Forex Scalping Strategy: Best Indicators & Tips

The spread is the difference between your broker’s sell and buy rates. High spreads and commissions cut into your profit and reduce the chances of scalping success. Another risk in scalp trading is not being able to close your position in time to meet your planned stop-loss limit. Such high-impact news can cause large price moves in a short period, which is ideal for scalpers. Scalping can also be a way to make money when currency markets are choppy, have no discernible trends, or are moving within a narrow range.

Moving averages for scalping forex

Before adopting a forex scalping strategy, it’s important to understand currency liquidity and volatility, and the pros and cons of this trading style. Forex scalping involves trading currencies based on a set of real-time analysis. The purpose is to make a profit by buying or just2trade review selling currencies, holding the position for a very short time, and closing it for a small profit. In other words, stop your losses quickly and take your profits when you have your seven to 10 pips. This is a scalping method and is not intended to hold positions through pullbacks. It is always helpful to trade with the trend, at least if you are a beginner scalper.

The assumption is that price will complete the first stage of a movement in a short span of time so you aim to take advantage of market volatility. Scalpers can place up to a few hundred trades in a single day, seeking small profits. Smaller moves happen more frequently than larger ones, even in relatively calm markets.

Due to the increased volatility, position sizes may be scaled down to reduce risk. While a trader may attempt to usually make 10 pips on a trade, in the aftermath of a major news announcement they may be able to capture 20 pips or more, for example. With our trading academy and the support and guidance of our trading coaches, you can quickly start scalp trading in the forex market as a forex scalp trader. The most liquid forex pairs tend to be those most traded, such as EUR/USD, GBP/USD and USD/JPY (大口）.

Placing an order at a certain level and having it executed a few pips away from where you intended is called slippage. As a scalper, you cannot afford slippage in addition to the spread, so you must make sure your order can and will be executed at the order level you request. Scalpers need to love sitting in front of their computers for the entire session, and they need to enjoy the intense concentration that it takes. You cannot take your eye off the ball when you are trying to scalp a small move, such as five pips at a time.

Since you intend to scalp the markets, there is absolutely no room for error in using your platform. As a trader, it is up to you to research and understand the broker agreement and just what your responsibilities would be and just what responsibilities the broker has. Ask questions to the broker’s representative and make sure you hold onto the agreement documents. Remember, with one standard lot, the average value of a pip is about $10. So, for every five pips of profit made, the trader can make $50 at a time. You can often see a pattern emerge as these waves hit resistance (upper) or support (lower) levels at similar prices.

This can amplify profits but can just as easily magnify losses, because your profit or loss are calculated from the full value of the position. That’s why it’s vital to have an appropriate risk management strategy in place no matter which scalping techniques you’re using. Use the 10-minute chart to easymarkets review get a sense of where the market is trading currently, and use the one-minute chart to actually enter and exit your trades. Be sure to set up your platform so that you can toggle between the time frames.

Currency trading is available on our online trading platform​, Next Generation. When scalpers fail to use hard stops in their positions, substantial losses can accumulate. This is especially the case if short-term trend reversals are encountered in currency pairs. A signal to close the second short trade emerges, as gold prices break above the downward trendline on the 5-minute charts. This turns the trading bias to bullish (positively) and this creates new interest in long positions. In the chart below, we can see how scalpers use Exponential Moving Averages (EMAs) to establish positions.

Technical Indicators

Scalpers use it primarily to spot potential reversals to discover the best time to enter and exit a market. Conversely, a scalper might open a short position when the %K line crosses below the %D line at the top, and close their position when it crosses above the %D line at the bottom end of the range. A stochastic oscillator is a technical indicator that compares the current value of a forex pair to its range over a recent period of time. Scalpers can use the stochastic oscillator to predict when a trend may turn bullish or bearish. Scalpers often use derivatives like CFDs to trade forex pairs that are rising or falling in value.

Trading platforms

Setting up to be a scalper requires that you have very good, reliable access to the market makers with a platform that allows for very fast buying or selling. Usually, the platform will have a buy button and a sell button for each of the currency pairs so that all the trader has to do is hit the appropriate button to either enter or exit a position. In liquid markets, the execution can take place in a fraction of a second. Spread betting and CFD traders trade with leverage when using a scalping strategy in the forex market.

Managing Risk in Scalping

This is observed through candlestick charts, using support and resistance​ levels and trendlines to decipher the same information that they would extract from a technical indicator. Scalping is a popular forex trading strategy that involves taking short-term positions on currency pairs to make small profits on each trade. With a live account, our traders have access to our online chart forums. These are updated regularly with market news and analysis from professional traders of the platform, so you can share ideas and take influence from others’ success with forex scalping strategies. Putting into place stop-loss orders​ when currency trading in such volatile conditions can help a trader more effectively manage their risk and losses.

Like we mentioned, scalping is all about making quick trades.

1. The market may gap through their stop loss point, resulting in the trader getting out with a 20-pip loss and losing four times as much as expected.
2. For example, if the price moves upwards as predicted, you could start by bringing your stop-loss up to break even, so at least you won’t lose anything on that trade.
3. In an automated trading system, you use programs (or ‘robots’) to do this for you based on set parameters.
4. As each trade carries transaction costs, scalping can result in more costs than profits.
5. This means that there are many small movements from which a scalper can benefit.
6. Leverage enables you to borrow capital in order to gain greater exposure on a trade, by depositing a percentage of the full trade value, based on an instrument’s margin rate.

If you like the action and like to focus on one- or two-minute charts, then scalping may be for you. If you have the temperament to react quickly and have no compunction in taking very quick losses, not more than two or three pips, then scalping may be for you. Remember, scalping is high-speed trading and therefore requires lots of liquidity to ensure quick execution of trades.