For those dealing in Forex on a day-to-day basis, there are a lot of strategies they can use to make the most of every situation. After all, the name of the game is maximizing profits, and you want to use every opportunity you can get to do so.
In this article, we will take a look at one of these strategies called scalping. We will discuss what scalping in Forex is, what the strategies and best practices are, and how you can use it to make a killing. So, without further ado, let us get into it.
What Is Scalping?
Scalping is a method of short-term trading. In this method, traders buy and hold their positions for a matter of minutes before selling them, gaining a few pips in the process. Instead of holding positions for days and weeks and gaining lots at one time, scalping depends on traders making a lot of microtransactions each day, building up profits in bite-sized pieces.
If you have spent any amount of time around Forex markets, you will have a good idea about just how volatile the market can be. The valuation fluctuates as many as twenty times in an hour on some days. However, since foreign exchange is so reliable that also makes it the most liquid market to trade on.
Put simply, Forex scalpers make money by capitalizing on every single one of these fluctuations over a very short period of time to build up a profit. However, in order to get consistent profits with scalping, traders make a huge number of trades every day - much higher than those made by others following a different trading plan.
There are two ways to go about it. The first is to do it manually, which is very labor-intensive and demands constant attention to your scream throughout the day, day after day. The other option is to use an automated trading bot. This software monitors the market and makes trades on your behalf based on the parameters you have set for it.
Best Forex Scalping Strategies
You now have a comprehensive grasp of the theory of scalping, but how do you master it? How do you make the most of a volatile market? Worry not. As promised, we will go through a few of the most popular strategies you can use to profit off scalp trading.
One-Minute Scalping Strategy
ADX is your best friend if you want to focus on one-minute scalping. You need to keep track of two things in order to do this: the main line and the dotted line. The main line shows you the strength of the trend, while the dotted line denotes the price direction.
You should not use ADX during the M1 timeframe in intraday strategies because it tends to create false signals resulting from price noise. However, since one-minute scalping is not dependent on trends, ADX points out short impulse movements to you, which are usually three to five candlesticks long.
You should open a trade as soon as the two dotted lines cross each other. Close the trade in about two to five candlesticks after making a small profit. As soon as the price reverses, you are good!
Five-Minute Scalping Strategy
To make use of a five-minute scalping strategy, you need to have two things:
- A preliminary signal. The published value of the index must be at least 2% off from the forecast, either way.
- An additional confirming signal. The actual published value must be the opposite of the forecast.
As a scalper, you do not need to follow the original source right at the moment of publication. In fact, it is best avoided because the highest volatility is recorded immediately after the news is published. Instead, you should give it a few minutes to calm down or simply track the behavior of the traders.
When the index values are published, and both the above conditions are met, you should make a trade only after waiting an amount of time equal to one candlestick. Make sure the trade you open is in the direction of the price.
Fifteen-Minute Scalping Strategy
This strategy is the one that is most independent of channel indicators. This strategy hinges on the principle that the price always rises back up to its median value after touching the channel limits. You should open a trade only in the following situations:
- If the price touches a channel limit and reverses, open a trade in the direction of the reversal. Close the trade when the price reaches the middle of the channel or reverses within it.
- If the price reaches the middle of the channel, open a trade in the direction it moves regardless if it continues on or reverses.
You should open the charts for several pairs of currency and open trades one by one once the signals start appearing.
There you have it. You are now armed with enough knowledge to take on scalping by the horns! We hope the article gave you the value you were looking for. We hope you have fun trading, remain mindful, and always stay vigilant. Good luck!