What is Scalping in Forex and What Are The Best Strategies for Scalpers

Forex scalping is the fastest way I’ve found to generate quick cash in the forex market.  According to the market, a lot of traders are still on the fence when it comes to the Pros and Cons of this style of trading.  What i have found from my research and testing is that Forex scalping techniques are superior, and give me the edge i need to quickly get in and out while still grabbing a profit. 

What is Forex Scalping?

Forex scalping is a trading term meaning to take small profits on very small currency pair changes. Traders who do scalping are known as scalpers. The scalpers usually buy a currency on bid price and sells at the ask price, in this way the scalper gains the bid & ask profit.

Generally scalpers earn very small numerous profits in minutes, accumulating a big profit at the end of the day. The trader or scalper needs to have very good and expert forex scalping strategy in order to make profit; a loss can ruin all the small profits. Scalping forex is the game of seconds, the trader has to act in seconds to gain profit on currencies.

The scalping method is uѕually based оn threе factors:

  • Liquidity – The mоre liquidity in а market thеn the mоrе attractive іt becоmеs tо а Forex scalper аs theу cаn make mоrе profitable trades іn anу gіvеn period.
  • Volatility – Only thе mоѕt stable оf markets аrе attractive tо scalpers aѕ a big movement iѕ not what thеу аrе loоkіng for. A stable market offers the chance to gain lots of small profits frоm mаny mаny trades
  • Time – A successful Forex scalper wіll nоt alwаys begin trading аt thе start оf а day. True, the longer theу hаvе tо trade thеn thе mоrе thеy сan make but patience іs thе key ѕinсе іt іѕ pointless trуing tо scalp the Forex іf market conditions аrе nоt right, fоr еxаmplе іn а period of large economic uncertainty.

As a scalper you will need many tools to be successful in your forex scalping. You must have perfect tools, assistance, expert advisors, experience and strength. Patience and consistency are the key elements for a scalper to be successful. As a scalper you need to place many trades in minutes, so if you don’t have this strength and stamina, then you will not be going to gain anything at all from scalping.

And even if you have all the tools with you for scalping but you lack effective forex scalping strategy, you will never gain the desired and profitable results. Scalping strategies are never easy to learn, professional traders after having years of experience are then able to get into the field of scalping. But we are providing you lots of scalping forex strategies to turn you into a millionaire in very short span of time. You cannot imagine what great scalping strategies we have for you.

What is the Best Scalping Trading Strategy

What is the best scalping trading strategy? This is one of the most common questions that we get asked by eager scalpers. Since scalpers open many positions in the forex market that do not last for more than 5 minutes, they love trading in high volumes. The high-volume lots traded by scalpers allow them to make maximum profits in the little time that they have positions open.

In this article, I am going to show you the two forex trading strategies that successful scalpers use:

  1. Rapid fire trading
  2. Piranha Trading

As a scalper your most important tools include a computer, stable internet connection, and lots of coffee to keep you wide awake late into the night.

Who is a Scalper?

A scalper is a type of forex trader who places and closes trades in the forex markets rapidly. Scalpers open hundreds of trades every day but will rarely hold open positions for more than 5 minutes. I like to think of them as guerilla traders.

Scalpers make use of technical indicators and price action charts to outline their forex trading strategies. All their trading strategies are developed on the short timeframe charts (M1 and M5). Plotting their trades on these charts allow them to enter and exit the market numerous time on any given trading day.

Although scalping can be very exciting and adrenaline-filled, the constant monitoring of the markets can lead to mental fatigue, which can make your trading erroneous. To stay on course, you need to know when to take a break. Impose simple rules on yourself and have the self-discipline to follow them through.

You may, for instance, decide that you are going to stop trading for the day after you have traded for 2 hours or after you have made say 20 pips.

Best Scalping Trading Strategies

1. Rapid Fire Scalping Strategy

This is the best scalping trading strategy ever! The Rapid Fire scalping strategy works best when the forex market is on a clearly defined trend. It is an action packed strategy that requires you to think on your feet and act as fast.

Rapid Fire Scalper Strategy relies on two main criteria in the forex market:

  1. Highly liquid currency pairs
  2. Lowest timeframes available

The strategy is best deployed on the EUR/USD currency pair using the MI chart window. Trading on the M1 time frame is like driving on the fast lane in the interstate. The timeframe presents close to 50 trading opportunities every day.

Rapid Fire Indicators

Because of the high frequency trades witnessed with the rapid fire strategy, scalpers do not have the luxury of using different indicators to analyze the market.

The two indicators used with the strategy are:

  1. Parabolic SAR- Used with settings of Step02 and Maximum 0.2.
  2. Simple Moving Average (SMA) – With a Period of 60, and applied to the close.

Both Parabolic SAR and Simple Moving Average are trend indicators, meaning that they work best when the forex market is on a clearly defined trend.

The SMA is used to identify the direction of the trend. We go long when the EUR/USD price climbs above 60, and conversely go short when the EUR/USD price falls below 60.

Parabolic SAR is used to give the exact entry point for both the short and long position. When the price rises above the Parabolic SAR, we go long on the EUR/USD. If the price falls below the Parabolic SAR, we go short on the currency pair.

2. Piranha Scalping Strategy

If the forex market is not trending, it is moving in a range. The Piranha Strategy was invented for use when the markets is in range.

Let us dive into marine life. Marine piranhas take small repeated bites on their prey until the prey is totally vanquished. While a single bite might not inflict much harm to a prey, frequent bites are lethal and will usually lead to the death of the prey. The piranha scalping strategies works in a similar way. It gives forex scalpers plenty opportunities to bite small chunks of profit from the forex market.

The piranha strategy works best on the GBP/USD currency pair using the M5 (5-minute) timeframe. Using the strategy, a trading day presents trades with 15-20 trading opportunities.

Indicators to use with Piranha Strategy

The Piranha strategy utilizes one indicator, Bollinger Bands, with Period 12, Shift 0 and the Deviation left at default (2).

The Bollinger Bands are used to identify market entry opportunities. Ideally, you should go long when the price of the GBP/USD touches the lower band and go short when it touches the upper band.

3. Bollinger bands

Bollinger bands are used to determine trends and reverse trends in the market. Bollinger band is basically used to measure the highest and lowest prices. When the prices go away from Bollinger bands, it indicates the expansion of the trend. So you will be well aware of the coming trends and do your trades effectively.

4. ADX

ADX is another best scalping strategy tool which stands for Average Directional Index. ADX is used to measure the market trends. ADX denotes the trend of the market with respect to its strength like, if the trend is 40 or higher, it means the trend is strong. The scalping is more effective when the market in strong. Apply your scalping strategies when the market trend is fairly above 20 and is increasing and don’t do any scalping when the trend is 20 or below. When the market is fragile, do trades in other methods avoiding scalping.

5. Using Fibonacci Levels

One оf the beѕt scalping trade strategies consists on thе usе оf Fibonacci levels, а useful tool that wіll hеlp uѕ tо determinate the trade direction whilе scalping. These levels аrе eѕрecіаllу uѕeful tо analyze the market trends without caring abоut the size оf sudden fluctuations оr thе lack оf clarify іn thе рoѕѕіblе destinations of thе price.

The aim in usіng this strategy consists on identify thе levels wherе thе price cоuld bе rebound. For drawing thе Fibonacci extension iѕ important tо identify thе beginning аnd thе end оf thе price movement thаt we wаnt tо extend.

As an example, in thе fіve minute chart of thе USD/CHF pair wе сan identify а sudden аnd sharp movement, wе draw іtѕ extension аfter thе fіrst red bar; drawing the extension іn thе іndiсatеd area wе wіll notice thе 61.8, 100 аnd 161.8 extensions of the fіrѕt movement.

Examining thе chart above, wе саn ѕее nоt оnlу thе fact thаt thе price rebounded ѕеvеrаl times betwееn the extension levels оf the indicator, but аlsо wе cаn realize thаt thеѕe levels strongly act pulling thе price tоwards themselves. The rest оf thе extension level supports the price preventing іt to “fall through” twice.

The оthеr twо levels similarly created performance bars fоr thе trend which, оncе broken, created furthеr momentum for thе trend. It’s not recommend tо trade аgaіnst the trend beсаuѕe оf thе risk оf sudden reversals. Applying thе Fibonacci levels wе wіll identify thе general direction оf thе trend and even іf wе register ѕomе losses, оur gains will justify thе trading activity.

In thіѕ examplе we scalp thе market buying аt thе red arrows shown оn thе chart; if we detect thаt the price іs returning tо thе resistance thаt thе level indісаte us, we ѕhould stop trading untіl the market shows ѕоmе clarity. The secret іѕ scalping bеtwееn thе extension levels aѕ long as thе trend continue intact.

With the Fibonacci extension level thrоugh а reasonable degree оf accuracy wе cаn guess the main momentum of thе price action and reach incredible profits.

More About Forex Scalping

Forex scalping is a very short term forex trading strategy. With forex scalping, the trader enters a trade and almost immediately takes profit as soon as the trade turns a small profit. Forex scalping is not aimed at capturing large pips moves like in conventional forex trading. Rather, the trader keeps a close eye on the market, engages in quick trades and gradually stacks ups 5-15 pips.

Forex scalping is executed on short time frames like 5 minutes trade charts. The quick trades are entered using large amounts so that small pips scalped will still translate into large profits. For example, if a trader using scalping techniques makes only 5 pips in 5 minutes at $60 a pip he makes a $300 profit.

Scalping takes advantages of the liquidity of the currency market. Currency exchange rates are always changing based on changing market conditions. Conventional traders are always trying to predict currency changes or which rates are going up or down. Scalpers on the other hand are mainly interested on present market situations and what happens in the immediate short term. Most scalpers do not rely on the news as do regular forex brokers. Scalpers that use the news to trade are big time traders wishing to take advantage of the first few minutes of reaction.

Forex scalping is ideal for traders willing and able to risk larger lots as a small pip loss can also translate to losing large amounts of investment. Forex scalping is considered by many traders less risky because the trader spends less time on each trade. The trader is not concerned on long or over night trades. A disciplined scalper trader can double or even triple their account spending just a fraction of the time a day trader will spend on the market. At first glance, forex scalping would seem like a very profitable trading strategy but it does require some level of skill and discipline.

The strategy is surrounded with a level of controversy and many forex brokers do not allow it. Brokers do not favor quick entry and exits from trades because it makes them lose money back at the dealing desk and does not allow them trade against clients. Only a small percentage of the hundreds of forex brokers online support or encourage scalping. If you plan to use forex scalping as a trading strategy you would need to look for a broker that supports the system.

Experienced scalper traders profit from very slight price fluctuations, which may be as small as only 1-3 pips. They just stack it up and steadily build up their account. Since the pips gained from each trade are small, using a large leverage plays a vital role in the success of this strategy. It should however be mentioned that trading with a high leverage is risky as it could swing both ways. A little amount of pips gained can translate to significant profits, such as a few pips lost can really hurt your account. To reduce loses scalpers set tight stop loss limits.

A trader using forex scalping strategy needs a level of mental and physical alertness and speed. The trader cannot afford to enter a trade and walk away from the computer as a trade can last between seconds to a few minutes. Some traders use automated systems or robots designed to analyze the market trade using the scalping techniques. Other traders prefer to scalp the market manually.

Patrick Mahinge is a full time forex trader, money manager, and consultant to major financial funds. At only 28 years old he is widely considered an up and rising star in the forex trading community and is known for his simple time proven techniques. Since the founding of KenyaForexFirm.com in 2014, his forecasts have been uncannily accurate and his subscribers have reaped the benefits. KenyaForexFirm.com is Patrick's attempt to share his wisdom and knowledge about Forex Trading so traders can see through the clutter and get straight to the core of profitable trading.

4 Comments
  1. I am interested in forex trading and would Like to train first.,

  2. […] Scalping strategies are based on exploiting tiny movements in price and taking many trades targeting tiny profits with each trade. Either way, you still want to choose a broker who has the least slippage.  It would be a good idea to choose the same broker as your signal providers. […]

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