A beginners guide to forex scalping

On the forex markets, you are likely to witness currency prices moving second by second, and for many traders, this is an amazing opportunity to capitalize on these movements. This opportunity is known as scalping. But in order to predict where a currency is moving, it is pertinent to have a strategy in place.

In the world of investment, scalping means regularly skimming small profits by going in and out of positions, holding the positions for a short time, several times a day. Similarly, in the forex market, it is trading currencies based on real-time analysis. So, when a forex trader is initiating a trade, they are seeking a large number of trades every time for a small profit.

Throughout the day, traders place several trades through a system based on signals derived from charting tools. Through technical analysis, a multitude of signals is created for charting, so a trader can make a buy or sell decision.

Why do traders prefer forex scalping?

Scalping may be considered similar to day trading, where a trader opens and closes their position during the current trading session without a position ever being carried the next trading session. However, scalping is more frantic, and multiple trades can happen during a single trading session. To put it further perspective, a day trader may conduct trades during 5 and 30 minute charts, while a scalper often makes trades at tick charts and one-minute charts.

There are some scalpers that prefer catching high-velocity movements happening during the release of economic data and news like employment statistics, GDP figures, etc. Most scalpers are likely to scalp between five and 10 pips from each trade, and the process is expected to be repeated throughout the day. By simply using high leverages and making trades with a few pips add to a scalper’s profits.

So who is ideal to scalp?

Well, clearly, scalping is not meant for everybody. The entire process is risky and requires the scalper to be completely focused. To put it simply, they need to enjoy sitting in front of a computer, as your eye cannot be taken off the ball. After all, you are scalping small, like five pips at a time. In order to scalp, you need to be someone whose reactions are quick without second guessing your every move. That is why you need a forex scalping strategy in place, as you have no time to think. Being able to and knowing when to "pull the trigger" is a requisite quality for a scalper.

Top 5 indicators for a forex scalping strategy

Bollinger Bands

Moving average

Stochastic oscillator

Parabolic SAR

RSI

How to prepare for scalp

Get a sense of direction: If you are a beginner, it is helpful to trade with the trend. You can discover the trend by setting up a weekly, daily time chart and inserting

Trend lines

Fibonacci levels

Moving averages

These will represent support and resistance areas. If the trend indicates an upward bias, you will want to buy and vice versa. You can determine your direction through trade frequencies, charts, and moving averages.

Prepare your trading charts: A forex scalping system can either be manual or automated. That is why most forex scalpers prefer real-time charts for technical analysis.

How to Set up for Scalping

If you are planning to be a scalper, you need access to online trading platforms that ensure you can buy or sell very quickly. In liquid markets, the execution can occur in a fraction of a second. So is a way to go about it:

Picking a broker: While choosing a broker, understand your responsibility and the brokers. Understand how much margin is required and how your broker will assist you

The broker's platform: Different brokers will offer different platforms, and since things happen quickly during scalping, always open an additional practice account and practice on it before scalping.

Liquidity: Forex trading happens throughout the day as forex markets are open 24/7, and as a scalper, you need to trade the most liquid markets like EUR/USD or USD/JPY. So choose accordingly.

Redundancy: Insure yourself against a trading catastrophe by having the ability to enter and exit trades in more than one way. Have a quick internet, a phone directly call the dealing desk, etc., as these are important when you are in a position and need to make a change.

Choosing a charting time frame: As scalping doesn't give you time to analyze, you must have a system that you can use repeatedly.

The forex market is large and liquid and provides enormous opportunities for traders. However, scalping is very fast-paced. If you have the temperament and don’t have any trouble suffering quick losses, then scalping may be for you.