Forex FAQ and Tips

Scalping Forex and Trading Strategies

Scalping Forex and Trading Strategies Guide

An Introduction to Forex Scalping

Scalping Forex means opening and closing trading positions in regular basis aiming to ‘scalp’ profits of 2-10 pips. These positions are opened and closed during tiny segments of time that usually last less than 1 minute. Scalping is the shortest form of day-trading and it becomes more and more popular among Forex Traders for reasons described below. You may scalp Forex manually or automatically via the use of a Forex Robot (Expert Advisor). Scalping requires the existence of state-of-the-art trading technology plus a perfect understanding of technical analysis and Real Price Action in Forex Trading.

What Characterizes Scalping?

These are the characteristics that are distinguishing Forex Scalping from other trading practices and styles:

1.   Trading the 1-Minute chart (Fast-paced-trading)

2.   Targeting profits 2-10 pips, stop-loss 2-3 pips below

3.   Repeated Trades / High Leverage Used

4.   Trading pairs with minimal spreads (most commonly EURUSD, USDJPY and GBPUSD)

5.   Choosing to trade only when liquidity peaks (liquidity peaks during market overlaps described below)

6.   Using state of the art trading technology (hardware, software, internet connection etc)

7.   Trading with minimal delays (ECN/STP Broker needed)

8.   Trading with no price manipulation and re-quotes (ECN/STP Broker needed)

9.   Scalpers are using advanced platforms offering 1-click-trading (MT4, MT5, JForex etc)

10.  Automated scalping via the use of an Expert Advisor requires the existence of a VPS hosting service in order to achieve 24-hours trading

Scalpers need to search, read and perfectly understand the small print of any Broker’s agreement (liquidation, margin levels, stop levels etc.)

Which are the Basic Scalping Strategies?

These are the three common scalping strategies:

1) Trending-Market Scalping Strategy

Trending or Directional Markets are those markets following a very strong short-term trend. A strong trend is considered ideal for scalping. A short-term trending market is usually the result of important news release. The best way to scalp those markets is by Running-Your-Profits. A very important news release may lead the market to 500 pip movements without any corrections at all. Don’t get in a hurry closing profitable trades in such markets -Instead use a simple trailing stop-loss order. By this way you may limit your losses but not your profit potential.

In order to validate and confirm a trend in such a market you may use a great number of different technical analysis tools and indicators. As concerns charting you should use 2 charts. The first chart should be used for the evaluation of the trend and the second chart should be used for defining the optimal entry level. Most commonly:

i) 5-Minute chart to evaluate the existence of a short-term trend

ii) 1-Minute Chart to determine the exact levels of entering the market

2) Ranging-Market Scalping Strategy

Ranging markets are a common phenomenon in Forex trading. A strong range can provide the ideal levels for target profit and stop-loss orders, at a glance. Some scalpers consider those markets even more lucrative than trending markets.

3) Price-Breakout Scalping Strategy

Price breakouts are triggered when a currency pair ‘breaks’ an important demand or supply level. This may be the result of news-releases or due to other technical reasons. When a price breakout occurs we are usually witnessing very strong short-term trends, ideal for scalping. A breakout may also trigger a significant price reversal. Be aware that many times a price breakout may be false (false reversals etc). Be sure that you are fully familiar with factors that are evaluating and confirming a price breakout before you try to scalp those markets.

In order to define and place the ideal target-price and stop-loss orders you may use the Fibonacci levels.

Automatic Scalping Strategies via Expert Advisors (Forex Robots)

There are tens of automated scalping systems in the market today. Most of them are scalping EURUSD and GBPUSD and taking advantage the high liquidity offered by these two pairs. Before you buy and use any automated scalping system you should research its past performance. In addition, when you buy such a system you should test it first on a demo account before moving to a real account. Testing on a demo provide traders the chance of evaluating performance but also the chance to define the optimal parameters. Finally, it is highly recommended to use any scalping system in separate trading accounts where no other trading activity takes place.

ForexAutomatic offers reviews and comparisons of Expert Advisors and other Automated Systems:

EXPERT ADVISOR

TRADING

PLATFORMS

PRICE

INFORMATION

FAP TURBO FOREX ROBOT

■ Scalping several pairs using the M15 Chart

■ MT4

■ $149

■ Lifetime Updates

Review FAP Turbo

» FAP Turbo Web

WALLSTREET ROBOT

■ Scalping: EURUSD, GBPUSD, USDJPY, USDCHF, AUDUSD, NZDUSD

■ MT4

■ MT5

■ $299

■ 3 Licenses

■ Omega Indicator

Review Wallstreet Robot 

» Visit Wallstreet

FOREX MEGADROID ROBOT

■ Scalping exclusively EURUSD

■ MT4

■ Zulu

■ $67

 Review Megadroid 

» Visit Megadroid Web

GPS FOREX ROBOT

■ Scalping several pairs (only in the Asian Session)

■ MT4

■ MT5

■ $149

Review GPS 

» Visit GPS Robot Web

VOLATILITY FOREX ROBOT

■ Scalping two pairs GBPUSD and EURUSD

■ MT4

■ $190

Review Volatility Factor 

» Visit Volatility Factor Web

 Mentoring Club Review ProsAdvantages of Forex Scalping

Here are some advantages when scalping Forex:

1.   A scalping strategy may be applied to both directional and directionless markets

2.   There are many ways to scalp Forex (Scalping trending markets, ranging Markets etc)

3.   A scalping strategy may be applied manually or automatically via advanced systems

4.   A scalping strategy may be used as an effective News-Trading Strategy

5.   Scalping doesn’t require fundamental currency analysis

6.   Not carrying positions overnight and thus avoiding SWAP charges

7.   Performing huge volumes favoring the participation in Rebate Plans (making money simply from volumes)

8.   Mastering Forex Scalping may lead to Financial Freedom (not for everyone)

Mentoring Club Review ConsDisadvantages of Forex Scalping

Here are some disadvantages when scalping Forex:

1.   Scalping assumes the existence of ideal trading conditions (minimal spreads, minimal delays, no re-quotes)

2.   Manually scalping the market means that a trader must devote enormous energy and time in front of his monitor

3.   Automated scalping strategies require the use of a VPS hosting service and that means extra cost

4.   Not every Forex Broker allows Scalping

5.   Scalpers are particularly vulnerable to slippage when executing trades (especially in volatile markets)

6.   Vulnerabilities exist also in potential computer problems and other similar technical inefficiencies

7.   Scalping requires a maximum degree of discipline –Not suitable for every personality

Scalping and News-Trading

Some traders use scalping strategies to exploit opportunities in news-trading. Usually when important news is released in the market, price volatility and velocity hit red. News such is:

- Inflation and Unemployment Statistics

- Interest Rate Adjustments by Central Banks

- GDP Announcements

What is the Best Time to Scalp Forex?

Scalping is more efficient and effective when the Forex market is considerably liquid. Liquid markets offer the narrowest spreads. Tight spreads are particular important when you are targeting 2-5 pips profit per trade. Volume in Forex is not equally distributed among the 3 sessions of the market. The London’s market opening is signaling a volume peak. Moreover volume is peaking during market session overlaps. An overlap occurs when two Forex sessions are opened simultaneously:

(a) New York & London Market Overlap: 8:00 am EST to 12:00 noon EST

(b) Sydney & Tokyo Market Overlap: 7:00 pm EST to 2:00 am EST

(c) London & Tokyo Market Overlap: 3:00 EST am to 4:00am EST

ForexAutomatic Compare Zone:  » Compare Live Signals | » Compare Forex Robots | » Compare Trading Platforms | » Compare Forex Brokers

Best Time To Scalp the Market

Here is maybe the ideal time to scalp Forex:

■ 7:00 am EST to 8:00 am EST

At a Glance: “Ranging Market, don’t be greed”

During this one hour the market is preparing for theNew York opening at 8.00 am EST. Price oscillation and ranging triangles are common phenomenon during this hour and that may be suitable for particular scalping strategies.

■ 8:00 am EST to 10:00 am EST

At a Glance: “Trending Market, run your profits”

During this two-hour period theNew York and London Markets are opened simultaneously (market overlap). The market activity peaks and that means the highest liquidity there is. Additionally, important news is usually released during this period and that means also high paced price velocity. That combination of liquidity and volatility creates the ideal trading conditions for scalping. During these two hours the market is usually trending (directional moves) by following strong swings.

■ 3:00 pm EST to 5:00 pm EST

At a Glance: “Market Moves Correctional, be Quick”

During this period the US Banks are preparing their daily closing. Compared to the other two selected periods this period is witnessing considerably lower volume activity and commonly it is characterized by directionless price oscillations. During this period profitable trades may occur as correctional moves on high currency performers. Scalping must be rapid.

Basic Trading Tips when Scalping Forex

Here are some basic Trading Tips when scalping Forex:

1.   Know what you are trading and choose the right time to trade it

2.   Select very carefully your Forex Broker, don’t start scalping unless you have found the right partner

3.   Read the terms of agreement of each broker and don’t miss the small print (in my country we say “evil is hidden in details”)

4.   Consider the possibility to join a rebate plan, it can make the difference as concerns your long-run profit potential

5.   Before you start scalping for real money test and re-test your strategy in a practice account

6.   Don’t trade during hours when liquidity and volatility are simply inadequate

7.   Stop trade if you have lost many trades in a row. Set some money management rules and follow them

8.   Discipline yourself and don’t get emotional

9.   Follow your strategy, if your strategy proves wrong, stop-trading and re-evaluate everything by getting advice from others (tutorials, forums etc)

10.  Keep a brief log of what you are trading and aggregate your performance by using multiple criteria

In the final section of this scalping tutorial by ForexAutomatic you may find 4 rebate plans specially designed for scalping Forex.

Trading Rebates for Scalpers

Here are 4 rebate plans for scalping Forex. Joining those plans is free to sign and to use and has not implications on your trading experience or your trading conditions. They can be used simply to reduce your trading cost. What is really nice is that all 4 plans are 100% automatic and that means no interference in receiving your rebates. You are using the IB just to register and then receiving the rebate automatically by your broker and directly to your trading account. The below Forex brokers offer pure ECN execution and fully allow scalping and automated trading.

FOREX BROKER

FOREX REBATE

USTRADER

MINIMUM ACCOUNT

DEPOSIT METHODS

AUTOMATIC REBATE LINKS

FinFx

(ECN ACCOUNT)

» Learn more about the rebate here

■ $0.6  lot discount

 

Yes

 

$1,000

Bank Wire, Credit Cards,

Debit Cards MoneyBookers

Just register via these Rebate Links (No further action)

Automatic ECN Rebate Link Minimum deposit $1,000

 

FinFx

(ECN PRO ACCOUNT)

 

■ $0.6  lot discount

■ 100% Free VPS

$10,000

Automatic ECN Pro Rebate Link -Minimum deposit $10,000

 

Dukascopy Bank

(ECN ACCOUNT)

» Learn more here

 

■ Dukascopy 40% Rebate on all commissions charged

No

$5,000

Bank Wire, Credit Cards

Action Needed. During the final steps of registration at the field KNOW US FROM indicate 8410 as your Introducing Agent

Register at Dukascopy Bank by indicating 8410 at ‘Known us From”

Dukascopy Europe

(ECN ACCOUNT)

■ Dukascopy 10% Rebate on all commissions charged

No

$100

Bank Wire, Credit Cards

During the final steps of registration at the field KNOW US FROM indicate 8411 as your Introducing Agent 

Automatic Rebate link indicate 8411 as your Introducing Agent

 

■ Giorgos Protonotarios -Investment Consultant / Financial Analyst

Forex Scalping & Trading Strategies 

 

Read More: ► Get Started ► Forex Heat Map | ► Basic Trading Tips | ► Money Management

You are here: Home Fx Tips