Forex Scalping Strategy: Best Indicators & Tips

We have the tools to help you succeed, including our customisable platform MetaTrader 4. We also provide outstanding customer support 24/5; a wide choice of deposit and withdrawal methods; and trading and technical support. Instead, you will be looking to react quickly to news to capture some of the rapid momentum in its wake.

Forex Scalping Strategy – Is Scalping For You?

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It’s very rare that a scalper will monitor charting time frames that are longer than 15 minutes. Once indicator readings on the Relative Strength Index (RSI) reached oversold territory, scalping traders would close the position at a profit. Similarly, another short trade becomes apparent as prices fall through trendline support a second time. Using this scalping technique, traders could open new short positions at $1,509.80. Before we delve into the best timeframe for scalping, it is essential to understand what a timeframe is. A timeframe in forex refers to the period that a chart displays market data.

Pay attention to the news

In order to make scalping works, this type of trader usually opens at least five trades per day. Ultimately, scalpers will hope that multiple positions each day and rely on substantial position sizes in order to drive profitability. This is because traders are only able to capture small moves in the market. Charting time frames also play a critical role in determining when to enter and exit trades.

Trade Like a Predator Hunt for Opportunities

1. If the trend continues , you could also set your take-profit limit higher, move your stop-loss up again, and so on.
2. Scalpers often use derivatives like CFDs to trade forex pairs that are rising or falling in value.
3. Scalpers are not attached to any position, have a neutral market outlook, and their only goal is to have a positive win/loss ratio by the end of the day/week/month.
4. In the same currency pair, we can see in the example below how each moving average – at periods of three, 12 and 100 – pull tighter together as the data indicates more up-to-date activity.
5. Being able to “pull the trigger” is a necessary key quality for a scalper.

You should consider whether you understand how spread bets and CFDs work and whether you can afford to take the high risk of losing your money. Around $6.6 trillion worth of forex transactions take place every day, which makes it the most liquid market in the world. Liquidity refers to the ability to buy and sell quickly without affecting a market’s price. High liquidity makes forex a good market for scalpers, who need to enter and exit their positions quickly – sometimes within seconds.

A refinement of scalping is to ratchet your limits up as the market moves. The relative strength index (RSI)​ is a momentum oscillator that predicts the future direction of the forex market over a period of time. Short-term traders, such as day traders and scalpers, can shorten the default settings of the RSI to monitor just minutes at a time, in order to find the best entry and exit points. Measuring momentum is useful within the forex market for traders to find a suitable strategy for the current environment.

Top 5 indicators for a forex scalping strategy

As each trade carries transaction costs, scalping can result in more costs than profits. Because you enter the market frequently, spreads will be a big factor in your overall profit. Pairs such as the EUR/USD, GBP/USD, USD/CHF, and USD/JPY offer the tightest spreads because they tend to have the highest trading volume. For example, if you go long EUR/USD, with a bid-ask spread of 2 pips, your position instantly starts with an unrealized loss of 2 pips.

Practice using the platform before you commit real money to the trade. As a scalper, you must become very familiar with the trading platform that your broker is offering. Different brokers may offer different platforms, so you should always open a practice account and practice with the platform until you are completely comfortable using it.

How to Use the 1-Minute Scalping Strategy for Quick Profits

Now, before choosing the path of a scalp trader, here are the most desired characteristics a scalper needs to succeed. Investopedia does not provide tax, investment, or financial services and advice. The information is presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all cryptocurrency broker canada investors.

There are two types of moving average – simple moving average (SMA) and exponential moving average (EMA). Moving averages are popular indicators in most forex scalping strategies, as they’re easy to read. Setting your take-profit ratio higher than your stop-loss can increase your chances of making a profit over time.

Scalping strategies require traders to closely monitor the trading station and to open/close a large number of positions. Scalpers aim to generate profits from small price movements in the market. The basic idea behind scalping is that is easier to profit from smaller market moves than focus on long-term trades. This approach includes opening a large number of trades focusing forex broker rating on small profits.

Although they are both seeking to be in and out of positions very quickly and very often, the risk of a market maker compared with a scalper is much lower. Market makers love scalpers because they trade often and pay the spread, which means that the more the scalper trades, the more the market maker will earn from the one or two pips on the spread. Scalp trading, also known as scalping, is a popular trading strategy characterized by relatively short time periods between the opening and closing of a trade. Traders are either scalping in the same direction (a trend-following approach) or in the opposing direction (a contrarian approach).