In forex, scalping is a strategy that focuses on profiting from currency fluctuations. Scalping is usually done in charts that are 15 to 30 minutes long. Scalpers don’t strive for large payments all at once; instead, they seek little gains that are consistent and recurrent. Before entering a trade, they usually aim for a profit of 5 to 20 pips per trade. In this article, we’ll discuss the top profitable forex scalp trading strategies.
Choosing Pairs With Lowest Spreads
You already know from the introduction that forex scalping is not about making money at a large number, rather it’s a way of making short but consistent profits. As a trader looks for a 5 to 20 pip gain, this could be diminished in the large spread of many brokers.
Similarly, those interested in learning how to scalp forex may be more choosy about the brokers and currencies they want to trade. The pairs with high volatility and lowest spreads are the hot cake for traders in scalping. Traders should consider trading with pairs like EUR/USD which is the most volatile and vastly traded currency pair. A broker who offers a 1.2 to 1.5 spread would be an ideal choice to trade the pair.
Apart from the EUR/USD, pairs like USD/JPY, GBP/USD, EUR/GBP, EUR/JPY, and AUD/USD with below 2.0 spread can be a good choice for forex scalping. On the other hand, fewer liquid pairs, like GBP/NZD, with an average spread of 4.4 pips, may not be the greatest vehicle for scalping trades for some traders. So, if a trader wants to make a 10 pip profit on each trade, in the EUR/USD market, he or she might only need 11 or 12 pip gain, but in the GBP/NZD market, he or she will need 15 pips. Although a 3 pip difference may appear negligible in the long run, with a forex scalping method, it can make a major impact.
Picking More Volatile Pairs
When choosing currency pairs for a scalping trading strategy, more volatile pairs are just as significant as spreads. As the strategy involves gaining quick money, the market has to move faster to produce such results.
The problem with less volatile pairs is that it takes time to move the rate. Consequently, traders might have to wait for hours than their expected 5 to 20 minutes chart, to reach the price to their desired level.
Currency pairs with considerably higher volatility include AUD/JPY, GBP/AUD, and GBP/NZD. In fact, on trading days, gold and silver prices tend to fluctuate more.
Using Moving Averages
Simple Moving Average, popularly known as SMA and Exponential Moving Average(EMA) is a very important and useful tool for forex traders. Traders can deploy an SMA or EMA of 5, 10, 50, or even 100 periods or greater, according to their preferences.
There are different ways to go about it. Looking at the direction of the moving averages and opening positions in accordance with them is one approach to go about it. Longer-term traders will obviously need additional research, but in 1- to 15-minute trades, it may generate some results. This isn’t the best Forex scalping strategy, but it can work for a lot of traders.
Bollinger bands are a useful indicator for Forex scalping. A flat Bollinger Band line indicates that the market is settling in for a period of trading in a small spectrum. The basic technique is straightforward: a trader can buy a currency pair if it goes closer to the lower bound, and sell pairs if the price moves close to the upper bound.
Obviously, this does not guarantee that all trades will succeed, but it may assist traders in winning the majority of their trades.
Executing Trades Manually
Stop-Loss orders are an important tool in forex trading. But in the case of scalp trading, there is an exception. The theory behind this is that putting a stop-loss order means to hold a trade for some time, in which there is a chance for the trade to fluctuate a number of pips.
It’s also important to remember that when dealing with 1 to 15-minute trades, it’s easy to keep a sharp eye on the platform for any significant adjustments. If the trade is for a longer period of time, such as days or even weeks, it makes sense to keep the Stop-Loss order in place.
Finally, keep in mind that scalping the market is a popular strategy among experienced traders. If you’re new to trading in general, or forex scalping in particular, we recommend practicing on a demo account first before risking any money.