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Forex Scalping Strategy


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You might have heard that forex scalping is the best forex strategy available for traders. In this article, we discuss what forex scalping is and the best forex scalping strategies you can apply when you’re trading.

What is forex scalping & why is it the best forex strategy?

Forex scalping is one of the four trading styles that traders use. It is, in particular, a style of short-term, day trading. While in traditional day trading, you hold the forex for a period of 24-48 hours and then sell it, in forex scalping, you hold your forex for only incremental periods of time.

The objective of forex scalping is simple. Make profits out of the incremental price changes that affect the stock market. The core idea behind the strategy is to get in and out of the market in as short a time as possible. What this means is, you hold your forex only for really short periods of a few seconds, 1-minute, 2-minutes, 5-minutes, 10-minutes and so on.

Typically, the very first hour of the day when the stock market opens is the most volatile. Traders who engage in scalping track the movement of the market. They look for specific times when the market is about to move, be highly liquid, or experience volatility. By making the right trade during these volatile periods, you can capture incremental gains with each trade. Usually, this can be anywhere between 5 pips and 20 pips. As you increase your position size, you’ll be easily able to scalp your way to high profits.

Benefits of forex scalping

Here are some reasons why forex scalping is the best forex strategy and also highly profitable:

Forex scalping limits the risk you experience

Forex scalping involves making small trades in a short time. Since you’re in and out of the market in a matter of minutes, you don’t have to experience the risk of long-term volatility. If you know when to make your trades and when to exit, you’ll be able to make quick wins in a safe manner.

You don’t require complex knowledge to scalp

Forex scalping is by far the best forex strategy for people who are new to trading. You don’t need extensive experience or complicated knowledge about the stock market and price trends to implement this strategy. You only need to learn how to track the sudden movements in the market and know when to make your trades.

Market volatility will offer you multiple opportunities for trades

During times of high liquidity or market volatility, traders can have their pick of various trades that fluctuate in value. You’ll be able to leverage these price changes very easily by keeping track of how the price fluctuations occur for different trades. Plus, you can make multiple trades in a single day and exit with small profits from each of them.

When would forex scalping not be the best forex strategy for you?

Although forex scalping has such great advantages, it may not be in your best interest during the following circumstances:

You don’t know how to predict market volatility

The success of forex scalping depends largely on your ability to pick up on and track sudden changes in the market. If you find this challenging, you may not be able to get successful outcomes with scalping. Plus, forex scalping requires immense concentration and focus for a few hours every day. If you are unable to devote this time to trading daily, scalping will not be of any use to you.

You don’t want to have a very large leverage

Typically, traders engaging in forex scalping use very high leverage amounts between 1:1000 and 1:3000 when trading. This large leverage is what allows them to magnify the returns they generate through scalping. This might not be an ideal situation for everyone.

You don’t want to forego the big wins

Forex scalping gives you smaller wins. The more consistent you are, you’ll be able to consistently make these small wins every day. But if you’re a trader who prefers to target the big wins, scalping may feel like too much effort for too few gains.

Best forex scalping strategies to use

Now let’s discuss the best forex scalping strategies you can use to earn profits:

Use a stochastic oscillator to track the price movement

The stochastic oscillator compares the current price of a trade with the price range over a particular time in the day. The movement of prices will allow you to gauge how well a trade is performing.

Use moving averages to indicate price trends

By looking at the direction of the moving averages and the relevant open positions, you’ll be able to get a clear picture of the trade you need to make.

Choosing volatile forex pairs

The more volatile a forex currency pair, the higher the chances of you making a profit when the market is moving and changing.

Using the parabolic SAR indicator to check if the market is bullish or bearish

The parabolic SAR indicator shows traders the direction in which the market is moving. If the dots on the graph are located below the price bars, it indicates a bull market. But if they are above the price bars, it indicates a bear market.

Doing the trade manually and not waiting for the trading desk

Since the success of forex scalping is dependent on how quickly you trade, it's important to avoid the trading desk and brokers and instead, do the trade manually.

Wrapping up

Forex scalping is the best forex strategy for traders looking for consistent gains and who don’t want to take too many risks to make profits while trading. This is the best entry trading style for new traders and you can try your hand at trading with forex scalping.