Scalping Strategy - The application and meaning of the strategy in detail!

Scalping is a very simple strategy, which is also used in other markets apart from the Forex market. It involves entering a large number of trades in conjunction with very tight stop-losses within a short period of time. The trader's goal is to make as many small profits as possible, which are maximized due to the large number of trades.

It should be noted that not all brokers allow the use of the scalping strategy. Brokers have the problem with scalping that they cannot hedge quickly enough and therefore losses occur if the trader wins.

Which broker is recommended for scalping trading ?

Of course, the choice of one's trading style also depends on the choice of broker. Someone who likes to trade long term will "not care" if a position is opened as fast as possible or takes 2 seconds. When scalping, this factor "time" plays an important role. For a scalper there is nothing worse than having to wait until his position is opened or confirmed.

Fortunately, there are brokers for this style of trading that specialize in executing market orders quickly - so-called ECN brokers.
Advantages of the scalping strategy:

    Whoever masters scalping can make quick profits with it.
    No complicated technical or fundamental analysis required.

Disadvantages of the scalping strategy:

  •     Not possible with all brokers
  •     Spreads destroy a part of the profits
  •     Trading is very time consuming
  •     Extensive market observation required
  •     Risk/reward ratio is often low

Application of the scalping strategy:

  •      Very volatile currencies are best suited for scalping. Good examples are UR/USD, EUR/JPY, GBP/USD and USD/JPY.
  •     It is best to use the M1 or an even smaller timeframe. However, in order not to lose track, you should also keep an eye on the Metatrader 4 Exness timeframe.
  •     The best timeframe for the scalping strategy is during the European/US/Asian session.
  •     Before placing the first trade you should first study the market for 5 to 15 minutes.
  •     Set the stop loss for a maximum of 10 pips.

When the profit is 1 to 1.5 times the spread, the position is closed. However, you usually cannot set the take profit so close to the entry. Therefore, you have to close the position manually when the profit mark is reached.
Importance of Forex Indicators in Scalping

Forex indicators are already integrated into many trading programs and also enable efficient trading when scalping. However, traders should inform themselves in advance exactly which indicators are really suitable for a scalping strategy. There are a large number of Forex indicators that are very similar and their joint use makes no sense. On the other hand, some Forex indicators need other indicators with different data. For example, there are momentum, price and volume indicators.

Where do Forex indicators come from?

The development of Forex indicators began in the 1970s with the conversion of stock market trading to computers. Certain oscillators, such as MACD or Stochastic, can be calculated and displayed only with appropriate software. Other indicators such as Fibonacci numbers or moving averages, on the other hand, are much older. In addition, Forex indicators became interesting for private traders only with the opening of the Forex market. For large investors, the indicators did not play a special role. From 1980 onwards, there were two major developments in Forex trading. Firstly, there was a switch to computer programs and secondly, there was a softening of exchange rates. Thus, Forex indicators became more and more interesting for traders and could be provided technically at the same time.

 
 
 

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