Ultimate Forex Scalping Guide and 1-Minute Scalping Strategy Explained
Even if you're a complete beginner in trading, you must have come across the term "scalping" at some point. This article will provide you with all the basics behind the concept of forex scalping, as well as teach you a number of strategies and techniques. Discover what forex scalping is, how to scalp in forex, as well as reasons why you should consider applying scalping techniques.
You will learn what kind of techniques are available to use, how to select the best scalping system for forex, take a look at scalping strategies and a detailed explanation of the 1-minute forex scalping strategy, and much, much more!
Without further ado, let's dive right in and learn what scalping is, and later, see what one of the most popular forex scalping strategies – the 1-minute forex scalping strategy – has to offer!
What Is Forex scalping?
Scalping is a method of trading based on real-time technical analysis. When it comes to forex trading, scalping generally refers to making a large number of trades that each produce small profits. Rather than holding a position for several hours, days or weeks, the main goal of scalping is to make a profit in as little as a few minutes, gaining a few pips at a time.
As we all know, forex is the most liquid and the most volatile market, with some currency pairs moving by up to 10-20 pips per day. Forex scalpers try to squeeze every possible opportunity out of these fluctuations in foreign exchange quotes, by opening and closing trades with just a few pips of profit.
In other words, scalping the forex market is simply taking advantage of the minor changes in the price of an asset, usually performed over a very short period of time.
Scalping is quite a popular style for many traders, as it creates a lot of trading opportunities within the same day. Its popularity is largely down to the fact that the chances of getting an entry signal are rather high. During the scalping process, a trader usually does not expect to gain more than 10 pips, or to lose more than 7 pips per trade, including the spread.
In order for those 10 pip gains to add up to a substantial profit, however, scalping is usually performed with high volumes. This means many scalpers are not following the common 2% risk management rule, but are instead trading much higher volumes during their forex scalping sessions.
By being consistent with this process, they can stand to benefit from stable, consistent profits. There are two different methods of scalping - manual and automated. In the manual system, scalpers need to sit in front of a computer so they can observe market movements for the purpose of choosing their positions. On the other hand, with an automated system, a scalper can teach a computer program a specific strategy, so that it will carry out trades on behalf of the trader.
To learn more about pros and cons of scalping trading and best and worst times when to scalp, watch this free webinar here:
Is Scalping Suitable for You?
Deciding whether forex scalping strategies are suitable for you will depend significantly on how much time you are willing to put into trading. Scalping the forex market requires constant analysis and the placement of multiple orders, which can be as demanding as a full-time job. In addition, there are only a few hours a day when you can scalp currency pairs.
After availability, the next most important thing is being able to think on the fly.
For a scalping forex strategy to succeed, you must quickly predict where the market will go, and then open and close positions within a matter of seconds. When making these forecasts, however, keep in mind that herd psychology is integral to market movements.
A perfect example of this is the sharp appreciation that certain currencies enjoyed amid China's expansion in the early 2000s. During the first decade of this millennium, both the Australian Dollar (AUD) and the Canadian Dollar (CAD) surged close to 40% against the US Dollar. Australia and Canada are commodity exporters, which is why their currencies thrive when China enjoys robust growth. As a result, some forex traders take long positions in the AUD and/or CAD when China's economy is expanding rapidly.
Did you know that Admiral Markets offers the ability to trade on currency pairs such as the AUD/CAD currency pair, as well as other popular currency pairings such as EUR/USD and USD/JPY? Additionally, Admiral Markets also provides forex traders with the opportunity to trade on exotic currency pairs such as EUR/CZK, GBP/PLN, NZD/SGD and many more. Start trading these currency pairs, along with thousands of other instruments, today!
Aside from predicting market direction, investors interested in forex scalping strategies must be able to accept losses. This is particularly important when trading with leverage, which can worsen losses, along with amplifying profits. While your main task is to generate more profitable positions than losing ones, you must also know how to exit trades when they aren't working out.
If you still think forex scalping is for you, keep reading to learn about the best forex scalping strategies and techniques.
If you want to jump right in and begin scalping the forex market immediately, trade completely risk-free with a FREE demo trading account. Take control of your trading experience, click the banner below to open your FREE demo account today!
How To Scalp In Forex
Now that we have an understanding of the fundamentals of scalping, let's take a closer look at its practical application. In general, most traders scalp currency pairs using a time frame between 1 and 15 minutes, yet the 15-minute time frame doesn't tend to be as popular. Both 1-minute and 5-minute scalping timeframes are the most common. Try them out and see which one works best for you - if any.
Your profit or loss per trade would also depend on the time frame that you are using, with 1-minute scalping you would probably look for a profit of around 5 pips, while a 5-minute scalp could probably provide you with a realistic gain of 10 pips per trade. When it comes to selecting the currency pairs for your perfect scalping strategy, it is vital to pick up a pair that is volatile, so that you are more likely to see a higher number of moves.
If you go for the currency pairs with low intraday volatility, you could end up acquiring an asset and waiting for minutes, if not hours, for the price to change. That being said, volatility shouldn't be the only thing you're looking at when choosing your currency pair. You should also look for a pair that is cheap to trade - in other words, the one that could provide you with the lowest possible spread. As a scalper, the spread will lie between 10% to 30% of your income and, of course, you would want this value to be as low as possible.
To make this possible, you need to develop a trading strategy based on technical indicators, and you would need to pick up a currency pair with the right level of volatility and favourable trading conditions. After this, once you see an entry signal, you have to go for the trade, and if you see an exit signal, or you have come to a profit that is adequate, you may then close your trade. What is also important in scalping is stop-loss (SL) and take-profit (TP) management.
While it is always recommended to use an SL and TP when trading, scalping may be an exception here. The reason is simple - you cannot waste time executing your trades because every second matters. You may, of course, set SL and TP levels after you have opened a trade, yet many traders will scalp manually, meaning they will manually close trades when they hit the maximum acceptable loss or the desired profit, rather than setting automated SL or TP levels. This is especially applicable for 1-minute scalping in forex.
Now let's focus on the spread part of the trading. Let's assume a broker has no commission attached to your trading account, but the spread on EUR/USD is 2 pips on average.
When trading 1 lot, the value of a pip is USD 10. This means your direct expense would be about USD 20 by the time you opened a position. If you are looking for a 5 pip gain per trade (USD 50), this means that you would actually have to go up 7 pips from your initial starting price (7 pips - 2 pip spread = 5 pips). If you do the math, you could see that it is nearly 50% extra. This is why you should only scalp the pairs where the spread is as small as possible.
Another important aspect of being a successful forex scalper is to choose the best execution system. 'Execution' refers to the speed at which trades are executed, or the speed at which, once you say you want to enter a trade, the trade is actually opened on the live market. In volatile markets, prices can change very quickly, which means your trade might open at a different price to what you'd originally planned. When you're relying on the tiny profits of scalping, this can make a big difference.
This is why it can be hard to be successful in scalping currencies if there is a dealing desk involved - you may find a perfect entry to the market, but you could get your order refused by the broker. The situation may get even worse when you try to close your trade and the broker does not allow it, which can sometimes be deadly for your trading account. This is why it is vital to choose a broker that offers STP or ECN execution, and is able to accommodate scalping.
If you want to apply your knowledge of scalping to the market, the Admiral Markets live account is the perfect place for you to do that! Trade forex & CFDs on 80+ currencies, choosing from a range of forex majors, forex minors, and exotic currency pairs, with access to the latest technical analysis and trading information. Trade the right way, open your live account now by clicking the banner below!
The Best Times (To Avoid) For CFD and Forex Scalping
Scalping is a system of quick trading which requires sufficient price movement and volatility. The highest levels of volume and liquidity occur in the London and New York trading sessions, which make these sessions particularly interesting for most scalpers. But it also depends on the type of scalping strategy that you are using.
Trading false breakouts can sometimes work well in an Asian trading session, as the price typically moves up and down in a relatively narrow range. Scalpers should also be mentally fit and focused when scalping. Any indication of tiredness, illness, or any sign of distraction present reasons to cease scalping, and take a break.
Also, keep in mind that CFD and forex scalping is not a trading style that is suitable for all types of traders. Some traders will thrive with it, but others perform much better as swing traders. Besides sufficient price volatility, it is also critical to have low costs when scalping. The main cost is the spread between buying and selling. Traders lower their costs by trading instruments with low spreads, and with brokers who offer low spreads. Usually, the lowest spreads are offered at times where there are higher volumes.
Depicted: Admiral Markets MT5 with MT5SE Add-on EUR/USD 5 minute chart - Disclaimer: Charts for financial instruments in this article are for illustrative purposes and does not constitute trading advice or a solicitation to buy or sell any financial instrument provided by Admiral Markets (CFDs, ETFs, Shares). Past performance is not necessarily an indication of future performance.
The Best Broker For CFD And Forex Scalping
When it comes to selecting the best forex & CFD broker for your scalping strategy, you need to first cross out all brokers that do not allow scalping inside their system. You may be surprised to learn that there are some brokers that do not allow scalping, by preventing you from closing trades that last for less than three minutes or so. As mentioned earlier in this article, you should generally eliminate all of the brokers that cannot provide you with either an STP or an ECN execution system, as scalping forex with a dealing desk execution may hinder you.
Now, when you have a smaller list of available brokers, you should start looking at the instruments for your trading and their pricing amongst the brokers. Many brokers do have some commissions and this isn't necessarily a bad thing - you just need to include the commission into your calculations when you try to determine the cheapest broker. Nevertheless, pricing should not be the only point that matters when you are selecting a broker that will enable you to scalp forex. Finding a good broker is actually a very important step for scalpers. Several aspects should be taken into consideration before choosing a broker - here are the key criteria:
- Competitive spreads and costs
- High-speed execution
- Order execution quality
- Regulated by key financial authorities such as the FCA (Financial Conduct Authority)
- Secured funds with reliable bank(s)
Admiral Markets offers all of the aspects above, as well as:
- Spreads from 0 pips on forex major pairs
- Market execution with no requotes
- Low slippage and rejection rates
- Deep liquidity from top-tier liquidity providers
- High execution speeds from 4 milliseconds
- No restrictions on trading styles or strategies
- Advanced tools and platform options
- Education and webinars
- Analysis of the financial markets
Scalpers who are new to trading often do not realise that execution is also a key factor, besides the presence of competitive spreads. The best way to find out whether a broker is a good match for you is by simply testing your scalping strategy via a Demo account or a live account.
The Best Platform For CFD And Forex Scalping
The best trading platform for CFD and forex scalping is arguably MetaTrader, with the MetaTrader Supreme Edition plugin. Traders can use scalping strategies on a wide range of other financial instruments, including forex, CFDs, CFDs on commodities, and stock indices. The MetaTrader platform offers a charting platform that is not only easy to use, but also simple to navigate. Admiral Markets offers the Supreme Edition plugin which offers a long list of extra indicators and tools.
These features are not a standard part of the usual MetaTrader package, and include features such as the mini terminal, the trade terminal, the tick chart trader, the trading simulator, the sentiment trader, mini charts (perfect for multiple time frame analysis), and an extra indicator package including the Keltner Channel and Pivot Points indicators. Click the banner below to receive your FREE MetaTrader Supreme Edition download!
The Best CFD And Forex Scalping Strategies
Traders must use trading systems to achieve a consistent approach. Although this is valid for all trading styles, it is even more vital for scalping, due to the speed of trade setups and the need to make quick decisions. Scalpers can earn as little as 2 to 10 or 15 pips for a setup. The critical factor to check is whether the small wins add up to more profit than what is lost when losing.
This is how it looks from a mathematical point of view:
- Expectancy per trade setup = (Win percentage multiplied by average win) - (loss percentage multiplied by average loss)
A plus figure indicates a positive trade expectancy, whereas a minus figure indicates negative expectancy in the long-term. Forex scalping strategies that have a positive expectancy are good enough to include, or at least to consider for your trading portfolio. Scalping strategies that create negative expectancy are not worth it.
Key Considerations for Scalping Strategies and Techniques
Providing a definitive list of different scalping trading strategies would simply not fit within this article. To keep things compact and readable, we will provide a summary of different types of forex scalping methods, and we'll dig deeper into one of the most popular strategies - the 1-minute forex scalping strategy.
When tackling the financial markets with any scalping trading strategies, make sure to also scan the charts for the following six aspects:
- Current and expected price volatility
- Current spread
- Range or trend (plus direction)
- Key support and resistance levels
- Other time frames for key levels
- Economic calendar for data, news, and press conferences
Forex Scalping Techniques: Comparing Time Frames
One particularly effective scalping technique involves comparing your primary time frame for trading with a second chart containing a different time frame. For example, if you use a 1-minute time frame to scalp currency pairs, you could then consult a 5-minute chart to check any signals that come up.
Forex Scalping Tools: 1-Click Trading
Technological resources can also enhance your trading. To expedite your order placement, you can use the 1-click trading tool available with MetaTrader 4 (MT4) or MetaTrader 5 (MT5). With Admiral Markets, you can access an enhanced version of the 1-click trading terminal via MetaTrader Supreme Edition for MT4 and MT5.
Forex Scalping Techniques: News Fades
There are certain numbers, when released, which create market volatility. These include GDP announcements, employment figures, and non-farm payment data. Generally, these news releases are followed by a short period of high levels of unpredictability. It is in these periods that some traders will move to make quick gains. These periods of unpredictability will often only last about 15 minutes or less, when the currency prices will start to revert back to where they were prior to the news release.
Scalping Techniques: Inside Day Breakout
Intraday patterns apply to candlesticks, whereby today's high and low range is between the increasing and decreasing range of the last day, which denotes reduced volatility or unpredictability. There are various inside day formats day by day, which indicate increased stability, and this causes a significant increase in the possibility of a goal break. Forex traders construct plans and patterns based on this concept. Using only inside bars on the day based chart time frame. If you use forex scalping strategies correctly, they can be rewarding.
1-Minute Scalping Strategy - A Complete Guide
The basic idea behind scalping is opening a large number of trades that usually last either seconds or minutes. However, some scalping strategies developed by professional traders have grown significantly in popularity. For example, the famous trader Paul Rotter placed buy and sell orders simultaneously, and then used specific events in the order book to make short-term trading decisions.
Rotter traded up to one million contracts a day, and was able to develop a legendary reputation in certain circles, and has inspired forex traders all around the world. While studying well-known strategies can be helpful, they should form the building blocks of your own unique setup. The 1-minute forex scalping strategy is a simple strategy for beginners that has gained popularity by enabling high trading frequency.
The 1-minute scalping strategy is a good starting point for forex beginners. However, you should be aware that this strategy will demand a certain amount of time and concentration. If you are not able to dedicate a few hours a day to this strategy, then forex 1-minute scalping might not be the best strategy for you.
The forex 1-minute scalping involves opening a certain position, gaining a few pips, and then closing the position afterward. Because you are only gaining a few pips a trade, it is important to pick a broker with the smallest spreads, as well as the smallest commissions.
For this reason, one of the main aspects of forex scalping is quantity, and it is not unusual for traders to place more than 100 trades a day.
How does this strategy work? You will need to consider the instruments you will trade, time frames, indicators and trading sessions:
- Instruments: every currency pair
- Time frame: 1-minute
- Indicators: Stochastic 5, 3, 3, and 50 EMA, 100 EMA* (available on MetaTrader 4)
- Preferred sessions: London, New York – high volatility
While you can use this forex scalping strategy with any currency pair, it might be easier to use it with major currency pairs because they have the lowest available spreads. In addition, this approach might be most effective during high volatility trading sessions, which are usually New York closing and London opening times.
Here's a brief example of how the 1-minute scalping strategy works in action:
Set your chart time frame to one minute. Now make sure these two default indicators (listed below) are applied to your chart:
- EMA with periods of 100 and 50
- Stochastic indicator with periods of 5, 3 and 3
You can also give your EMA lines different colours, so you can easily tell them apart. Why not attempt this with our risk-free demo account? And see if this strategy works for you!
Forex 1-Minute Scalping Strategy Purchase (Long) Entry Point
Now you have applied the indicators and your chart looks clear, let's review the signals required for opening short and long positions using this simple forex scalping technique. The first EMA (50) must be positioned above the second EMA (100). When this has occurred, it is essential to wait until the price comes back to the EMAs. In turn, the Stochastic Oscillator is exploited to cross over the 20 level from below. The moment you observe the three items arranged in the proper way, opening a long (buy) order may be an option.
In summary, the signal for long orders is:
- 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 the Stochastic rises above the 20 level, open a long position.
To minimise your risk, you can also place a stop-loss at 2-3 pips below the last low point of a particular swing. As the 1-minute forex scalping strategy is a short-term one, it is generally expected that you will gain between 8-12 pips on a trade. Hence the take-profits are best to remain within 8-12 pips from the entry price.
Forex 1-Minute Scalping Strategy Sell (Short) Entry Point
To make a short trade, the first EMA (50) should be positioned below the second EMA (100). As with the buy entry points, we wait until the price returns to the EMAs. Additionally, the Stochastic Oscillator is utilised to cross over the 80 level from above. As soon as all the items are in place, you may open a short or sell order without any hesitation. The exact same things occur here.
In summary, the signal for a short order is:
- To determine when to make a short order, use the same strategy indicators in reverse.
- The 50 EMA indicator should be below EMA 100, and the spot rate should be close to these lines.
- The Stochastic should fall below the 80 level.
Again, stop-losses are positioned near 2-3 pips above the last high point of the swing accordingly, and take-profits should remain within 8-12 pips from the entry price.
The Pros and Cons of the 1-Minute Scalping Strategy
In order to determine whether forex scalping and forex 1-minute scalping may prove useful for your style of trading, we are going to delve into the pros and cons of scalping.
First, the pros:
- Less risk exposure, a brief exposure to the market reduces the possibility of running into inauspicious events.
- Relatively small movements are easier to achieve, this implies that a larger supply and demand imbalance is required to ensure bigger price changes.
- The main logic behind scalping is that smaller moves occur far more frequently than larger ones.
- Even when the markets are comparatively quiet, a good forex scalper can utilise many small moves.
Now, these benefits might sound quite tempting, but it is important to look at the disadvantages as well:
- A large deposit is needed.
- Bankers and dealers have a certain advantage over amateur scalpers as they possess more information about the market.
- A 1-minute scalper requires quick reflexes, good instincts, and mathematical skills.
- It can be difficult to scalp and maintain a good risk/reward ratio. For instance, with a ratio of 2:1, your take-profit at 10 pips requires a stop-loss at 5 pips, making it too close not to get stopped out in the majority of cases.
- 1-minute scalping is time-consuming and may lead to stress.
You have to see for yourself whether the pros outweigh the cons, and vice-versa.
Technological resources can also enhance your trading. To expedite your order placement, with Admiral Markets, you can access an enhanced version of the 1-click trading terminal via MetaTrader 4 Supreme Edition.
Click the banner below to download MetaTrader 4 Supreme Edition FREE!
Our Top Tips for Successful Forex Scalping
Forex scalping is not something where you can achieve success through luck. Any forex scalping system focuses on exact movements which occur in the currency market, and relies on having the right tools, strategy and discipline to take advantage of them.
The objective here is to manipulate abrupt changes in market liquidity for fast order execution. Successful scalping is not related to trends, but it is dependent on volatility and unpredictability.
Here are some of our top tips to keep in mind for successful forex scalping.
1. Manage Scalping Leverage Risk
As scalping profits tend to be small, almost all scalping methods use larger than normal leverage. While leverage can amplify profits, it also leads to higher risk, therefore risk management is key. For scalpers who use of a stop-loss as part of their trading strategy, a higher leverage ratio may be acceptable.
Using high leverage is particularly risky during news or economic releases, wherein wide spreads can occur and the stop-loss might not be triggered. To prevent this, it is advisable to use an appropriate leverage ratio when scalping during periods of high unpredictability.
Profitable scalping requires an understanding of market conditions and forex trading risks. Traders always have to keep in mind that they shouldn't trade more than they can afford to lose. Trading beyond your safety limits may lead to damaging decisions. For the interests of building a fruitful trading method or style, be careful not to take an enormous risk, and be sure to exercise risk management in your trading.
2. Build Your Trading Discipline
Forex scalping systems demand a certain level of mental endurance. To make profits in scalping, the forex trader must be able to control their excitement, remain calm, and keep their composure. Emotional responses to risky activities can cause traders to make bad forex business decisions.
3. Understand Market Conditions for Scalping
Gaining profit in forex scalping mostly relies on market conditions. Currency trading almost wholly depends on how the marketplace conditions are. Accordingly, scalping often denotes difficult trading market conditions - and scalping systems need to fully understand and be able to adapt to the changing nature of the market.
4. Define Your Forex Scalping Goals
For the best forex scalping systems, traders should first define their goals. Of course, the purpose of entering the market for traders is to gain profit, but when scalping you have to remember that the profits will be low. No matter what style a trader chooses for their trading, they need to make sure it suits them and that they feel comfortable with it. A well thought, disciplined, and flexible strategy is the main feature of any successful scalping system.
Scalping Forex for a Living
Many forex traders try to make a living from trading, and many novice traders want to make a decent return on their investment in scalping. Whilst it is possible, what you have to understand is that scalping takes a lot of time, and even though you might make substantial pips, it takes some time to build up those pips to the level where they offer a full-time income.
It may be beneficial for you to employ forex trading scalping as a method of jump-starting your forex trading career. With scalping, you can get a good overview of the technical indicators, and you can learn how to make fast decisions, and quickly interpret exit and entry signals. We hope our guide to simple forex scalping strategies and techniques has helped you, so you can put what you have learnt into practice, and succeed when you use your scalping strategies.
Forex Scalping Guide: Final Thoughts
Scalping has been proven to be an extremely effective strategy – even for those who use it purely as a supplementary strategy. The same goes for forex 1-minute scalping. However, it is important to understand that scalping is hard work. Scalpers are rewarded for quantitative work – the more forex scalping they perform, the larger the profits they achieve. In the end, the strategy has to match not only your personality, but also your trading style and abilities.
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About Admiral Markets
Admiral Markets is a multi-award winning, globally regulated Forex and CFD broker, offering trading on over 8,000 financial instruments via the world's most popular trading platforms: MetaTrader 4 and MetaTrader 5. Start trading today!
This material does not contain and should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments. Please note that such trading analysis is not a reliable indicator for any current or future performance, as circumstances may change over time. Before making any investment decisions, you should seek advice from independent financial advisors to ensure you understand the risks.