Scalping Trading

High Volume of Trades – Scalping involves making a large number of trades within a short timeframe.

Small Pip Accumulation – Forex scalpers aim to accumulate small amounts of pips as frequently as possible.

Quick Entry and Exit – Scalpers aim to rapidly enter and exit the financial markets.

How to Start Day Trading Scalping

If you’re interested in day trading scalping, there are different systems and strategies you can use, including automated bots. It’s important to choose a broker that offers competitive fees, rapid order execution, and leading software and platforms to assert an edge in the market.

Learn how to build a real-time scalping program to profit from forex, stocks, and crypto markets.

Scalpers generally prefer a liquid market because they can enter and exit positions with less negative impacts. With that said, they also tend to attract professionals which can make it harder to predict trends.

Volatility – In contrast to momentum traders, scalpers prefer stable markets. Let’s say price doesn’t shift, scalpers could bank profits all day – placing thousands of trades on the same bid and ask.

Timeframes – Even by day trading standards, scalpers move quickly. In fact, some market shifts are too small to even be seen on a one minute chart. This means scalpers often have a huge number of trading opportunities in any given session.

Risk management – Because they make a huge number of trades, scalpers can accumulate lots of losses as well as profits. As a result, traders need to employ risk management tools to curb exposure.

How to apply a scalping technique may vary, but systems can be used in multiple financial markets, from cryptocurrency pairs with Bitcoin, to gold, CFDs, stocks and binary options. We’d recommend applying a scalping strategy to a market you already understand, such as forex, the Dax 40, ASX, or Nifty.

Benefits Of Scalping

Achievable profit targets – While some strategies require a significant price shift to accumulate profit, scalpers may only need a forex pair to move one pip to reach their profit target.

Trading options – Scalpers don’t need high profile market shifts to bank profits, meaning there are often plenty of smaller opportunities to apply scalping techniques, even on relatively quiet trading sessions.

Reduced risk exposure – Because scalpers are only exposed to the live market for a few seconds or minutes, it reduces the chances of incurring a large loss in a single trade.

Scalping Trading Tips

Spreads

Scalping relies on tight spreads because you’ll be entering markets frequently throughout the day.

As a result, you need to focus your efforts on assets offering the greatest trading volumes.

For forex traders, EUR/USD, USD/JPY, and GBP/USD are sensible options.

You also want to focus on the most liquid times of the day when sessions overlap.

These are 02:00 – 04:00 to 08:00 – 12:00 EST.

Another useful tip is to ensure your targets are at a minimum double your spread so you factor in times when the market shifts against you.

Start Simple

We’d also recommend focusing on one asset first.

Trying to scalp multiple forex pairs as a beginner will prove challenging.

Once you see consistent results, you can then turn your attention to other assets.

Automated Trading

Trading bots can prove an effective way to implement a scalping system.

Intelligent algorithms can open and close huge volumes of trades based on preset criteria.

You can build your own Expert Advisors (EAs) on platforms such as MetaTrader 4 using Python and the MetaQuotes scripting language.

Alternatively, you can buy pre-existing scalping robots from the MetaTrader marketplace, among other providers.

Always check reviews to make sure you’re getting value for money when buying a Hamster scalping trading robot, for example.

Training

Scalping can be a time-consuming and complex investing method.

With that in mind, it’s worth tapping into the wealth of guides, courses and real-time tutorials available online. You can find scalping ebooks that walk through strategy examples and can help you set realistic results.

For visual learners, there are how to start scalping training videos and interactive PDFs. Forums also offer a useful space to bounce ideas about indicators off established scalpers. Additionally, keeping a journal where you track order book options and experiences in live trading rooms can help you refine your technique.

Leverage

Intraday scalping with high leverage means you can take more positions to generate greater profits. Leveraged scalping also offers a mechanism to diversify your investment portfolio as you can take positions in different markets, such as forex and cryptos.

Note, scalping with high leverage does increase your risk exposure and losses can exceed deposits.

News Reports

Be conscious of news reports which, due to slippage and volatility, can harm scalpers. A news announcement can see the market move against you. It’s worth keeping an eye on your broker’s economic calendar so you’re not caught off guard by major news events.

Order Execution

Scalping trading relies on slim profit margins. As a result, beginners need to make fast and efficient trades.

One way to increase profits and avoid losses is to avoid delayed orders. Utilizing supplementary systems such as Direct Market Access Trading and Level 2 quotes can be helpful in this regard.

Costs

Scalpers can make numerous trades a day, but fees and commissions can quickly add up and cut into profits. It’s important to choose a broker with competitive fees, as even small price differences can accumulate over time. Additionally, not all online brokers allow scalping.

Timeframes

Scalpers must remain disciplined and aim to close all positions within a single trading day, rather than rolling them over. The basic premise of scalping is to hold positions for a short period, and beginners should stick to this strategy.

Trading Sides

For novices, starting with the buy-side can provide relative comfort and an opportunity to refine strategies before moving to the sell-side. However, successful scalpers should eventually balance both sides for optimal returns.

The Best Scalping Strategy

There are multiple scalping trading methods and strategies that can work, and setups and techniques can vary between traders. We recommend trying different options on a demo account and tinkering until you find a system that works for you.

Scalping Trading Using Moving Averages

This is a straightforward system where traders look for two short-term moving averages and one longer one that indicates the trend.

For example, if you took a one-minute GBP/USD chart, you could use five and 20-period moving averages for the shorter term, and a 200-period moving average for the longer term.

When the longer-term moving average is rising, you’d look for the five-period average to cross above the 20-period. You could then take positions in the direction of the trend.

Alternatively, when the long-term moving average is declining, you’d aim for short positions when the price crosses below the five-period average which has already crossed below the 20-period average.

Scalping Trading Using The Stochastic Oscillator

Stochastic refers to comparing the current price with a range seen during a recent time frame. The comparison can help indicate turning points. Scalping using the oscillator aims to paint a picture of moves in trending markets, for example, one that’s moving up, down or consistently. The premise is that prices typically close near the limits of recent ranges before turning.

The stochastic offers entry points for long trades while the position can be exited when the stochastic hits the top end of its range or when the bearish crossover appears.

In contrast, short positions can be used in a downward trending market.

This time, instead of buying the dips, traders can sell the rallies.

Scalping Trading Using The RSI

The RSI can be used to identify entry and exit points in an existing trend. The three moving averages show when the price is trending upwards. When there are dips in the trend, traders should buy when the RSI drops and moves above the trendline.

Alternatively, when the RSI peaks and starts to fall in a downward trend, traders have an opportunity to sell the rally. This is a simple, easy to implement scalping strategy.

Note, you can also browse online for a list of the top 5 scalping strategies for beginners available as PDF downloads, training videos or via other mediums.

Scalping May Be Suitable If…

• You have lots of time to take positions on the markets
• You want fast-paced activity rather than waiting for longer-term positions to materialise
• You’re comfortable spending extended periods studying charts and conducting technical analysis
• You have a careful and considered approach to risk

Scalping May Not Be Suitable If…

• You prefer to make fewer trades with larger profit potential
• You don’t have the hours to commit to charts and trading
• You don’t like the stress of fast-moving markets

Scalping vs Swing Trading?

Swing trading is a popular strategy among investors.

Swing trading can be applied to various markets, including stocks, forex, and cryptocurrencies. However, there are significant differences when compared to scalping.

Scalping Trading Vs Swing Trading

	Scalping Trading	Swing Trading
Holding Period	Seconds to minutes	Typically days
Trading Volume	Hundreds or thousands a day	A few
Profit Target	Small but multiple	Few but large
Charts	Tick or 1-5 minutes	Daily or weekly
Monitoring	Constant	Standard
Characteristics	Impatience & discipline	Patience & precision
Stress	High	Moderate
Experience	Typically intermediate	All

Scalping vs Day Trading

For novices and investing amateurs, scalping and day trading can be confusing.

Scalping trading is a type of day trading, but day trading encompasses various strategies for entering and exiting positions within the same trading day.

Comparison of Scalping Trading and Day Trading

	Scalping Trading	Day Trading
Use	Always day trading	Scalping is optional
Timeframe	Seconds or minutes	Can be any duration during the day
Automated	Frequently	Optional
Monitoring	Constant	Standard
Experience	Typically intermediate	All levels

Is Scalping Trading Legal?

Scalping trading is generally legal as long as it complies with the regulations for investing.

With that said, it’s always worth checking the rules in your jurisdiction, such as in the UK, India or Canada.

But while scalping is legal, some trading platforms do not allow the practice. Bans are usually seen at brokers that have lagging price feeds that cannot meet the direct access demands of scalpers. So check the rules at Binance, Robinhood, eToro, or Plus500, for example, before you open an account.

Some brokers also define “scalping” differently. For example, if a trader aims to exploit:

• Internet latencies
• Delayed prices
• Off market/bad prices.
• High volumes of transactions targeting tick fluctuations (rather than price movements) where trades are opened and closed very quickly.

…then some brokers will identify this as abuse of the trading platform and take actions to stop it (even voiding closed trades). Defining the motives of the trade is problematic however, which is why brokers tend to tread carefully when scalping is discussed.

Final Word On Scalping Trading

Scalping day trading is a strategy used to place a large volume of trades throughout a trading session to generate small profits vs placing a few, big-ticket orders. It’s a system that requires time, discipline and a careful plan for managing risk.

Beginners should find a broker that offers easy and direct market access, low fees and excellent tools. It’s also worth focusing on a single asset with high volume and volatility to begin with, such as the major forex pairs.

A scalping system can be used as a primary trading strategy or to supplement other techniques.

FAQ

Further Reading

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