Ultimate Forex Scalping Guide 2020 and Scalping Strategy Explained
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Ultimate Forex Scalping Guide 2020 and Scalping Strategy Explained
Forex scalping is one of the most common trading approaches used by both newbies and professionals as its application does not require much experience and allows quick profit from a small deposit.
It is not a simple strategy, because it does not leave you the option to make a mistake, and if you are a beginner or have not yet honed your skills of technical analysis on the currency market, errors are inevitable. Sometimes even the most perfect technical pattern can fail. Also, scalping on Forex is suitable for traders with a certain type of personality - they must be able to make trading decisions quickly and without hesitation, and certainly not to question their decisions after they have been made
What Is Forex scalping?
Scalping is a type of trading in financial markets, where a trader always closes a position with either a small loss or a small profit. A trader practicing scalping has a large number of trades in a short period of time.
The essence of the strategy of scalping is that trading is carried out on the shortest time interval M1, its length is only a minute, so you can clearly see the smallest fluctuations in the exchange rate. You can work both for buying and for selling, depending on the direction of the trend.
However, scalping can also be carried out on higher time frames of M5 or M15, especially if there is a weak movement of the rate and on one minute you are unlikely to earn something. In an uptrend, it is safer to make buy deals and vice versa. You can also earn by playing against the trend, but in this case, there is a risk that you simply will not have time to catch the price fluctuation in the opposite direction and lose more than you could earn.
The main task is not to be greedy and close unprofitable positions in time.
Scalping can only bring results on very volatile currency pairs with a small spread. Scalping is quite a popular type of trading, especially for beginners in the Forex market. Most likely, it happens because the result of their actions in the currency market can be obtained almost instantly, in a few minutes.
Is Scalping Suitable for You?
Before choosing any trading strategy and deciding forex scalping strategies are what you've been looking for, take into account the following factors:
see if the strategy fits your lifestyle;
the goals set;
way of thinking.
Now let`s quickly go through the pros and cons of scalping which will help you to figure out if it is suitable for you.
The main advantages of scalping:
Reduced risks due to short entries. If a trader enters the market as the price moves, he has a good chance to make a profit on a very short distance.
Scalping is possible even if the trader has only minimal capital. In this case, the leverage comes to aid. While scalping, a trader learns to deeply understand the market and to predict the slightest changes in it. A couple of months of active scalping will teach you much more than a year of trading on a long-term strategy.
It is much easier to "catch" small price changes. For any security, a movement of 10 cents happens much more often than a movement of 1 dollar.Small movements occur in the market much more often. Even in periods of relative "calmness" on the market scalpers always have work to do.
Disadvantages of scalping:
Significant risks. In the advantages, we have mentioned that scalping reduces the risks due to the short trades in terms of timing. But on the other hand, the risks associated with the need to open more positions or more capital investments increase.
Scalping is suitable only for experienced traders who can quickly analyze the situation and confidently make informed decisions.
There is a lot of tension. Traders who only practice scalping are subject to high mental stress. Accordingly, it is necessary to understand whether you can withstand such loads. If not, it is better to refer to other methods.
Scalping does not tolerate errors. One erroneous decision can override all your previous efforts. A trader can trade profitably all day long on minor price movements. But with the appearance of a trend, he is likely to make a wrong decision and lose all his earnings.
How To Scalp In Forex
As with any tool, scalping can be used differently depending on the scalping forex strategies attached. Some traders prefer to squeeze out all the possibilities, while others choose a more tactful and restrained style of using the technique. In total, there are three most common scalping approaches, each of them has its advantages and disadvantages.
High-risk - the most dynamic, most profitable, and most risky used by scalper Forex strategy. It is also called pipsing, as the income from one trade is measured literally by a pair (from 2 to 7) points. When using this tactic, an order is closed in the vast majority of cases within only one minute, more often - several seconds. Leverage is chosen either as the maximum available leverage or around 1:500. Pipsing is suitable for traders with an extremely aggressive trading style, as the risk of losses is very high. In general, if you act wisely, by the end of the trading session it is quite possible to earn a couple of hundred points.
Classic - a more restrained, but at the same time, comparable in the profitability trading method. It is characterized by a longer duration of trades, usually equal to 1 to 5 minutes, as well as more selective and accurate entries. Usually, popular oscillator stochastics is used for such scalping, and since the readings of all oscillators are late, it takes a little more time to close the trade.
Conservative - the calmest way of scalping, which in general is closest to the classical, conservative trading. In this case, the position can be opened up to 15 minutes, and the leverage is reduced to 1:200 or even 1:100. The profitability of such scalping is much less than that of pipsing, but the risks are also much lower. As for the scalping Forex strategies, the same methods are suitable for earning money with scalping as any other type of trading. The only thing to keep in mind is more stringent conditions for entering the market and closing positions. This is what determines the success of any trade opened by the scalping method.
The Best Times For CFD and Forex Scalping
The best time for CFD and Forex scalping is the most important factor that needs to be taken into consideration. You must have known that currency trading is a daily basis trading system and since there are several time zones all over the world the best time for scalping is showing an upside-down pattern. In other words, though the center of time is using GMT and other countries are adjusting the schedule with it but still, there are some patterns you should learn while creating your Forex scalping strategies. Seeing the marketing trend in each time classification is very interesting stuff to do because the patterns will be repeated every day. So, let’s start with classifying the period of time and see the flow of the market and then find the factors or aspects that influence it.
The first time-zone classification is from 11:00 up to noon GMT. In this period, the market flow tends to move really slowly, the reason is that most of the traders from Europe prefer to sit back and reconsider their scalping Forex strategies before the American traders enter the market at noon. This condition causes the market flow really choppy but very slow and it is the best time for scalping currency trade or a perfect time for scalpers to practice with their movement in seeing opportunities offered by the trend. They could hold the position a bit longer to see the possibility and there is always a chance and enough time to liquidate their position or change their strategy when they found the position is unprofitable. The next time-zone classification is from noon up to 2:00 pm GMT. In this period, all-important markets are all opened from the United States, Europe, and Asia. The flow of the market is moving very rapidly and though the chance to make a profit is increasing the risk to suffer the loss is also higher. However, it is the best time for forex scalping or there is no better period to build up the position as long as you know how to stay alert.
Period of time between 7:00 up to 11:00 PM is the phase when some banks are preparing to close. This time is the calmest period from the entire trading period in a day, especially when all American banks are already closed along with all banks from major countries. The chance to make a profit is low as well as the risk and during this period is better for scalpers to avoid building up the position because the market flow is very choppy.
The Best Broker For CFD And Forex Scalping
In order to successfully trade with a scalping strategy, you should not only be able to choose the right trading tactics and time, but also solve a lot of purely technical issues, including choosing a broker for scalping. For your information, some companies openly write in terms and conditions that scalping is forbidden, while others prefer to act in other ways rejecting to execute an order, price slippage, requotes, false quotes, delays in order execution. Many brokers have algorithms to identify traders that use the specified Forex scalping strategies as soon as the trader starts to make money. Most brokers and dealing desks (DDs) get quotes from information systems (Reuters, Bloomberg, etc.), usually used by several quotation sources to form consolidated streams. On their basis, they form their own quotes and broadcast them to their clients. So it turns out that the trader is trading against broker/DD, and successful traders will bring losses to the broker. Other important criteria for choosing a broker for scalping are:
Security of funds.
Low spreads. If the spreads are high, the price changes very slowly and as a result, it causes a loss.
The accuracy of the price, preferably 5 decimal places.
Fast execution and reliability of the system.
Fast platform. Scalper needs a fast platform that can execute trades quickly and without problems. so that they can make the most of every second and compress as many orders as possible.
Trading with PaxForex you will get access to all of the above mentioned, along with:
Premium liquidity from 6 partners, which leads to tight spreads and almost no requotes.
The provided MT4 platform supports automatic trading with robots.
Several account types, which include accounts suitable for limited trading capital.
Assistance provided to traders through market analysis, training, and dedicated account managers.
All in all, whenever you have to choose a trading strategy or broker, always test drive on the virtual account in order to compare and to confirm your choices, only after that you can make a final decision.
The Best Platform For CFD And Forex Scalping
No doubt, the best platform for CFD and Forex scalping is MetaTrader 4.MT4 terminal has a large number of various functions and allows us to perform complex technical analysis of any currency pair. The number of open charts is almost unlimited, there is a possibility to increase and decrease the scale of charts, change the type of charts from lines to bars or candlesticks.
Trading terminal MetaTrader 4 includes a large arsenal of all kinds of functions, but it is not difficult to understand and grasp. The interface is quite simple and user-friendly, it does not take long to master, if there are any difficulties or questions, you can always refer to the help built into the program.
Above, only a part of a huge number of functions is briefly described. It is not sly to say that the MT4 trading terminal is currently considered the best program for Forex trading and is used by the vast majority of traders and brokers.
So, scalping is a short-term style of trading that gives an opportunity to make a large profit and teaches a trader to understand and feel the market perfectly. At the same time, scalping is associated with very high risks and psychological stress. It is risky for beginners to start their way in the Forex market immediately with scalping. It is necessary to undergo special training in scalping, with great attention to the choice of strategy, carefully assess and weigh all the risks. In scalping, success depends largely on the scalping strategies forex trader applies. Before you start trading on a real account, you should carefully test drive your scalping strategy, bring it to perfection, and only then start trading with real money. Remember that despite the fact that scalping allows you to make quick profits, it`s a complex trading style that requires a lot of effort, concentration, patience, and experience.
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