Best Simple Scalping Trading Strategies for Forex Trader
- August 24, 2021
- Posted by: Daniel Richard
- Category: Forex Trading
Scalping is a very short-term trading strategy that forex traders use. This strategy is satisfactory for the beginner because of its low risk. Therefore, the duration of its trading time is one to fifteen minutes, and traders can earn one to 20 pips within a few minutes.
The aim of using the scalping strategies is not to gain massive profit. As a scalper, you have to choose a currency pair that is so volatile. You will get more trading opportunities from this volatile currency pair. You should be very careful while scalping because every second is essential for the scalper.
What is Scalping?
Scalping is a very first-speed trading strategy where a trader can make a profit within a few minutes or seconds. You can make a profit from a small price change. The profit is small, but you can take profit several times a day because the number of trades is large, and your earned amount will be more at the end of the day.
As a scalper, you must have a relentless passion for your trading method and avoid significant losses. It is most important for a scalper that the number of wins should be more than a large profit with a few trades. So, the possibility of earning a large profit also means the chance of high risk; on the other hand, the probability of low profit also means low risk.
The trading time is so short, for this reason; the gaining amount is small. A scalping strategy is a day trading system that means you have to close your trade within a particular time. The small moves are more manageable than the large ones. Therefore, the small movements are more frequent than the large ones. Traders who do not have enough time to trade overnight can use these scalping strategies.
Scalp Trading Using the Stochastic Oscillator
A stochastic oscillator can fulfill scalping trading. The stochastic is related to the current price with the range of a recent period of time. You can get a signal or a possible turning point by comparing the price to its current range. The main target of using the stochastic oscillator for scalping is to get a potential signal of price movement.
As a scalper, traders use this kind of oscillator for identifying the movement of the currency market. The price action may be up or down. Price always tries to go closer to the recent range before making a turning point.
For a better understanding, you can use a chart that indicates the higher and lower position of the price movement in a stochastic oscillator. When the stochastic touches the top end of its range, the trade exists. You can use a short position in a downward trading market.
Scalp Trading Using the Moving Average
To identify the trend, the scalper uses another method, the moving average. By using a moving average method, traders can get a possible future price movement which will help them to take an immediate decision for scalping trading.
For instance, we can use a three minutes chart. For short-term trading, you can apply five to the twenty-period moving average. And for short-term trading, you can apply a two hundred period moving average. In the chart, you can find that the long-term moving average is rising. Therefore, you may take a position by following these directions.
On the other hand, in the below chart, the long-term moving average is decreasing. So, it will be best for your trading to look for a short trading position. By taking a short position, you will make a short profit, but your risk level will also be below.
As a scalper, you should never forget that it is not possible to catch every movement because trades follow the trend. So, you must have the perfect risk management quality to avoid significant losses. It is more needed to win huge smaller trades than one or two larger trades.
Scalp Trading Using the RSI
The Relative Strength Index is shortly known as RSI. It is an indicator that traders use for identifying entry points. In the below chart, the price is moving high. When the RSI is under 30, it indicates the oversold position. So, this is the perfect entry position for trading.
In contrast, when the RSI is above 70, it indicates the overbought position. So it is the perfect position to “sell the rally.”
What You Need to Know before Scalping
A scalper should be very disciplined and have rigid concentration about the time management system. As a scalper, you should have the full attention while scalping because the longer term and smaller sizes trade enable traders away from their platforms, and also, the probable entries are limited.
Traders should always be careful and related to their trade because the possible entry can appear and disappear quickly. So that traders can easily catch the entry points. You have already noticed that scalping is a day trading system. So, if you have another job or other activity in the daytime, scalping is not suitable for you. In that case, you can try the longer-term trade with the target of big profits.
Scalping is not so easy; it is more challenging to be a successful scalper because it requires proper research before starting scalping.
It is essential to be careful about the market movement to catch the entry position quickly. You have to engage yourself while scalping all the time. That’s why some traders avoid this strategy to reduce their time commitments.
Therefore, scalping strategies require patience and discipline, and a small number of traders hold these qualities. For this reason, the long-term strategy traders are more than the scalper.