The technique of scalping is a very popular one among Forex traders, one loved and encouraged by some online brokers, and which is made possible by exploiting the high leverages that are typical of this market.
What Scalping Is and How to Scalp
Scalping consists in using very high leverages — typically 1:1000 or even 1:3000 — to open trades on pairs with a low spread, aiming at a small target in terms of pips, usually compensating the higher risk exposure with tighter stop-losses.
Because of its unique features, a typical scalping trade lasts a few seconds to a few minutes, allowing traders to place more trades and invest more capital during the course of the day. Stop-losses and take-profits are usually quite tight, which makes it easy for the pair to reach one or another in a relatively short period of time.
This technique is quite easy to use and, when mastered, it certainly allows traders to earn (as well as lose) a very consistent percentage of their equity in a single day by placing multiple trades, but still controlling their risk exposure in a very precise way. For instance, it is not uncommon to see traders earn or lose up to 15-20% of their equity in a single day by placing several trades of this kind, although professional traders do not usually risk that much unless conditions appear particularly favorable.
Why Some Online Forex Brokers Love Scalpers
Some FX brokers love scalpers and encourage the use of this technique by their traders because, as you already know, Forex brokers are being compensated with the difference between the bid and the ask price. This means that their earnings are proportionate to the product of spread and your current exposure and so, the more you trade, the more they earn.
However, it has to be said that not all online brokers have the ideal conditions for scalping, which are very high leverage and reasonable spreads (no more than 1-2 pips on EUR/USD and other main pairs).
Moreover, not every broker allows you to place your stop and limit orders exactly where you want them, especially if you want to place them very close to the current price of the currency pair, say, at a distance of only 5 or 6 pips.
This partially limits your possibilities as a scalper, but it also has the very positive effect of protecting you against the high volatility of this market. Placing a stop/limit order at just 5 or 6 pips is typically not something you want to do, especially when you factor in the spread which can already be 2-3 pips: this would mean that, if the pair went just another 2 pips down, you would trigger a stop-loss and lose on a potentially profitable trade.
When you use scalping, you typically want to give the pair a little more room to swing back and forth a little before it has the possibility of reaching your take-profit objective. Many traders use SL and TP levels from 10 to 20 pips each, which are still considered quite tight compared to other trading strategies, especially those in the long term.
FAQs
What Scalping Is and How to Scalp. Scalping consists in using very high leverages — typically 1:1000 or even 1:3000 — to open trades on pairs with a low spread, aiming at a small target in terms of pips, usually compensating the higher risk exposure with tighter stop-losses.
What is the best scalping strategy time frame? ›
As scalping is a very short-term strategy, popular timeframes for carrying out scalping in trading can be anywhere between one and 15 minutes, although some may choose longer. This is because price movements tend to be very small, so your entry into and exit from the trade need to be sharp.
What is the 5 pip scalping strategy? ›
The 5 pip scalping strategy is tailored for short-term trading. Day traders use this strategy to capitalize on minor price changes in the forex market. The approach focuses on small profit targets, distinguishing it from other trading methods. Swift trade execution is essential for effective forex scalping.
What is the 1 minute scalp strategy? ›
The 1 Minute Scalping Strategy is a precise trading style, focusing on a 1-minute time frame. It depends on market volatility to capitalize on rapid price movements within a 60-second window, aiming for quick, small profits. The charts and indicators used in this strategy are tailored for swift decision-making.
What is the most successful scalping indicator? ›
The EMA indicator is regarded as one of the best indicators for scalping since it responds more quickly to recent price changes than to older price changes. Traders use this technical indicator for obtaining buying and selling signals that stem from crossovers and divergences of the historical averages.
How many pips are good for scalping? ›
Forex scalpers usually aim to scalp between 5-10 pips from each position, aiming to make a more significant profit by the end of the day. Forex scalping is a form of arbitrage trading. Get tight spreads, no hidden fees and access to 10,000+ instruments.
What is the 5 minute scalping strategy? ›
In the 5 minute scalping system or strategy, the seller and buyer requires to establish a lowest level of 10 trades in no more than a one day for the purpose of benefits on whichever insignificant price movements.
Which hour is best for scalping? ›
The best time to use a scalping strategy is during periods of high market liquidity and volatility, typically at the opening and closing of major financial markets. Additionally, economic news releases and events can create short-term price movements, offering opportunities for scalping.
What is the 20 pip scalping strategy? ›
Forex scalping strategy “20 pips per day” enables a trader to gain 20 pips daily, i.e. at least 400 pips a week. According to this strategy the given currency pair must move actively during the day and also be as volatile as possible. The GBP/USD and USD/CAD pairs are deemed to be the most suitable.
What is the algorithm for scalping trading? ›
The algorithm idea is to buy the stock upon the buy signal (20 minute moving average crossover) as much as lot amount of dollar, then immediately sell the position at or above the entry price. The assumption is that the market is bouncing upward when this signal occurs in a short period of time.
The best scalping trading strategy
Stop-losses should be arranged around two or three pips, below the last low point of a swing. It's not uncommon to gain 6-12 pips on a trade. Aim for this and you'll be on the way to success.
What is the best timeframe to scalp on? ›
Whilst there is not really a "best" time frame for scalping, the 15-minute timeframe does tend to be the least popular with most Forex scalping strategies. Both 1-minute and 5-minute timeframes are the most common. Your acceptable profit or loss per trade will depend on the time frame that you are using.
What is the 10 pip scalping strategy? ›
What is the 10 Pips a Day Forex Strategy? The idea behind the strategy is to aim for quick wins every day. As the name implies, the goal is to make a profit of 10 pips each day. This sounds simple enough, and in theory it should be.
What is the success rate of scalping strategy? ›
The Hyper Scalper strategy revealed some compelling statistics when applied to daily charts. The strategy achieved an impressive average success rate of 81.51% for bullish signals. This high success rate indicates the strategy's effectiveness in identifying upward trends and potential buy opportunities daily.
What is the greatest scalping strategy? ›
Multiple Chart Scalping
Watch for price action at those levels because they will also set up larger-scale two-minute buy or sell signals. In fact, you'll find that your greatest profits during the trading day come when scalps align with support and resistance levels on the 15-minute, 60-minute, or daily charts.
What is the best interval for scalping? ›
The best time to use a scalping strategy is during periods of high market liquidity and volatility, typically at the opening and closing of major financial markets. Additionally, economic news releases and events can create short-term price movements, offering opportunities for scalping.
What percentage is good for scalping? ›
5. What percentage is good for scalping? Scalpers typically need a win/loss ratio exceeding 50% to be profitable, unlike other intraday trading techniques where making money is still possible even with a lower win/loss ratio.
What is the 9 30 scalping strategy? ›
Setting up the 9/30 strategy involves attaching a 9-period EMA and a 30-period WMA to the price chart. The direction of the main trend is determined by observing the slope of the 30-period WMA and the position of the 9-period EMA relative to the WMA.
