Regulator : asic

Scalping in Forex market and how to use it

Scalping in Forex market and how to use it

It is not uncommon for Forex traders, both beginning and skilled ones, to look for new strategies and those that will broaden their possibilities with their trading platform. The answer to the question 'what is scalping in Forex?' examines and gives the best advice and tricks regarding scalping currencies online.

To start with, let us note that this article will be the best for traders with some level of market knowledge and experience because we will not detail on the basics. Instead, the main focus will be on scalping and how it is applied in Forex trading. Also, the best and the worst uses of scalping in Forex market will be included.

What is Forex scalping?

Scalping is one of the day trading styles. It is a well-known fact that the Foreign exchange is the most volatile and the most liquid of all the markets. And while there are many investors who bear through small price fluctuations to gain some 100-200 pips per trade, there is also a large amount of Forex scalpers who grab every possible opportunity out of such minor fluctuations in the quotes. Put another way, scalping the Forex market means reaping benefits of the small
changes in the price of an asset, conducted, as a rule, over a very short period of time.

Because it paves the way to numerous gains within one day, scalping is really popular with many traders. It is also explained by the fact that the opportunity to see an entry signal is quite high. With scalping, investors rarely hope for more than 10 pips gain and 7 pips loss per trade, including the spread. As a rule, scalping is practiced with significantly high volumes, so many of such traders disregard the common rule of 2% risk management and trade much higher volumes at their FX scalping sessions.

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How to scalp Forex?

We have described the basics of scalping, so let us proceed to explaining its practical uses. As a rule, the majority of traders scalp currency pairs using time frames between 1 and 15
minutes. It is worth noting that the 15-minute scalping frame is not very popular, while the 1-minute and 5-minute timeframes are the most used. If you are set to try scalping out, test it with these two timeframes to see which one is better for you, if any. The length of the time frame affects the volume of a trader's loss or profit per trade. One-minute scalping in Forex
market might give you the profit of around 5 pips, and a five-minute scalp is able to bring a realistic gain of 10 pips per trade.

Another important thing you need to be aware of when scalping is how to select currency pairs to implement this strategy perfectly. Pairs that are volatile suit more for scalping because they
are able to secure a bigger number of moves. If you choose a pair that has low intraday volatility, you risk buying an asset that will leave you waiting for minutes and even hours before the price changes.

In addition to volatility, there is another parameter you should consider when picking a currency pair for scalping. The pair you pick must be cheap to trade, which means it can offer you the lowest spread possible. Usually scalpers look for the spread somewhere between 10 to 30 percent of their income, and you should certainly strive and keep this figure as low as possible.

Having outlined basic scalping parameters, we can now answer the question how to scalp in Forex? First, you must create a trading strategy that involves technical indicators. Second, select a currency pair that has the required level of volatility and positive trading conditions. Third, wait for an entry signal and go for the trade. You may close the trade either when you see an exit signal or when you receive a profit that you consider satisfactory.

For Forex scalping, Stop Loss (SL) and Take Profit (TP) management is of great importance. Usually, SL and TP are strongly recommended to be applied in all trades, but scalping may be
excluded from the rule. This is explained by the fact that for scalping, every second of trading time matters and should not be wasted. If you want to, you certainly can set your SL and TP levels for your trade after you opened it; however, many investors prefer scalping in a manual mode without SL or TP being set. This issue is of special relevance for the one-minute scalping FX. Again, setting Stop Loss and Take Profit are favored in any trading, so if you make sure you're fast enough, you can apply it to your scalping as well. Usually traders do not skip SL and TP in cases when they are scalping several pairs of currency simultaneously.

The spread is also an important factor to consider when scalping. Let us presuppose there is no broker's fee tied to your trading account, and the EUR/USD spread is an average of 2 pips.
If your regular trade is 0.2 lots, then you would possibly go for about 1 lot scalping. This totals to about 20 USD in direct expenses by the time you open a position. If your goal is to gain 5 pips per trade, then would need to go up 7 pips from the starting price. Doing the math will show you this is almost 50% extra. So, consider only those currency pairs for scalping which have the
smallest spread possible.

Moving on from figures and parameters, a choice of the execution system must be made thoughtfully by a successful Forex scalper. If there's a dealing desk involved in your scalping of the currencies, a number of obstacles might arise. One faulty scenario happens when you find a perfect market entry point, but the broker refuses the order. Another unpleasant thing done by broker when you're scalping is when you attempt to close your trade but the broker does not allow it. This can be sometimes deadly for your trading account, so make sure you select a broker that offers STP or ECN execution and is capable of accommodating

Summing up at this point, you now know how the spread and execution system are important to pay attention to when scalping, and have a general idea of how to Forex scalp. Let's move on to choosing a broker.

Choosing the best Forex broker for scalping

When you decide to select the best FX broker for scalping, start with eliminating all brokers that prevent traders from scalping inside their system. This might sound surprising to you, but there are brokers at the market that do not allow scalping by means of forbidding to close trades shorter than, let's say, three minutes.

Then, cross out all of the brokers that do not offer STP or ECN execution systems for trading. Without one of these, you will have to trade with a dealing desk execution, which will cripple your trading.

Now, when the list of accessible brokers is smaller, begin to look at the instruments for your trading and how they are priced with each available broker. Take into account that many of the
brokers might charge fees – you would need to add the commission to your calculations when selecting the cheapest broker. However, when you pick a broker for your scalp Forex trading, the cost of the broker should not be the only point to consider.

Admiral Markets grants a high level of service, gladly accepts all strategies, provides investors an ECN execution for their trades, and offers competitive pricing for the major pairs of currencies, cross ones, and even exotics. Before you begin to scalp, you can examine Admiral Markets spreads and execution on a demo account; yet it is advised to operate a live account for this purpose.

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Scalping Forex for a living

It is not a secret that many Forex traders attempt to make a living out of their trading activities. Knowing this, trading newbies are sometimes hoping they will be able to earn significant amounts of money in scalping. While this is generally possible, you have to realize that scalping is very time-consuming. Decent pips are possible with scalping, but it will take time to build up. Thus, we suggest applying Forex trading scalping for jump starting of your trading career in Forex.
Scalping strategy gives a good understanding of technical indicators, teaches you how to think and decide fast, as well as how to see and react to exit and exit signals. Hopefully, this brief summary of major important points of scalping has been helpful, and you will now be able to
implement in practice what you have learnt.

Admiral Markets Group consists of the following firms:
Admiral Markets Pty Ltd
Regulated by the Australian Securities and Investments Commission (ASIC)
  • Leverage up to:
    1:500 for retail clients
  • Volatility protection
  • Negative Account Balance Policy
Note: If you close this window without choosing a firm, you agree to proceed under the FCA (UK) regulation.
Note: If you close this window without choosing a firm, you agree to proceed under the FCA (UK) regulation.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage.