Scalping is the action of opening and then closing a position in a very short time. Your goal is to profit from very small price movements.
In this short space of time the purchase and sale of an asset on the Stock Exchange must be closed. This dynamic is conducive to traders making many trades throughout the day.
The theory that justifies scalping is that Small price changes are easier to predict than large ones.
What is scalping?
The scalping is a variant of day-trading what are you looking for obtain reduced profits in operations of a very short period of time. What makes traders who use this operation make many operations throughout the day.
Generally the entries made by scalpers they are highly reliable due to their short duration. That is, there is less room for something to happen in the market and this causes it to turn against us.
Otherwise, the advantage is that the associated risk is low in each operation thanks to the stop loss that fit. Thus, our losses are very limited at a low amount.
Scalping also It presents you with a multitude of entry opportunities in a single day. When making many entries a day, it is important to keep a trading journal to control the reliability you have throughout your session.
To make Scalping we are going to take advantage of the rapid movements of the price. And for this to happen, it is essential that we have volatility in the markets.
The hours in which we are going to find more entries doing scalping are times when there is more volatility. This is at the openings and closings of the markets, for example:
- Europe: 9 a.m. to 11 a.m. (Spanish time)
- USA: 09:30 a.m. to 11:30 a.m. (local time in the Eastern USA), with Spain the schedule would correspond to 3:30 p.m. – 5:30 p.m.
These hours are suitable for trading indices, commodities and currencies (forex), which are the ideal markets for scalping.
Best Scalping Strategies
All forms of trading require discipline. In scalping a large number of trades are made and the profits from each trade are small. Therefore, a scalper must strictly adhere to his trading system.
The scalper small profits will be taken to take advantage of the winnings as they appear. The goal is to create a successful trading strategy through a large number of profitable trades..
One of the most effective strategies for scalping is Combination of Volume, Volatility and Trigger Patterns.
High volume against a support or resistance line, coupled with a trigger pattern, indicates a price reversal with a high probability of success.
Best Indicators for Scalping
There are many indicators with which you can do scalping. We could separate them into trend indicators and oscillators.
The best and most used indicators for scalping
Some of the most used by Traders are the moving averages, RSI, MACD, Parabolic SAR, Bollinger Bands or Stochastic.
There are many traders who use them and profit from them. We do not like to use this type of indicators because we consider that more than predicting the price movement, they give you information about what has happened in the recent past. Personally, I like to see and make decisions with indicators that provide live information such as volume.
I like to combine the volume, with the Market Profile to follow the price dynamics and see the areas where the price can turn and trade short. This makes it easier to predict and adjust entries and profit targets.
It is not only because we have programmed it, but One of the most efficient and profitable indicators to operate in Scalping that I know is the DTP Twists. This technical indicator offers both long and short entries with a reliability greater than 75%.
Know all our indicators
Best Brokers for Scalping
Scalping is an interesting and simple trading strategy, which is used by many traders. But not all broker companies offer the possibility of using this strategy. To allow you to use the best authorized Forex brokers for Scalping, I have prepared this ranking for you.
This list includes verified, trusted, and authorized brokers for the use of this strategy. Something that I have taken into account is the cost of commissions and the spread. Two fundamental factors for the choice of online broker suitable for scalping.
How to Scalp on Forex
The scalping operation is to have a highly liquid environment, a high volume of trading in the market. All These requirements are perfectly met by Forex, which is the most liquid market in the world..
The more a currency pair is traded, the easier and faster it is for a scalper to enter and exit trades with it.
The most liquid currency pairs are denominated in English “Majors” (major currency pairs): EUR/USD, USD/JPY, GBP/USD, etc. – therefore, they are the easiest and safest pairs to implement Forex Scalping in terms of liquidity.
During certain market hours, some more experienced scalpers may also trade non-USD liquid currency pairs, known as Crossed Pairs (in English, “Crosses”). Some of the most liquid cross pairs are EURGBP, EURJPY, GBPJPYetc.
If a trader is limited to making transactions with the most liquid currencies, it increases his chances of implementing the scalping method successfully. Generally, the more liquid a currency pair has, the less spread your broker will charge you and the faster you can make a profit.
Those traders who scalp Forex should be able to enter and exit trades with the least amount of latency possible.
Because scalpers typically make fewer points or pips per trade than day traders or make swing trading, any lag could represent a relatively higher percentage of your results. With the list of brokers that I have mentioned a little above you will not have problems in this regard because they issue your order to the market in milliseconds.
As for the leverage, scalpers apply more leverage than any other trading style to increase profits. Of course, keep in mind that leverage works both ways: you can achieve potentially high profits, just as you can have larger losses. In this sense, it becomes even more important to respect monetary management.
Scalping vs. Swing Trading
For both scalping and swing tradingthe base is in the technical analysis although we should not completely rule out the fundamental especially in the second case.
The scalping It is a type of intraday trading that consists of opening and closing positions in a very short space of time that can last minutes and even seconds.
In contrast to Scalping we can find the swing trading a style that maintains positions in a longer period of time than in scalping, without having to constantly keep an eye on the market. This type of trading, being also short-term, offers entry opportunities and does not require high leverage compared to Scalping.
On the other hand, one of the advantages of scalping over swing trading is that, by closing all the operations on the same day, we avoid paying the swaps.
Swaps are a commission charged by all brokers for keeping trades open overnight.. This commission is charged every day, there being one day, on Wednesdays in currencies and on Fridays in indices, that you are charged a triple swaps (3 days of commissions in 1).
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