Scalping is one of the strategies that is widely used amongst Forex traders. We will share with you in this article the definition of Scalping, scalping strategies, and techniques.
What is Scalping?
Scalping in forex trading refers to executing many trades within a short time frame and aiming to gain small profit per each trade scaling the total profit of the huge number of trades executed.
Most traders who apply this strategy consider having a high leverage in case their trading volume is high and they execute several trades at the same time, otherwise, you won’t need a high leverage or a big account equity.
If you are not a full-time trader, this strategy will not be executed to its full potential as it requires constant analysis of the market and executing orders heavily.
When applying this strategy, you have to know when to enter or exit a trade as losses are associated to this strategy and we have to accept this fact. On the other hand, this strategy aims on making a total profit from the total open trades, so the total profitable trades should be higher than the losing ones.
The 1 Minute Strategy
This strategy is simple and popular amongst traders as we have mentioned earlier, scalping trades are executed for only seconds or minutes.
If you are considering applying this strategy, you have to start using the following indicators on your 1M charts with the below periods, in addition to any other indicators that you are using effectively:
1. Exponential Moving Average (EMA) with the periods of 100 and 50
2. Stochastic with periods of 5, 3 & 3.
Any time a 50 EMA indicator surpasses a 100 EMA indicator, be ready to open a long order. If the price at which you plan to fill the order is close to the EMA indicators and Stochastic rises above the 20 level, open a long position.
To determine when to make a short order, use the same strategy indicators in reverse.
This strategy might be most effective during high volatility trading sessions, which are usually New York closing and London opening times.
Some scalpers follow short term signals and events that involve a high volatility, so keeping an eye on these events and entering a trade at the right time is essential and can be an effective technique to execute a scalping trade.
Also, you may consider placing TP/SL values to the orders to reduce the losses and manage the strategy’s risk in addition to enabling the one click trading factor to speed the process of entering and exiting a trade.
Don’t forget to share your thoughts in the comment box below and perhaps write about manual scalping vs automatic algorithmic software “EAs”.