What is a Forex Scalping Strategy?
Scalping is a very short-term trading strategy, characterised by high volume trading and taking small profits per trade. Traders who employ this trading strategy are known as scalpers. A Forex scalping strategy involves trading from ten to hundreds of times in a day and taking small profits of around 2-15 pips per trade.
Forex Scalping Strategy Examples
Most scalping strategies employ either indicators (including custom indicators) or price actions (including candlestick patterns) or a combination of both. These techniques are developed for use on low time-frame charts like the M1 (one minute), M5 (five minutes) or M15 (fifteen minutes) charts, so that the strategy is able to give traders ample opportunities to facilitate high volume trading.
Who Should Use a Forex Scalping Strategy?
Scalping is more suitable for experienced traders because the window of entering trades spans from seconds to a minute or two. This requires very fast decision making and reaction times from the trader. Given such short timeframes, new traders are likely to fumble and make mistakes.
A Forex scalping strategy is also suitable for traders who prefer:
1. Getting in and out of the market in a very short time, within a few seconds to an hour.
2. Trading by constant monitoring of the market for a few hours at one time.
3. Taking a high volume of small profit trades.
Managing the Risks of a Forex Scalping Strategy
Before you embark on your journey to become a World Class Scalper, there are a few things that you must be aware of:
Scalping requires constant monitoring of the market. It requires high concentration and focus, resulting in fatigue after a period of time. Traders must know when to take a break or call it a day. Trading more does not necessary yield more profits. On the contrary, you may have a higher tendency to make a wrong decision or a mistake due to fatigue.
To overcome this issue, set a guideline for yourself such as “I will take a break or call it a day after trading for one hour” or “I will stop trading after I hit my daily target of 80 pips”.
2. Major News Releases
During major news releases, market volatility may increase and gapping may occur. Depending on which Forex scalping strategy you choose, it may work best when the market is volatile or it may work best when the market is flat. Know your scalping strategy and choose the right time to trade.
Increases in market volatility require much faster reaction times to enter and exit your trades. Market gapping can be disastrous since it may wipe out a number of profitable trades in one quick moment. Of course, gapping can also be a blessing when the gap is in your favour.
3. Consistent Risk Management
As traders, we often seem to hit losses when we trade more lots and hit profits when we trade fewer lots. To avoid experiencing this situation and to increase the likelihood of consistent profits, be consistent with your risk management. Ensure your maximum acceptable loss per trade remains the same, either in absolute amount or in percentage of your trading capital.
4. Stick to Your Trading Plan
There are “devil’s voices” in the heads of all traders that tell us to remove our Stop Loss, to enter a larger lot size to make up for a previous losing trade, to continue trading when we’re in “winning form” and so on.
Have a trading plan that tells you when to take a trade, when to stop trading, how much risk to take and stick to it.
5. Trade with the Right Broker
The broker you trade with is like your spouse or significant other. Choose the wrong broker and your life as a trader will be miserable!
Not all brokers are friendly to traders who use a Forex scalping strategy. Some brokers even disallow scalping. If you find yourself having difficulty entering or exiting trades on a regular basis when you are scalping, it’s time to find a new broker.
The good news is you need not look any further: FXPRIMUS allows any trading style, including scalping and hedging.
Why not try FXPRIMUS and see for yourself?