Scalping is a trading strategy used in the securities, commodities and foreign exchange markets.
This style of trading involves placing many trades throughout a trading session.
Each trade is held for a short period of time to take advantage of market fluctuations.
The idea of scalping is to place a high volume of small yielding, yet profitable trades.
What Does Scalping Involve?
Scalping involves trading fast and being focused on price charts for long periods of time.
A scalper is required to think fast and be able to change bias, or direction very quickly.
Because of the long periods of focus and attention needed, scalping can be very stressful for some.
This is why traders that have the time, patience and ability to remain calm in stressful situations choose to scalp.
This style of trading is perfect for traders who do not like to wait for long trades, with multiple trades places daily.
With scalping traders do not expect to gain more than 10 pips and so usually high volumes are traded.
With higher volumes traded this usually means that there is a higher percentage at risk per trade.
How To Scalp The Forex Markets
- Scalp currency pairs using 1-15 minutes time-frames.
One minute and five minute time-frames are the most used.
- Be aware of any scheduled news reports as this could change the direction of the price instantly while you are in a trade.
- Look for a pair that is volatile, the higher volatility then the higher number of moves for that pair.
- Choose a liquid currency pair with the lowest possible spread, the higher the spread then the less profit that can be made.
Major pairs tend to be the most liquid.
- Choose a forex broker that offers STP or ECN execution that is able to accommodate scalping.
This will help prevent having your order refused or even worse not having your order to close a trade allowed.
- Trade during the most liquid times of the day, this tends to be when trading sessions are overlapping.
- Focus on just one or two pairs, trying to scalp too many pairs will be create unnecessary stress.