Scalping can be perfect for traders who are looking for small but regular profits, but might not be the best approach for beginner traders as there’s more concentration, decision-making speed, and constant monitoring of trades required.
Scalpers trade on a few pips per trade during a single trading session, but this is done through the closing and re-opening of trades time after time without having big losses.
High-Velocity Moves
Scalping is when you use sudden and regular price fluctuations to your advantage. Scalpers are most often one minute, five minute, and tick chart traders that try to profit from minute-scale price action within seconds or minutes.
Scalpers will require high-speed internet connection and a sophisticated trading environment that can do trades in minutes, and they must have a very good attention span and intuition regarding chart dynamics so that they are able to identify when to trade.
Scalpers need to be systematic and also have the discipline to execute that strategy, or your gut-wrist moves can easily bring you back down and ruin your hard-won profits. Thus, proper risk management should be the scalpers’ must-have tool – putting in place specific risk-reward parameters, stop orders and limit orders – and practice accounts that provide free-float trading environments prior to exposing themselves to live markets. This will allow you to be confident trading in the long term.
High Volume
Scalpers use the volatility of the market to cash in in several little increments based on small price changes. These traders usually use high leverage trading platforms which make possible more profit and more risk.
By trading liquid pairs and during times of high trading volume, traders search in detail for tight spreads that reduce losses but at the same time offer more chances to scalp pips per trade.
For example, forex scalpers work with very accurate indicators such as moving averages (MA) to pinpoint trade signals quickly. Moving averages (MAs) allow you to identify entries and exits quickly.
Because scalpers make regular trades, they should be both hungry and driven to succeed and are able to stay on top of things for a long period of time. There might be no profit at all on one losing trade — and that is why it takes discipline, patience and thorough knowledge of market conditions.
Low Spreads
Scalpers looking to get in on small price movements want low spread currency pairs, so that each trade doesn’t lose money and all profits can be made.
For scaling to work, you need a trading platform with low spreads and good connectivity on the internet, as frequent trades can make transactions very expensive compared to other strategies.
Scalpers use one-minute (M1) and five-minute (M5) charts as a lot of microtrends can be identified here. Additionally, they are helped by measures such as the Relative Strength Index and Stochastic Oscillator to spot overbought/oversold areas which may indicate a reversal of price.
Scalping is a very lucrative style if you can meet its high standards but it makes you vulnerable to long term market risks and a highly disciplined style, which demand traders who commit to the fullest. Because of these demands, scaling generally only makes sense for professional traders who can invest all their time.
Low Risk
Scalping is a high velocity trading technique that requires accuracy and fast judgment, yet also extremely risky as traders will tend to trade at very high leverage – creating more profits and more losses.
Short term moving averages and trend indicators such as the Relative Strength Index and Stochastic Oscillator help scalers find entry and exit points in seconds, identify strong momentum, verify breakouts in larger volumes, and execute trades in minutes. They use these tools to get into and out fast of markets they think are either risky or risky.
Traders then look for a profit target of high risk to reward ratio (usually done by multiplying the distance from stop loss by 2 and extending it down (for short positions) or up (for long positions). This is a perfect demo account to get started scalping as you can test a lot of strategies with zero real money – creating winning formulae based on who you are and how you like to trade.
