Simple Forex Scalping Strategies
Forex Scalping Trading Strategy - Essence, Methods and Advice
You cannot start using forex scalping trading strategies on Forex right away, but any trader can learn
how to use scalping strategies. The term `scalping' comes from the verb `to scalp', i.e. to cut the
scalp from the skull. With the foreign exchange market, `skulls' are day and local extremes. A scalper
`cuts the scalp' (profit margin) from these `skulls'.
If you are a beginner in forex scalping, you need to know that this method of trading is one of the
most labor-intensive forms of trading on the market. It is quite difficult to perform long-term and
above all, effective scalping, because it is very exhausting.
There are different well-established scalping methods but each trader has an individual approach.
Specifically, this means that every trader uses his own indicators and oscillators, has his own instinct
and vision of the market.
That said, the basic strategy is identical for everyone: you enter the market, you `scalp', and you exit
the market. If you want your strategic model to be effective and profitable, you should make quick
decisions on the market, i.e. be capable of turning around in a moment and following the market.
We will examine a working forex scalping trading strategy below. You shouldn't take this model as
the rule but more of a guide for action. There is no doubt that this model is open to optimization.
You can optimize it, using different currency pairs, changing the rules of entry or exit and so on.
But remember that any optimization on Forex is a relative concept as any model should be
continuously analyzed and corrected depending on market conditions.
We will use two trading sessions in our example:
1) The European trading session. It starts 11:00 (Moscow time) - the time when London opens
2) The American trading session. Orders of this session appear on the market at 15:45 (Moscow
EXAMPLE. Trading time - 11:00 (Moscow time)
Recommended model of initial actions:
1) Don't hurry to open positions at exactly that time
2) Launch two terminals (training and trading)
3) Analyze execution of night bids (let big investors set levels of resistance and support for the
current trading day)
4) Analyze the economic calendar (news calendar)
5) Launch a group movement digital indicator on the training terminal, i.e. open
complementary tools in any direction on the demo account
These are the trading instruments: cable (GBP/USD), USD/CHF (dollar group), EUR/JPY (yen group).
Recommended timeframe: M5, M15, M30
We recommend entering the market when group movement is determined. These variants of
placing pending orders are possible:
1) Placing pending orders in close proximity to price (if your terminal allows it)
2) A less risky variant is to place orders on a breakout of a day extreme (if it's close) or on a
breakout of some recent appropriate local extreme
Additional positions are a very important aspect of scalping. It is better to place them every 10
points after the `first' order.
As a rule, the number of additional positions doesn't exceed three. Of course, it is not necessary to
use additional positions, but they play a very important part.
So what is it? Initial entry is carried out with a small lot and you then exit with small losses if this
entry was wrong.
If a trend is positive and price moves in our direction, we increase the open position. As you see,
additional positions act as entry insurance against risk. It works quite well at the early stages: On the
one hand, we want to make a profit but on the other hand, we don't want to lose too much money if
things go wrong.
In future, when you become more experienced and start feeling the market better, you will be able
to give the first orders more `weight'. It is important to note that, having passed 30-40 points, the
morning trend runs out and inter-session flat starts.
To illustrate the scalping model, let's carry out an analysis of trading (see Picture 1).
Having got over the mark of 15 points of profit, we place a stop at +5 points and wait for further
Having exceeded the 15 point mark, we place a trailing stop at a distance of 20 points. 45 minutes
after the beginning of the movement, we can start preparing to close orders at the slightest signs of
As a result, three positions were closed on trailing stop and the fourth position was closed on break-
even (+5 p.): 30 + 20 + 10 + 5 - 10 = 55 p.
Scalping strategies, as well as other trading strategies, have their advantages and disadvantages. For
example, if you use a long-term pattern of trading, you will get a lot of free time, but you have
almost no free time at use of scalping.
You actually have to sweat your guts out throughout a whole trading day!
On the other hand, a scalper can make much more profit for a trading day than a trader who prefers
mid-term or long-term trading.
Besides, you constantly see the whole price performance with scalping. You also have a `lever' for
immediate reaction on any changes on the market.
Thereby, this everyday tiresome trading does give scalpers priceless experience.
When using scalping methods, a trader starts to get a better understanding of the price behavior
models of one or another currency pair. They also start feeling the market better thus forming
correct predictions of market behavior.
Scalping is a simple principle-based strategy focused on fast opening/closing positions using 1-5
In this case, the main goal is to make a profit which would cover the spread size. So as soon as the
amount of profit on the opened position becomes positive and at an amount the trader is satisfied
with, the order should be closed.
The main feature of scalping is the large number of performed trades. A trader can close from 30 to
1000 trades within a trading day. As a rule, the diagrammatical models M1 (1 minute) and M5 (5
minutes) are used at scalping. To succeed in trading, a scalper needs to have a large leverage. The
majority of scalpers use 1:200 - 1:500 leverage.
For example, at 1:500 leverage, there is a possibility for opening a position with the volume of 1 lot.
In this case, the pledge would make only 200 US dollars.
Scalping methods are not popular among professional traders as many of them regard scalping
strategies as a direction with pointless risk and an absence of clear market entry and exit strategy.
These statements have some merit but are not strictly true which will be discussed later. Currently
there are many scalping-based trading strategies.
Different currency pairs and timeframes are used, but the priority of a scalping strategy is invariable:
to make profit in quick time.
Forex Scalping Strategies: http://iticsoftware.com/scalping-forex