Forex Scalping is a method of trading the currency market which entails entering and exiting the market at short intervals and usually taking small amounts of profits in terms of points. Forex scalpers would most often only hold trades for a few seconds or minutes at a time before closing their trades. The forex market is especially suited to scalping due to the high level of leverage employed. A trader is able to gain large amounts of profits for small movements in the currency market.
Forex scalping strategies
- Support and Resistance Scalping : This involves scalping strong support and resistance levels. As there is generally more volatility around support and resistance levels this is often a good area for small trades.
- News Scalping : As the name suggests this is a method of trading that focuses on scheduled news releases. As news releases often cause extra movement in the market it allows for some good forex scalping opportunities.
- Scalp with the trend : A trader identifies the underlying trend of the instrument they are trading. They will trade in the direction of the trend but only once the price has moved “against” the trend. e.g. When there is an up trend, i.e. the price is gradually and steadily moving up over time, and there is a short interval in the trend where the instrument value decreases, the scalper would take that opportunity to buy.
- Scalping with a Trailing Stop: A trailing stop is a stop loss which follows the price as it moves, thus locking in profits when the price has moved in your direction by a set amount of points. It is wise to use a trailing stop in most forms of forex scalping as it is often difficult to react quick enough with human reflexes especially at times of high volatility.
Key Factors for the success of Scalping
- Get a good broker ! This is the most important part, without one you never succeed. In our experience there are 2 forex brokers that are good for scalping : Tradeveiw Forex and FXCM.
- Automate as much of the process as you can. A machines reactions are much faster than ours, take advantage of the expert advisors that can be coded for metatrader 4.
- Always use a stoploss. Scalping like all trading is a numbers game, make sure that you have a safety net in the form of a stop loss. Risk management is key to long-term success.
- Never become greedy. Get a scalping plan and stick to it. Do not deviate from your rules, stay disciplined and you will be just fine.
Scalping is very exciting and can be a very low risk way of trading if done correctly. If you would like to test a scalping strategy please let us know. We would be happy to share our expertise.