David Dombrowsky

Top 5 Tips for Scalping Trading

Published on
March 21, 2023

Forex traders leverage various strategies to try and take advantage of price swings in the market. While others play the long-term game, others look to take advantage of small price movements. Scalping is one strategy that allows traders to squeeze in a profit by focusing on short-term price movements.

How to Scalp in Forex Successfully

Scalping is a strategy that allows traders to generate profits from small price changes. Trades are taken quickly, and once they become profitable, one can lock in profits. The action is repeated throughout the day, with traders opening and closing dozens of positions.

Most scalpers open and close positions within minutes, whether they generate profits or losses. The idea is to take as many trades as possible, taking advantage of short-term price swings. Consequently, no position is left open for hours as market sentiments will have changed.

Tips for Scalping Forex Successfully 

Ignore Fundamentals, Focus on Technical Analysis

One of the best tips on how to scalp in forex calls for traders to focus on price movements on the chart rather than carrying out fundamental analysis. The idea is to study price movements and look for support and resistance levels.

Support and resistance are critical levels from where trading opportunities emerge. For example, if the price is in an uptrend, a trader will look to enter a quick buy position whenever prices pull back to the support level. Similarly, a trader can look to enter a quick short position as soon as the price rises to the resistance level when the underlying trend is bearish.

Support and Resistance in Scalping Trading

Source: DailyFX.com

If you're wondering how to scalp in forex, it's better first to master how to identify support and resistance levels and other chart patterns. Reversal patterns are some of the best as they provide an opportunity to open a quick trade as the price reverses course and starts moving in the opposite direction.

It is also essential to master candlestick patterns as they provide valuable insight into the direction price is likely to move. For instance, the emergence of a bearish engulfing candlestick is usually a sign that the price is expected to tank from an uptrend. Likewise, the emergence of a bullish engulfing pattern is an early sign of the price's likelihood to bounce back after moving lower for some time.

As a result, one of the best tips on how to scalp in forex calls for traders to master various chart and candlestick patterns. The only way to understand the market momentum, therefore, predict the direction price is likely to move. In this case, one ignores economic factors that might affect price movement.

Focus on One Currency Pair at Time

Taking advantage of short-term and small price movements calls for a lot of precision and timing. Therefore, to master how to scalp forex successfully, it is essential to focus on one currency pair at a time.

Focusing on one pair at a time makes it easy to analyze price action with the utmost concentration. In this case, attention is not diverted. However, it can be challenging to properly monitor the technical charts of various currency pairs and take advantage of small price movements simultaneously.

Liquidity is Key

While there are many currency pairs that one can scalp and squeeze in considerable profit, few provide solid and highly probable trading opportunities. Liquid currency pairs are the best for anyone looking to master how to scalp forex successfully.

Liquid currency pairs generate ideal trading opportunities, given that the price moves up and down rapidly. In contrast, illiquid currency pairs take a long time to move from one place to another, making it impossible to take advantage of small price movements.

The major currency pairs are the best for anyone looking to master how to scalp forex successfully. Moreover, given that many people trade these currency pairs, their prices tend to fluctuate quickly, generating ideal scalping opportunities.

Liquid Currency Pairs in Scalping Trading

Source: Fxssi.com

Additionally, liquid currency pairs come with low trading costs. The spreads while trading these pairs are usually small, given the high number of people trading them. Therefore, a scalper will only incur a small fee despite opening dozens of trades while scalping.

In contrast, illiquid currency pairs come with wide spreads, which translates into higher trading costs. Consequently, the more positions one opens, the more likely one is to incur additional costs, making it challenging to generate optimum profits.

Psychological Edge

Scalping is a high-speed trading strategy that requires a high level of sobriety and concentration. Given that prices can move too fast, one must be mentally prepared and well-equipped to respond adequately to profit as a scalper.

A trader's technical analysis skills and patience are crucial to mastering how to scalp forex successfully. A trader must be ready to make hasty but well-thought out decisions to make a profit as a scalper. Additionally, one must be able to overcome greed and avoid the temptation of overtrading while trying to scalp forex successfully.

Instead of forcing trades as a scalper, it is vital to take what the market gives. While it is possible to place up to 15 trades daily, the scalper must also appreciate that, at times, placing four trades or less is better.

Best Time to Scalp

Successful scalping would also come down to a trader's ability to trade at the appropriate time. Even though the focus is usually on liquid currency pairs, they don't provide ideal scalping opportunities all the time. Therefore, a trader should know the best time to open trades and when it is better to stay off the market.

For instance, GBPUSD and EURUSD provide the best scalping opportunities whenever the London and New York trading sessions overlap. Moreover, this would be the best time to open and close positions, given the increased volatility that makes it easy to take advantage of small price movements. In contrast, the pairs might not be ideal during the Tokyo session as market participants in North America and Europe are sound asleep, and there is little market movement.

Best Time for Scalping

Source: Admiralmarkets.com

The best time to scalp the major currency pairs is during the New York session, as the focus is usually on the US dollar. During this time, economic releases and increased market participants trigger wild swings in the market, making it easy to enter and exit positions.

Bottom Line

Successful forex scalping is a combination of many factors. Mastering technical analysis is overly important as it is the only way to understand market sentiments and predict the direction price is likely to move. In addition, one should focus on liquid currency pairs and only trade when ideal conditions arise.

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