Scalping strategies

Scalping strategy

Scalping is one of the most popular forex trading strategies because it can bring good profits in a short period of time and psychologically, it’s easier to trade than any other method. Its characteristics are: positions are closed almost immediately after opening, they are kept open for no more than 10 minutes. The number of won trades is significantly larger than the number of lost trades and risk/reward ratio is 1:1 or less but if there are more winning than losers should be enough to compensate a poor risk/reward ratio. Spread, slippage and execution speed play a very important role for this strategy: the lower the better. A high spread and execution delays mixed with a high slippage can kill these strategies very quick, haven’t you notice that most of them show great results on demo account only? There are no high slippage or requotes on demo accounts. High liquidity is also important for the success of this strategy. It’s recommended to scalp only on high liquid pairs like EURUSD, GBPUSD, USDJPY but good results have been reported on other pairs as well, we’ll talk about that later in the article. The most popular scalping techniques are discussed bellow.

Scalping strategy near support and resistance levels/zones
When the price reaches a support/resistance zone it doesn’t stay there for long, two thongs can happen: the line is broken or the price is rejected. Here is the simplest and most efficient scalping technique I know: identify the direction of the trend on a higher timeframe then switch on a lower timeframe and try to spot support and resistance levels calculated as the higher highs and lower lows. Use price action techniques in order to spot strong movements then trade in the direction of the main trend. Stop loss should be placed few pips above resistance/bellow support line.

Scalping example 1

Scalping example 1

The main direction of the trend is clearly down on a higher timeframe. I wait for the latest mini support line (lower low) to be penetrated from above then enter short at retest. Close the position 10 pips later. Stop loss is placed a few pips above resistance line.

Scalping strategies – breakouts in the direction of the trend.Trade only if the trend in strong on a higher timeframe and the previous range is clearly broken.

Breakout scalping

Breakout scalping

Wait for a clear signal that the range has been broken (wait for the current candle to close), then open a trade in the direction of the trend. Stop loss should be placed at the beginning of previous candle. I trade using this method on EURUSD and GBPUSD M15.

Scalp trend reversals
A long and strong rally is almost always followed by a reversal which provides wonderful trading opportunities. Usually price action is again used in order to spot the reversal points. If a candle has a very huge shadow it means that we are near a strong rejection level which usually happens after a long rally. Here is an example:

Scalping trend reversals

Scalping trend reversals

The trade should be closed for a loss if the price reverses and the current candle closes above the last upper shadow. Take profit should be larger than stop loss so I close the trade when I spot the next strong rejection point.

Scalping near high impact newsThis is dangerous due to high slippage and many requotes, but profitable if you are lucky. Just wait for the figures to be released and if the results are positive for the currency open a trade right away. Don’t use a forex robot because it will get killed by requotes, do it manually. It’s not my favorite scalping method (I always prefer the aftermath, but it works if you have a good broker).

Of course there are many scalping methods available but presenting them is beyond the purpose of this article. This is just a presentation to get you used with scalping techniques. I’m not sure if my readers are interested, but if they are (and I need your feedback for that) I will create a special section in which I will post manual trading strategies with tips and tricks.

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