Forex is one of the largest (according to per day trading volume) and most attractive markets, generating maximum returns for you if traded carefully. There are many trading strategies, such as day trading, forex scalping, swing trading strategy, which you can use. The best forex scalping trading strategies are those that meet all your trading demands. This article will cover the forex scalping trading strategies and all the related facts that you require to know before getting started.
The Main Points that we will explore in the guide are as follows:
- What is foreign exchange trading?
- Time Frames associated with forex trading?
- What are Forex Scalping trading strategies or scalp trading?
- Some top forex scalping trading strategies for traders
- Top Indicators for traders
- Choosing the best broker
- Step for scalping
What is foreign exchange trading?
Forex exchange trading or current pair trading refers to trading currencies of different currencies in pairs. The change in the value of one currency against the other or currency fluctuations is the major factor through which forex traders harvest profit. Forex brokers make money through spread which is the difference between the ask price and bid price. The major currency pairs of this market include:
- The US dollar and euro: EUR/USD (or eur usd)
- The Japanese yen and the US dollar: USD/JPY.
- The US dollar and the British pound sterling: GBP/USD.
- The Swiss franc and US dollar: USD/CHF.
Time Frames associated with forex trading
The currency pair market is divided into three main activity sessions: the European, North American and Asian sessions. These three periods are known as London, New York and Tokyo sessions. Many times the other or fourth, Sydne or Australian session is employed to fill the gap between Tokyo hours and New york hours.
What are Forex Trading Scalping Strategies or scalp trading?
Forex scalping or scalp trading is just a trading technique that forex traders employ to sell or buy a currency pair. They hold this trading position for a short period of time in order to generate returns. Forex scalpers usually try to place a large number of traders. Thus, taking benefits of the small price movement that are common throughout the trading day. Forex scalping focuses on grabbing small profits or pip gains, such as 6 to 21 pips per trade. By surging the trade size, you can enhance the overall returns on these small trades.
To scalp forex, you need to hold your trading positions for several seconds to one minute (or more) and open and close different trading positions within a trading day. There are various strategies in the forex scalping trading strategies system which you can follow.
Some of these are provided below.
Forex Scalping Trading Strategies
There are numerous forex scalping trading strategies to choose from but, make sure that the strategy which suits your trading standards, time frame and long term goals best will provide you with better profit compared to the one which your friend recommends. or relative Remember that different traders have distinct trading environments and preferences. Forex scalping trading strategies generally fall into the following broad categories:
1) Trend trading: You must have heard that trend is a friend. Trend trading is one of the common scalping trading strategies used by many scalpers. They try to make a profit by trading in the direction of the currency trend. If the trend continues, they harvest a good amount.
2) Countertrend trading: Countertrend trading is complex for a forex scalper as it involves trading in the opposite direction of the trend. Traders who trade using these strategies generally take this step when they think that trend will reverse or pullback in future.
3) Range strategies: Range traders usually check for resistance and support areas on charts, and then the investor tries to sell near resistance and purchase near the support arena. The profit is earned from price movements or oscillating price actions.
Best indicators for forex scalper
Have you thought about which is the best analytical or technical indicator for forex scalping? In this segment, we have listed some of the famous indicators which protect you from unwanted risk and price changes in the currency pair market. This includes technical analysis, candlestick, chart pattern, trading stops and several others.
Technical Analysis: For forex traders, it is vital to understand how the technical analysis proceeds. Technical analysis generally employs patterns, charts and other technical indicators to predict and monitor the price shifts in a security or currency pair. Some examples of scalping methods include indicators such as the Bollinger band, moving averages.
Bollinger Band scalping: The Bollinger band graph usually shows the volatility (whether high or low) of the currency pair market. It is beneficial for scalpers because their trade orders are so rapid, generally within five minutes for each trading position. The Bollinger band indicator is a highly effective forex scalping trading strategies indicator for those currency pairs with low speeds in the foreign exchange market.
They have very low volatility and, once executed precisely, can lead to massive profit once. This incorporates a blend of minor and major currency pairs such as the GBP/USD, EUR/USD and EUR/JPY.
Moving averages for scalping forex: You can see multiple lines on the moving average forex graph. Some famous and widely used forex indicators for scalping are the EMA or exponential moving average and SMA or simple moving average. You can use these indicators d to describe short-term changes in the price trends of currency pairs.
A moving average chart is one of the most commonly used indicators (for forex scalping trading strategies ) by analysts and professionals just because of its potential to detect market changes more swiftly than others.
Candlesticks: Candlestick patterns are graphs that are plotted by keeping the general price trends of currency pairs in mind. They provide a visual view about closing, opening, low, and high aggregated investment prices per day. They are named so just because of their candlestick appearance.
Chart Patterns: Chat pattern is a forex scalping strategy that gives a clear visual of multiple trading days’ prices. They are named so because of the appearance they take. For example, shoulder pattern, cup patterns, and invest head or handle. Investors use these patterns or indicators to trace the trajectory of the financial market price in future.
Trading Stops: Many traders feel it is attractive to trade larger trades to earn fast money. But, it is not the right approach and can put you at serious risk. Trading stop or stop-loss order is a way through which your forex broker gets to know how much amount you can afford to lose on a particular trade.
When you place or set the limit through this function, it keeps your trade away from unwanted losses. It automatically closes the trade order when the price goes below the acceptable limit.
Controlling your emotions: Emotions are a barrier to successful trading. It will help if you learn to control your reaction and emotions and stay calm and cool when the price declines or surges. Make a plan before getting started or before deciding to enter the financial market. Creating a plan is not sufficient; you also require to adhere to it. Not falling to greed and sticking to your trading plan mitigates the risk of losing a massive amount of money.
Remember, keep your orders small and never invest the amount which you cannot afford to lose. Overcoming these small mistakes and making a huge change.
Choosing the best brokerage firm for scalping:
It goes without saying that, while thinking to start trade in the currency market, selecting a suitable broker is essential. In short, we can say that selecting a reliable brokerage firm is a vital step, not only for scalpers but for all kinds of traders. There are some essential factors which you should consider before opting for a firm.
- Speed of trade execution
- Spreads and trading costs charged on trade
- Quality of order execution
- Check whether the broker is regulated by legitimated financial authorities such as CySEC (the Cyprus Securities and Exchange Commission) or FCA (Financial Conduct Authority)
- Whether your funds and personal information are safe or not
- Technical and analytical tools offered by the broker for monitoring the regular currency prices
Steps to be taken for Scalping
Scalping requires reliable and good access to the financial market. The financial service provider provides it via its advanced trading platforms, which allow fast buy and sell of assets. Generally, these trading platforms have a sell button and buy button for every currency pair. This makes it entirely easy for traders just to hit these buttons and instantly exit or enter a trading position. In highly liquid markets, the trade execution can occur in a fraction of a second.
A scalper usually puts hands in those markets which are most liquid. These markets are generally in major currency pairs, which include USD/JPY or EUR/USD. The liquidity varies depending on the trading session; certain currency pairs may be more liquid during a particular session. The vital point about the forex market is that though it is a 24-hour market, the still volume of forex pairs is not similar throughout the day.
The volume surges with the opening of London around 3 AM EST. It is the major central trading centre for the forex market. After this, New York opens around 8 AM EST, and it adds a certain value to the previous volume. It is the best time for traders looking for liquidity. The Tokyo and Sydney markets open after these two.
Scalper should make sure that their trade order will proceed at the levels they wish. Therefore, it is essential on your part to understand each terminology which your broker uses. Some financial service providers may restrict their execution guarantees to a period when the financial markets are moving slow. In contrast, other financial service providers may not offer any kind of execution guarantee to everyone.
Placing a trade order at a particular level and executing the same a few pips or points away from where you expected is known as slippage. While proceeding with trading with scalping spreads in addition to slippage can land you at serious risk. It is crucial to ensure that your trade order executes or will execute at the level you requested.
Redundancy is insurance that protects traders against failure. This is trading terminology, reflects the ability to exit and enter trade orders in one or more than one way. Make sure that your internet connectivity is fast and does not break. These things are very important, especially when you are in a trade position and require to get out instantly or need to make any amendments.
Choosing a Charting Time Frame
For executing trade orders frequently or repeatedly, you require an automatic platform that you can follow. While scalping forex, you do not get time to do an in-depth analysis, so it is good to have a system that you can frequently use with a good confidence level. As a scalper, you require short team graphs, including a five-minute chart, one-minute chart, two-minute chart or tick charts.
The Best broker for scalping
If you are a scalper and searching for the best broker, there is no other competition for T1markets. It is one of the best brokers allowing trading on many small and large currency pairs. The broker is well-regulated, working under the guidelines of the Cyprus Securities and Exchange Commission. The broker’s technical indicators help determine exit and entry points and provide you with the best time to proceed with the trade. You can open a number of trades with this amazing platform.
The broker offers several trading accounts for both novice and seasoned traders, including retail investor accounts such as gold, silver, platinum, Islamic trading account, professional trading account and demo account. To mitigate risk, the broker offers a stop-loss function with each account type. The money of capital required to open trade with the broker is just $250. Scalping requires expertise and deep knowledge. The broker provides educational material to serve this purpose, including ebooks, tutorials, articles, videos on demand, webinars, etc.
The broker’s trading platform has several features, including regular updates about currency price movements, choosing time frames as per requirement, real-time trade history, different execution modes, in-built analytical tools, customized synchronisation, and several other features. The broker’s maximum leverage on the forex market is 1:500 with a minimum spread of 0.03 pip.
The risk involved in forex market scalping
- High transition cost is involved with scalping.
- Scalpers need a large amount of leverage to make massive returns.
- Scalping is a time-consuming technique and needs high concentration.
Forex scalping trading strategies: The Bottom Line
Scalping is one of the ways through which forex scalpers can harvest a massive amount from the market. You can pursue long term trades and short term trades using this technique. But, the important thing is that scalping requires deep research and knowledge. T1markets offers advanced educational tools to serve this purpose. It also provides negative balance protection and stop-loss order to mitigate financial risk and the risk of losing money. Also, remember that for pip gains to be large, traders trade at high volumes. It simply reflects that scalping is a viable trading method if you have a good deposit.
Frequently asked questions
What is scalping?
Forex scalping or scalp trading is just a trading technique that forex traders employ to sell or buy a currency pair. They hold this trading position for a short period of time to generate returns.
Is the currency market scalping illegal?
Currency market scalping strategies are legal. Both institutional and retail investors use it.
Where can I trade forex?
You can trade forex with T1markets. It is one of the best brokers allowing trading on major and minor currency pairs. The broker is well-regulated, working under the guidelines of the Cyprus Securities and Exchange Commission. The maximum leverage offered on forex is 1:500 and the minimum deposit to open an account with the firm is just $250.