping, in its turn, refers to the riskiest Forex strategies, even though it can still be classified as thoughtful trading. The existing tools of technical analysis and automation of scalping can significantly reduce risks and facilitate the trading process. But their use also requires a methodical and thoughtful approach.