Forex Scalping: Everything You Need to Know

Last Updated July 23rd 2021
5 Min Read

Traders make money (or lose) with different forex trading strategies. And with a number of trading strategies to try out, it is easy to get lost trying to figure out which forex trading strategy would suit you. Is your trading style closer to that of a scalper, a day trader, a swing trader or a combination of all?

Whichever forex strategy you would like to follow, your preferred trading style is a critical part of trading successfully in the long run. In this article, we are going to take a look at the forex scalping trading strategy, the pros, the cons, the best time to scalp, and the best currency pairs to trade.

What is Forex Scalping?

Scalping is a short-term strategy that includes the opening and closing of trades in quick succession. A scalper enters a trade that lasts only a few minutes or even seconds making a quick profit from a few points and then makes an exit. And as trading is done at lightning speed, this strategy is very intense and requires full attention to maximise the chances of success. The earnings from multiple wins are typically small, however, once you start collecting profits you could take home large sums. 

As a scalper, you need to understand what the market is doing at that particular moment and how you can take advantage of it. Scalpers are known to use higher levels of leverage to open trades on pairs with a low spread with minimum market exposure and tighter stop-losses. 

Scalpers aim is to win smaller and steady profits from the market. Just like any other trading style, scalping has its own set of advantages and disadvantages.

What Are The Advantages of Forex Scalping?

Lots of trading opportunities:

The benefit of scalping is that there are many opportunities available.

Steady income:

Your earnings may be small, but the accumulation of the profits will be large.

Non-directional:

For scalping, the market does not need to go in a specific direction. You can make profits from both the top and bottom positions.

Limited risk:

Scalping limits the risk of loss by making tight leverage and stop-loss points. 

Easy to automate:

Scalping strategies are based on a series of technical criteria and are easy to automate.

Read More: Devising A Profitable Forex Trading Strategy

What Are The Disadvantages of Forex Scalping?

Screen time: You need to be glued to the screen for many hours a day.

Stressful: Scalping can be highly demanding and taxing.

High transaction cost: Scalping involves a lot of trades which means that the cost of transactions is high. For some scalpers, the transaction cost will eat up most of the profits.

Difficult to predict: It is difficult to predict what the market will do on a minute to minute basis.

You need to win a lot: You have to be a consistent winner in order to be profitable. With this type of strategy, you have to win one trade after the other in order to add up the profits.

Check Out: What Is The Importance Of Risk Management In Forex Trading?

So How Do Scalpers Make Quick Trades?

  • Decisions are made on lower time-frames, such as 1 to 5-minute charts. For e.g., for a 1-minute forex scalping strategy, the two moving averages are used to identify the current short-term trend in the 1-minute timeframe.
  • Traders make a move when there is a pullback to the moving averages. 
  • Scalpers take a look at the market indicators that helps them take only high-probability trades.

Best Time For Scalping In Forex

Market analysis shows that the best time to scalp forex is in the early hours of the morning when the market is most volatile, but this depends on the currency pair. For instance, if GBP is involved, then the best time to scalp is during the first hour of the London trading session. However, if the USD is involved and as it has the highest trading volume, the best time to trade would be during the first few hours of the New York trading session.

Scalping Tips To Become An Expert 

  • A time frame of when you are going to make buy and sell.
  • It is easy to go overboard while short-term trading. Avoid going overboard.
  • To enhance your trading experience and make better decisions, use a forex trading platform to open a forex trading account. Trading platforms can be used to analyse the market and its trends. It will help you.
  • Create a strategy based on facts that you see online. 
  • Sticking to a strict entry and exit strategies is the best way to reduce your risk level.
  • Keep a scalping journal. Analyse your investment trends and see what works for you. 

Read More: Forex Scalping: 5 Simple And Profitable Strategies

What Are The Keys To Successful Scalping?

  • Devote a lot of screen time
  • Great connectivity to markets
  • Quick thinking
  • Lightning fast execution skills
  • 1-minute tick charts
  • Numerous routes to execute your orders
  • Patience

Best Pair For Scalping Forex

Traders should consider scalping currency pairs that dip in and out of the market very frequently. The currencies that have the highest trade volumes and the tightest spreads to minimise losses are the best ones to consider for scalping. Some of the currency pairs that are best for scalping are EUR/USD, GBP/USD, AUD/USD, and AUD/GBP. 

Open A Forex Trading Account

Scalping forex requires stringent entry and exit strategies and skills to analyse the market on very short timeframes. To be a scalper, be ready to be in front of the charts and screens for many hours. To explore trading and to improve upon your forex trading performance, open a demo forex trading account first and start trading. Using a demo account, you can trade in real-time without risking your money.

Most forex trading platforms have access to the market analysis, trading history, live feed tick charts, other resources and allow you to implement strategies of any complexity. The latest financial news and timely alerts on the platforms allow you to prepare for unexpected price movements and make the right trading decisions. Once you are familiar with the ins and outs of trading, you can start using a live forex account.

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