In forex, a trade which lasts below an hourly timeframe is categorized as short-term. Scalping is one good example of such. If one wants to engage in scalping, it is best to consider the necessary rules. Currency pairs must be any of the major pairs (EUR/USD, GBP/USD, USD/CHF, AUD/USD, NZD/USD and USD/JPY). In line, trading timeframe must be 1 minute up to 15 minutes.
WHAT IS FOREX SCALPING
This is considered to be the fastest way to earn profit in trading. To define, scalping is a fast-paced trading approach which aims to acquire fast profits and open multiple trades using minimal price changes. Such is possible after a trade has been placed and has acquired gains.
FOREX SCALPING STRATEGIES.
- SCALP TRADING WITH STOCHASTIC OSCILLATOR- The slow stochastic is composed of lower and upper level. The lower level represents the oversold area and the upper one, the overbought area. If these two lines overlap upward from below, it denotes a long signal. When these lines overlap downward from above, a viable short signal is triggered.
- SCALP TRADING WITH STOCHASTICS AND BOLLINGER BANDS- For long position, the price should break under the lower Bollinger band and the candle must close within the BB. The stochastic must be under 10 and overlapping up to 10 from beneath. More so, for short position, the price must break over the higher Bollinger band and the candle must close within the BB. Stochastic is required to be above 90 and overlapping down 90 from above.
Exit point must be positioned at the opposite of the Bollinger band or right after 10-30 pips in respect to what type of timeframe is being utilized. For stop loss, it should be placed 3-5 pips under previous low if one is opening a long position. However, it should be placed 3-5 pips above the previous high if one will sell trades.
RISKS OF FOREX SCALPING
Similar to other trading frameworks, forex scalping also has its own setbacks. One scalping risk that one needs to focus on is the tendency of the market to go against the position. Just before this happens, it is crucial for forex traders to have a course of action ready to mediate mounting losses.
Scalping is viewed as a trading style prone to large losses. Though this is not always the case, the chance of losing will be minimized if scalping will be treated as a mechanical process. This means that before chart assessment, decisions about entry and exit points, trade size, and leverage must be assessed and analyzed carefully.
AN EXAMPLE OF SCALPING STRATEGY
Forex scalping with the help of MT4 indicators can be a challenging task due to delayed trading signals, malfunctions, etc. With this, comes the efficiency of using price action scalping system that does not use trading signals and indicators. If one wants to get started with scalping, it is best for one to have an ECN forex account. ECN brokers allow scalping all with the opportunity of trading with small spreads and low commissions. This allows investors to trade outside their traditional trading account as it also provides wider flexibility. Using trading automated systems like this will guarantee exponential profits as there are no complicated rules and are very comprehensive for traders that are just starting with forex trade.