In the fast-paced world of forex trading, where time is of the essence, scalping is emerging as a popular and dynamic strategy. With its focus on quick trades that are executed within minutes or even seconds, scalping provides traders with an opportunity to take advantage of short-term price movements.
Opportunities abound here in the global 24-hour market, and scalping stands out as a dynamic approach that can be taken by traders of all types, including part-time enthusiasts.
In this article, we will briefly explain what scalping is and how you can use it to navigate the forex market with confidence.
What is the scalping strategy?
Scalping It is a trading strategy of a very short term nature. This approach makes it possible for day traders Opening and closing trades within a few minutes with a profit. When this happens, the trader can go ahead and open new trades using the same approach.
Here is a good example of how a scalping strategy works. Suppose you have an account with $10,000. In this case, you can open a small trade and make $10 within a few minutes. If you repeat this process 20 times a day, you will get a profit of $200. In a month, earnings can reach $4,000, which is a 40% return.
naturally, This example assumes that the trader does not incur any losses using the strategy. In fact, the profiteers suffer some losses. So, You need a good risk management strategy to make sure this works.
How does scalping work in forex
To understand how scalping works in forex, we need to take a look at what forex trading is. Forex, which stands for Foreign Exchange, is a process Buying and selling currencies with the aim of making a profit.
For example, suppose the USD/JPY pair is trading at 138 and you have 1,000 dollars. In this case, you can change the money to Japanese yen and get 138,000.
If the dollar strengthens and USD/JPY rises to 145, that means your initial $1,000 will be worth $145,000. This means that you have made a profit of 9,000 yen.
That includes forex trading Do a currency search Then speculate whether it will go up or down. After doing this research, traders execute trades betting on what will happen. If they are correct, their trades become profitable.
Unlike other trading strategies, scalping is very short term as traders usually hold their trades for less than 5 minutes.
As such, these merchants Do not use long term charts. Instead, they use very short charts between 1 minute and 5 minutes.
Best forex scalp pairs
Companies offer many forex pairs. These pairs are divided into three: Majors, minors and exotics. Main are the currencies of developed countries It has US dollars. They include EUR/USD, GBP/USD, and USD/JPY among others.
small currency pairs It consists of developed countries which lack US dollars. Examples are EUR/GBP, AUD/USD, and GBP/AUD among others.
Exotics are currency pairs that have emerging market currencies. Examples are EUR/TRY and GBP/ZAR.
in most cases, Investors focus on major foreign currencies Because of its deep liquidity and low transaction costs. Speculative exotics can be very expensive due to their wide reach.
Therefore, the best currency pairs to consider are:
- EUR/USD
- GBP/USD
- US dollar / Japanese yen
- US dollar / Swiss franc
- Australian dollar / US dollar
Among other things. Forex juniors are also the second level of this.
Scalping trading strategies
There is a common question about some of the best scalping trading strategies. There are four basic scalping strategies you can use in forex: trend following, reversals, news trading, and arbitrage.
Follow the trend
Trend following is a trading strategy where a trader simply buys an asset that is going up and drops the price that is going down. People who use this strategy believe in it Following the direction to the end or when it reaches a resistance level.
Trend tracking also involves the use of trend technical indicators such as moving averages, Bollinger Bands, VWAP, and Ichimoku. These indicators will give you a clue When to exit the trade. A good example of a scalping trade is shown below.
relapses
The opposite of trend-following is reversals. A reversal is the situation when a forex pair changes its direction and starts a new trade.
A good example of inversion is shown below. The chart shows that the pair was in a downtrend when it bottomed out at 34.1. Then I started a new bullish trade.
So, Reflection, reflux, inversion merchants Search for business opportunities When reversals are about to happen then ride the new trends.
Traders use several methods to trade reversals, including chart patterns, candlestick patterns, and indicators. most popular Reflection, reflux, inversion Schedule patterns They are the head and shoulders, the double and triple tops and bottoms, the rising and falling wedges.
most popular Reversal candlestick The patterns are the morning and evening star, the shooting star, the hammer, and the hanging man among others.
Trade the news
This is a trading strategy that focuses on the news that appears on a daily basis. The most popular forex news are:
- Interest rates and economic data on inflation
- employment
- manufacturing
- Industrial production
- Consumer confidence
Speeches of influential leaders such as presidents and central bank officials can also move currency pairs.
Best times to scalp forex
An important part of forex trading is that Currency pairs are usually live for 24 hours, five days a week. Therefore, you can trade forex daily any time you want. However, history shows that the best time to trade forex is during European and American sessions.
The European session starts at 7:00 GMT and ends at 4:00 PM GMT. On the other hand, the American session starts from noon until 8 pm GMT.
Many traders like to trade when there are crossovers between the Asian and European sessions and between the European and American sessions. The Asian session is the worst for trading due to low volume and low volatility.
How do you perform your analysis in scalping?
We recommend the situation in which it is used Three ways When using a scalping strategy. First, look at Comprehensive news of the day. The economic calendar will help you know what to expect during the session.
Second, do a multi-timeframe analysis, where you are Look at three charts before executing the trade. In this case, you can look at the hourly, 15-minute, and 5-minute charts.
using this approach It will help you to identify support and resistance levels. It will also help you to identify the main chart and candlestick patterns.
finally, Go to the short term chartAnalyze, then execute the deal.
Best broker for forex speculation
There are many things to consider when looking for a good forex broker for your scalping strategy. The most important one LiquidityAnd Low feesIt is stable and has access to many markets.
A broker with deep liquidity will make it easy for you to enter and exit trades. One with low fees will save you a lot of money in transaction fees.
Summary: Is scalping a profitable forex strategy?
As with all strategies, scalping is profitable It depends on the skills of the trader (This is true of any asset). While many people make their living from speculation, some do not. In fact, many people who start speculation do not succeed in it.
The secret to success is having a good scalping strategy, learning more about how it works, and having a good risk management strategy.
Useful external sources
- How to apply forex signals to scalping? – Forex leaders