Complete Guide to Scalping or Short Term Trading
In this article, you will find simple and effective methods and short-term trading strategies. Welcome to the best scalping guide for forex trading.
What is scalping - definition, technique
As a trader, you must have wondered - what is scalping?
Scalping is a trading method that involves buying and selling financial products over very short periods of time.
Traders who use the “scalping” trading style trade mainly derivatives using high levels of leverage. The ratio of profit to risk is quite small, but the positive effect is achieved by the number of transactions.
For example, a Dax 30 scalper is a person who scalps the stock market. The profit from the trade when using the scalping strategy is relatively small due to the small movement, so the scalper increases the number of transactions and uses a higher level of leverage than the swing trader.
When trading on such small time frames, everyone tends to use the smallest market fluctuations for trading.
One can also say about scalping that it is also the fastest way to trade after high frequency trading.
Among these two trading methods, the scalping method is really the only one available to the average trader because high-frequency trading requires expensive professional equipment and an incredibly fast internet connection.
Scalpers do not follow the usual money management rules, such as the “2% of trading capital per trade” trading rule.
Once you start gaining experience in Forex trading, you understand the role and importance of Forex strategy in trading success.
There are many good trading strategies, in this article we will focus on scalping and in particular we will look at several scalping strategies and talk about scalping indicators.
Let's start with the definition of scalping in trading.
What is Scalping Trading?
Forex scalping is a style of trading with large volumes and very short trade duration. This method is used by those who want to trade using a short term strategy.
In fact, short-term Forex trading is algorithmic forex trading.
The average gain for short-term trading is a maximum of 5 pips. Investing in the stock market in a very short period of time is often carried out with a high level of leverage.
But the definition of scalping does not end there.
Let's continue - what is scalping?
It is also a short term trading strategy. As you know, Forex is the most liquid and most volatile financial market in the world. The volatility of currency pairs allows stock traders to make money with moves ranging from 100 to 200 pips.
Scalping is known to attract the most active Forex traders: orders are opened and closed very quickly, very often with the help of scalping trading robots that will try to use any point to enter a trade.
In other words, he can make a small profit in Forex by speculating on the exchange rate in a very short time.
Scalping trading strategies are very popular among professional traders because they help to limit the time of the trade with limited risk.
Exchange rate scalpers are trying to capitalize on small movements in currency pairs and have opted for Forex scalping because there are more opportunities in the short term.
A Forex scalper is someone who wants to average no more than 10 pips in the Forex market and accept a maximum risk of 20 pips in order to be able to generate trading income using the scalping method.
Market volumes should be large and brokerage commissions should be as low as possible.
Ichimoku Scalping - the best short-term Forex indicator
Scalping is a trading strategy based on technical analysis and price action . Fundamental analysis is only marginally considered when making this type of investment in derivative financial instruments.
Technical indicators are very commonly used for scalping, but you may not know which indicator to use for scalping.
Let's look at some options to get started with Forex scalping.
The Ichimoku 1 min scalping indicator is a widely used technical indicator and is at the top of our list of the most used Forex scalping indicators.
Whether this is the best Forex scalping technique will be entirely up to you.
Some say it is the best scalping indicator, while other traders don't even plan to use it. In any case, the word is yours - the choice of indicator depends on your vision and trading style.
Other free indicators that are important if you decide to try scalping in MetaTrader 4 and 5 include oscillators.
Here are some more technical indicators for Forex scalping:
- Heiken Ashi scalping
- Scalping RSI
- Moyenne Mobile
- Pivot points using scalping pivot points
- Support and resistance in scalping
Let's look at the use of these indicators in scalping.
Depending on the forex scalping indicator used, there are several types of short-term strategies:
- Heikin Ashi scalping strategy
- Scalping Ichimoku
- Bollinger bands scalping strategy
- Scalping strategy with RSI
- Point Pivot Scalping Strategy
- Price Action strategy scalping
- Scalping strategy fractal
- Fibonacci Scalping Method
- Keltner Scalping Strategy
Is this a complete list?
Of course not. Other indicators that improve scalping in MetaTrader 4 can be used in a simple scalping strategy, such as moving averages, MACD, Renko, Parabolic Sar, etc.
How does MetaTrader 5 and MetaTrader 5 Forex Scalping work?
Most currency traders use 1 minute, 5 minute or 15 minute charts.
You cannot trade the scalping method using higher timeframes. You can try all timeframes less than the 15 minute Forex chart or even time dependent charts with the MetaTrader 4 and MetaTrader 5 Supreme Edition tools available from Admiral Markets.
You can decide for yourself which approach is more comfortable for you and with which you can achieve long-term success.
You might be wondering why we are talking long term while the scalping technique is based on very short timeframes…
And the answer is simple: as with any trading approach and style, interesting results are measured over time. You may have one or even five good sessions:
- Forex scalping, such as EURUSD scalping
- Scalping CAC 40 or DAX with RSI
- Cryptocurrency scalping, in particular Bitcoin scalping
- Scalping with Ichimoku
But in the end, you will inevitably have unsuccessful sessions, and until you have an idea about your scalping strategy, you will not be able to objectively judge whether this method is the best scalping strategy for you.
The profit and loss you are aiming for also depends on the unit of time you are using.
If you are trading a 1 minute EUR/USD chart, you will want to earn 5 pips, not 10 pips…If you are on a small Renko chart, you can look for even less than 5 pips of profit
The smaller the unit of time, the smaller the potential for movement, that is, it makes sense to adjust profits based on the MetaTrader trading chart.
What are called scalping trading methods are performed in the shortest periods of time that:
- 5 minutes.
- 1 minute.
- Bar range
- Renko bars
The Renko bar and Range eliminate the “noise” on the chart and are widely used with Bollinger Bands and the MACD indicator for scalping in MT4.
These bars are used to trade breakouts.
How to become a Forex Scalper?
Are you wondering how to become a scalper or do you want to find a short term trading strategy?
You are in the right place! As you can see, we have already shared a few concepts about free forex scalping strategies, but we still have more to discuss!
Want to know more?
The first step to becoming a professional scalper is to learn the basics of forex charting and then see if this method is right for you.
The demo account allows you to practice risk-free strategies in real market conditions.
The success of scalping also depends on how much time you spend developing your trading strategy and whether you are really interested in Forex scalping.
Since this is a highly leveraged investment, it is important to use sound money management.
DAX 30 scalping or CAC 40 short-term trading requires analysis and constant monitoring of the stock market. A short-term trading strategy requires high liquidity from the financial market and low spreads.
A scalper trader must react instantly and execute orders quickly in order to receive his winnings.
Here is a simple explanation of how to scalp DAX:
When scalping Index CFDs, one tries to use only a few pips. This is why many online traders use tick charts to better see price movements. Forex scalper opens many positions per day.
All these operations are performed within very short periods of time, a few seconds, 1 minute, 5 minutes and must be accurate.
Scalping Guide: 5 Steps to Forex Scalping
- Determine market conditions (low volatility or high volatility)
- Determine on which instrument scalping is profitable
- Determine the trend
- Identify key support and resistance levels within a few units of time
- Take trading positions in the market according to your own strategy, scalping money management and a well-designed trading plan
What is better to trade - Forex Scalping
You can trade with a short-term trading strategy for all financial assets. However, some of them will allow you to improve your results!
Below is an overview of the categories of tools available to you:
- Forex Indices
- Raw materials
To take advantage of scalping technical trading, there must be volatility in the desired market, as well as sufficient liquidity.
Therefore, it is better to use assets for scalping, such as currencies and indices. Raw materials include gold (GOLD) and oil (TI or Brent). Other commodities are less attractive because the spread is too large.
Here are MetaTrader scalping CFDs most popular among online traders:
- Scalping EURUSD
- CFD scalping on DAX30
- Scalping CAC 40
- Dow Jones Scalping 30
- Scalping GOLD
This list is not exhaustive because you can use almost all liquid financial instruments as long as the spread is reasonable and you have a scalping strategy for the financial instrument in question.
Depending on the class of financial instrument used, scalping can be used on:
- Futures - scalping on futures
- Stock market (mainly stocks)
Each stock market has its own characteristics, but scalping in each market usually occurs on the most liquid instruments, or those where brokerage fees are lower: for example, stocks such as Apple or Google in the stock market, the euro dollar in Forex, the DAX 30 in futures.
Short-term trading requires liquidity in the underlying market with the possibility of short selling.
Not all markets offer this opportunity, and often the most liquid financial instruments are most often used in high-frequency trading.
What is the best scalping technique?
You already know that there are many Forex trading methods.
That is why it is difficult to give a definitive answer to this question. Each trader has his own scalping strategy. More often than not, the best scalping strategy for a beginner trader as a professional is a simple scalping strategy.
Of course, you think that if a simple Forex scalping technique could work, everyone would know about it and use it.
No, in most cases the expectations are too high and the trader may not have enough work with historical data (backtesting), which prevents the scalping trader from pursuing the strategy in the long term.
In the end, the best technique is a simple method that can be easily tested and simply performed on a daily basis!
Scalping trading DAX 30
If your answer is yes, you probably know that it is not the easiest index to predict and that you should keep a close eye on what the price action of the index is, highs and lows on different timeframes, and of course support and resistance levels.
Of course, there are other trading strategies that can be used in 1-minute Forex scalping: you can use a forex scalper robot.
Forex scalping is trading based on volatility.
To succeed in scalping, you need to choose a fairly volatile currency pair with low fees.
For example, we cannot scalp the Chinese currency, the yuan, because the exchange rate never moves.
Another example of a hard to scalp currency pair is the exotic pairs: Russian ruble, Brazilian real, Mexican pesos, Romanian leu, Polish zloty or Turkish lira.
Exotic pairs can be highly volatile, but they are much more risky than other currencies.
If you choose a currency pair with too low volatility, you may need to wait a while before the exchange rate moves.
Scalping Stop Loss and Take Profit
How do we manage stop loss in scalping?
To develop a profitable scalping method, it is important to think about two basic concepts:
- Where to place an order to protect our capital, namely Stop Loss
- Where to take profit if the scenario unfolds in our favor, namely Take Profit
Stop Loss and one or more Take Profits are necessary but not required for scalping currencies or indices in terms of time. Indeed, it may take time to set up and calculate the risk of a move, and the trade may be missed.
For a long time, this technical problem has hampered the work of more than one professional trader.
Best Forex & CFD DAX Scalping Broker
Which broker to choose for scalping?
If you are looking for the best broker for scalping, you should pay attention to the following conditions:
- Regulation by an FCA Recognized Financial Authority
- Ensuring the safety of funds with a reliable bank
- Speed of execution using state-of-the-art technology
- Availability of competitive spreads and transparent commissions
- Offer tool extensions like MT4 and MT5
- Ideally - the presence of a strong educational base
If you decide to become a Forex scalper, you need to look for the best trading conditions, because it is very difficult to be profitable in the long run if your broker has very large spreads.
Choosing a scalping broker is very important. We can't scalp with too big spreads and medium order execution.
Choose a regulated broker with low spreads for scalping!
When it comes to choosing the best regulated Forex broker for your scalping strategy, you must first drop all brokers that do not allow scalping from your list of options.
You should be aware that not all Forex brokers allow all trading styles and some of them do not allow scalping.
Then remove from the list all online brokers that cannot provide you with an STP or ECN system.
Now that you have a small list of regulated forex brokers left, you need to familiarize yourself with the available trading instruments and spreads.
The absence of entry and exit fees during scalping will give you more profitability.
However, pricing shouldn't be the only thing that matters when choosing yours for scalping.
Scalping is based on multiple trading positions during a trading session or day. To be sure of being able to withdraw your earnings, you should look to UK regulated brokers.
Brokerage fees can reach up to 10% to 30% of the profitability of scalping traders. This is why it is important to do a cost analysis before choosing an online scalping broker.
If you are looking for a 5 pips gain per stock market order or trading position, this means that you really need to reach 7 pips in your favor compared to your starting price to actually earn 5 pips.
This is why you need to scalp the currency pairs where the spreads are the lowest, such as the Euro Dollar, US Dollar, US Dollar or Pound Sterling.
Fundamental Factor - Scalping Spread
To summarize, in order for a Forex scalping strategy to be profitable, you need to pay attention to the following:
- Order execution
For scalping, we should choose brokers with low spreads.
If we take a trade to win 3 pips, for example, and our spread is 1 pip, the stock price must move 4 pips so that the scalper can close his position for profit.
For example, on Admiral Markets, a typical DAX 30 spread between 8:00 am and 10:00 pm averages 0.8 points. Such a spread may be interesting for DAX scalping 1 min.
The quality of order execution is just as important. It is best when the broker has several liquidity providers and can execute orders on the best terms.
Forex broker for scalping with the best order execution
Having the best spreads is always good, but it's better to have very fast execution. It is useless to use the services of a forex broker with the best spreads and poor order execution.
Some brokers take execution transparency very seriously and publish order execution statistics. You can find order execution statistics on the Order Execution Quality page .
It is also important to choose the right execution system. It is difficult to succeed in Forex scalping if the order execution system is full of flaws.
What does it mean?
In other words, a good scalping broker is one that has almost no reviews and can transmit your scalping orders as quickly as possible.
You can only see the quality of order execution on a live account.
Demo accounts are not suitable for checking the quality of order execution, because quite often demo accounts are located on separate servers. We recommend that you use two real accounts:
- An account with a small deposit to test the effectiveness of a broker
- Account with your standard deposit as soon as you evaluate the service offered
CFD Scalping tips
Here are some tips that can be found on the internet compared to a forex scalping strategy:
- Use small time scales on M1 or M5 charts
- Use technical indicators, especially oscillators like RSI and ATR
- Use candlestick charts
- Use tick, range or renko charts
- Set a target of 3 to 10 pips
- Place a stop loss on all positions (to limit the loss if the market goes too fast in the opposite direction)
- Use the Mini Terminal to set the group size before opening a position
- Use Mini-terminal to manage position with partial exits
- Start with a simple short-term strategy:
- EURUSD scalping
- Dow Jones scalping
- DAX scalping
Tools for Forex Scalpers
Forex scalping is one of the most difficult trading methods and it is a short term trading method that requires the most powerful technical tools.
To make the right decisions in the market, a professional trader must analyze the charts with high quality.
Stock chart analysis is the basis of scalping as we are not talking about medium-term trading or long-term investments in the stock market, which can be based on fundamental analysis.
For scalping, you will need powerful charting software such as MetaTrader 4 or MetaTrader 5.
Some Forex scalpers even use tick charts to better determine the moment of a trade.
When a trader starts scalping on Forex, he can analyze the charts of CFD instruments on several time frames.
A good technique that should really be considered a must for Forex trading is to set a Stop Loss on every position. Especially during important news, where “Stop Loss” can prevent you from taking very large losses.
Forex scalping robots are becoming more and more popular. Scalping robots MT4 attracts the attention of both professionals and beginners with its advantages:
- Forex scalping robot never gets tired
- Forex robot can trade 24 hours a day
- Forex scalping robot has faster execution speed than a human
- Forex robot calculates the risk in one moment in accordance with the Stop Loss specified in the trading strategy
In short, automated or semi-automated trading is a significant advantage but is often misunderstood because EA selling is over-hyped online and promises huge wins in a very short time. This is not true.
Scalping in trading: In particular, there are several Renko scalping strategies. The Renko scalper will only go into the CFD markets according to the movement, this is the whole advantage of using a Renko chart and not a time chart!
MT4 and MT5 Scalping Platform
For a scalper, a trading platform is extremely important! The platform installed on your computer is often faster than the online platform in an internet browser. For a scalper trader, the MT4 platform must meet several important characteristics:
- Excellent order speed
- Professional Features
- Intuitive and reliable operation
- Possibility of strategy backtesting
All of these criteria are present on the MetaTrader 4 and MetaTrader 5 platforms.
How to become a Scalper - Forex scalping in trading on a real account
Many forex traders strive to make a living from trading. Beginners want to get regular earnings using the scalping strategy.
Even if it is possible, you should be aware that scalping takes a lot of time to master this method and especially to gain experience.
If you have enough time for this activity, you can gain a good understanding of technical indicators, learn to make quick decisions, and quickly identify entry and exit signals.
Features of CFD Scalping
Stock market scalping is often associated with CFDs.
The reason is this: scalping, by definition, is aimed at finding small movements in the financial markets, on the order of a few points. If we take several points with a small number of lots, the result of the operation will be measured in centimes - it's not worth it.
It is also common for scalpers to use high leverage to multiply the pip value. This is a risky strategy, so scalping is not a beginner trader's strategy.
Therefore, CFDs allow:
- Speculate on growth
- Speculate on the decline
- Use leverage so that small movements in the financial markets can increase the profit or loss of an experienced trader.
Scalping CFDs or Futures?
Futures and CFDs are two types of financial assets that can be traded intraday.
Cfds on the DAX are more accessible, i.e. one can start with a small amount of capital to start scalping the DAX, unlike futures. Indeed, in general, the technical methods of scalping are developed by professional traders with a lot of capital.
However, we note that futures leverage levels are much lower than the leverage offered by CFD brokers.
Learn Forex scalping or swing trading?
Swing trading is a long term strategy. Therefore, when we choose scalping, we cannot say that we are swing trading and vice versa. Swing trading involves holding trading positions for weeks or months or even years.
If you are wondering which day trading or swing trading is best, it is worth checking out these strategies on a demo account.
Here are the criteria to help you choose between these two approaches:
- If you like to act, scalping is definitely for you!
- If you like to take your time and think for a long time, then swing trading is more suitable for you.
Your main activity
- If you are already busy - full time, swing trading will be more convenient - you can devote half an hour to an hour a day to trading.
- If you are not busy or have a part-time job and you are willing to practice and train, then scalping can be a good solution.
If you are unfamiliar with money management techniques or if you do not have a clear trading plan, you should not be scalping.
Forex Scalping or Day Trading
What is the difference between scalping and day trading?
- A professional Forex scalper takes a position for a maximum of a few minutes
- A day trader takes positions for a full day of trading
On the other hand, these two trading methods are often based on technical analysis and will never have an overnight position.
What are the disadvantages of scalping?
On the Internet, you can find many articles on the topic that Forex scalping is a simple and effective way to make money.
In fact, there are nuances - the scalping strategy must first be tested on a demo account.
Scalping is especially difficult for beginners, so it is especially important for beginners to test new strategies so as not to risk their capital in the process of learning this technique.
The trap that you can fall into is to start trading with scalping, and having received losses, switch to long-term trading. If you want to become a short-term trader, you must have a strict risk management strategy and understand that you should not back down at the slightest difficulty.
How to profitably scalp on Forex?
Forex scalping guide tips:
- Watch for times of high momentum and volatility because it is important to know exactly when to scalp.
- It is not profitable to trade during periods of low volatility and the absence of movements in the markets
- Some scalpers participate in ranges and consolidation periods, but generally with less success.
- The best trading sessions are in London and New York, and especially in the first three hours. Good opportunities usually happen 10 minutes before and after candles close.
- It turns out it's best to avoid trading on major economic announcement days, or at least look for opportunities during the 15 minute period before and after the news release.
- Use Stop Loss in CFD Trading
- Risk management is essential, using Stop Loss is the first step to controlling losses.
- The goal is small wins
- What is scalping in trading is now clear - this is a trading style in which the trader does not seek to profit from large market movements, his goal is to get a few points at strategic levels. This is why the traditional scalper only targets small targets per position.
- Follow a clearly defined trading strategy
- Regardless of which strategy you decide to use, be it a breakout strategy or a correction, the most important thing is to remain consistent in applying one or more Forex scalping strategies.
- Be aware that some online brokers do not allow scalping
- Remember that scalping can be both dangerous and profitable.
- Trading success is a matter of risk management. In scalping, as in day and swing trading, you can get both big profits and big losses.
- Don't Forget Trader Psychology
- Everything happens faster when scalping, so you have to manage your emotions, because a moment of uncertainty can prevent you from taking a position that will be winning.
How to trade Forex with high frequency?
High frequency trading is a form of scalping done only with robots that will buy and sell financial assets at high speed.
Here is an example of a robot: DAX scalping EA on MT4 or MT5.
High frequency trading is much more professional than manual scalping and often requires much higher internet speeds than the average trader can have. Therefore, it is not always available.
Scalping is a trading technique that requires a lot of learning.
Who is a scalper and what qualities does he have?
- High stress resistance
- Understanding when to cut your positions
These qualities are less important in other forms of long-term investment. This is why testing scalping on a demo account is the best way to learn short term trading in real life. You should also learn money management and make a trading plan.
Learning the stock market in the short term is not always easy and requires training and patience. To learn short-term trading, it is important to practice as much as possible.
Forex Scalper - Psychology
We remind you that scalping trading for beginners is not the best choice if they are not ready to take the time to learn.
When a professional trader evaluates the Forex and CFD markets, whether in Eurodollar or DAX 30, he must be able to:
- Follow Stock Market Prices Without Stress
- If the market goes in the opposite direction of the trade, the scalper needs to know when to cut his losses.
- Efficiently manage capital
- Remain calm even if losses occur
Scalping for dummies: advantages and disadvantages
What are the benefits of Forex scalping for you?
- Limited exposure to market risk
- Quick results (after each session)
- Ability to manage risk with Stop Loss orders
- High success rate (a few points, but often achieved)
- Provides adrenaline
- No routine (each session can be different)
Let's see what are the disadvantages of scalping.
Cons of scalping:
- Trading scalping is a stressful activity.
- This approach requires you to spend some time on your computer unless you are using an EA scanner.
- Like any forex trading, scalping involves a lot of learning.
- This strategy is not for beginners, before moving on to scalping, learning will be your first priority.
- The scalper can take several losses before making a profit.
- Scalping is less effective for slippage when executing orders
All about Forex scalping
Metatrader 4 or MT5 scalping for beginners should start by testing on a demo account to see if this style of trading suits you. Each trader has their own vision of the CFD markets, and some of them may well succeed in scalping.
Check it out and find out if CFD scalping or regular scalping is right for you!