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Scalping Strategy: What is Forex Scalping? Scalping Indicator Analysis

2022-08-11

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I believe many of you have heard of the Forex scalping trading strategy, which is one of the most commonly used Forex investment strategies by investment veterans. Forex scalping strategy is the only way for a trader to become mature, and many investors regard it as a "Forex secret".

Because the scalping trading method makes it easier to invest and profit, many trading institutions believe that the scalping trading strategy is to use data loopholes to make profits, thus explicitly prohibiting traders from using the scalping trading method.

If you don't know what scalping is? Not sure how to use scalping. Today in this article, we will give you a comprehensive and clear introduction to Forex scalping trading

What is scalping?

Scalping trading is a short-term trading method that uses three or more trend indicators to quickly judge buying and selling to obtain profits. Typically, scalping is used with 10 to 100+ trades in a day to capture small movements in the market.

Scalping trading strategies involve a large number of trades aimed at small profits, and it has also been proven that it is often easier to profit from small market movements than long-term trades that analyze fundamentals.

Traders will divide the scalping trading strategy into 1-minute, 3-minute, 5-minute and 15-minute scalping trading according to time, and scalping transactions of different durations will have different indicators for reference.

Are scalping strategies suitable for beginners?

We believe that scalping trading strategy is an investment skill that every investor should take the time to learn. Of course, whether you are a novice investment or an investment veteran, I think you should understand it and then judge whether it is suitable for you.

However, we still recommend that beginners should strictly implement their stop loss targets if they want to get into the scalping trading strategy, and do not trade too large or too greedy. Plus, traders need to make quick decisions, spot opportunities, and constantly monitor screens.

Therefore, those who have the patience and the satisfaction that comes from the success of small trades are great candidates for scalping.

In general, beginners should pay attention to order costs, technical indicators, and risk control when implementing scalping trading strategies. We can be sure that although this strategy is very popular, it is not easy to master it.

Advantages and disadvantages of scalping

Before introducing a trading method, we will introduce the advantages and disadvantages of this investment method to investors, because everything has two sides, and only by understanding the advantages and disadvantages of the scalping method can we use it well.

Disadvantages of scalping

Scalping trading has two disadvantages. The first is that trading institutions may set transaction fees in order to prevent investors from using scalping transactions. If investors make more than a dozen transactions a day, and the trading institution charges fees according to the number of transactions, it is difficult for investors to transfer money.

The second criticism of scalping trading strategy is that it lacks the sense of achievement of big winners. Many investors will think that scalping trading is tedious, and it is necessary to constantly pay attention to the data and make the same type of transactions over and over again, so as to ensure that every Profitable trades, therefore, not everyone has the mindset to use a scalping trading strategy.

Advantages of scalping

The biggest advantage of the scalping trading strategy is that the winning rate is relatively high. We recommend that experienced investors aim for a win rate of at least 80%. Another advantage is that traders can pay less attention to the fundamentals and do not need to spend on the underlying investment. Too much time for analysis and investigation.

Because financial assets tend to move in one direction and then turn in the other, traders only need to pay attention to the trading indicators involved in scalping.

What trading indicators are involved in scalping?

The scalping trading strategy is a purely technical trading method, so there are several trading indicators that will be used when using scalping trading. Below I will list some of the most commonly used trading indicators in scalping trading.

MACD Indicator

The MACD is useful for understanding momentum and tracking and capturing trends. Its formula is: MACD is calculated by subtracting the 26-period exponential moving average (EMA) from the 12-period EMA.

RSI indicator

RSI is displayed as a line chart in the range of 0 to 100. RSI can not only analyze oversold and oversold, but also can be used as a basis for judging trend reversal.

SMA indicator

The SMA indicator is the most basic type of indicator that traders use to develop a trading strategy. It helps traders to understand whether the asset they are investing in is going up or down, helping them identify trends.

EMA indicator

The EMA indicator is considered to be one of the best indicators for scalping as EMAs are used to look at price trends over a period of time. Traders use this technical indicator to obtain buy and sell signals derived from crossovers and divergences from historical averages.

SAR indicator

The SAR indicator helps traders determine the future, short-term momentum of an asset and helps understand when and where to place stop-loss orders.

Preparing to start scalping

Having covered some of the basics of scalping trading, if you want to learn more about scalping trading skills, be sure to figure out what you need to prepare before you start.

Determining the time frame for scalping trades

Generally, most traders use the 1 to 15 minute time frame to scalp currency pairs. With a 1 minute scalper, you might need to look for a profit of around 5 pips per trade, while a 5 minute scalper might give you a realistic target of 10 pips per trade.

Choose an asset to invest in

When choosing a currency pair for the best forex scalping strategy, it is crucial to choose a currency pair that is more volatile so you are more likely to see a lot of movement. In addition to foreign exchange, virtual currency has also become a popular investment asset for scalpers due to its high volatility.

Choose a trading platform

It is critical to choose a suitable trading platform. In addition to security, it also involves transaction costs. Since scalping is an intraday transaction, there is no overnight fee, and general trading institutions will charge the spread. Assuming the spread on EUR/USD averages 2 pips, when trading 1 lot of EUR/USD, one pip is worth $10. This means that your direct fee for opening a position is about $20.

If you are looking for a gain of 5 pips per trade ($50), that means you actually have to go up 7 pips from the initial starting price (7 pips - 2 pips = 5 pips). This will seriously affect your reporting rate.

Here we recommend the CM Trade trading platform. CM Trade provides investors with a large number of investment categories and a very competitive spread ratio. CM Trade has three account types. Different account types have different spread ratios. If you Interested can click here to inquire: CM Trade account type.

Summarize

The scalping trading strategy is not a bold or innovative trading strategy, but it is a multi-day trading strategy that traders have successfully implemented. Scalping minimizes your risk of loss and enables efficient profits even in the flattest markets.

The above information is provided by special analysts and is for reference only. CM Trade does not guarantee the accuracy, timeliness and completeness of the information content, so you should not place too much reliance on the information provided. CM Trade is not a company that provides financial advice, and only provides services of the nature of execution of orders. Readers are advised to seek relevant investment advice on their own. Please see our full disclaimer.

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