What Is Forex Scalping: Strategies and the Best Indicators


Forex scalping strategies are quite popular with beginner day traders. High-frequency trading (holding a position for a very short time and closing it for a small profit) allows taking quick real-time profits and avoiding swaps. Training on Forex scalping on a demo-account helps a newbie improve reaction and learn to intuitively understand the behavior of many traders in financial currency markets. However, one had better enter real trades on longer time frames.

The article covers the following subjects:

This article will uncover the secrets of scalping: I will review the most common mistakes and the ways to avoid them and will acquaint you with efficient high-frequency trading (HFT) strategies.

What is Scalping? Trading scalping definition

Scalping is a high-frequency trading strategy that is used to amplify profits from a multitude of trades over a short time period. A scalper is a trader who uses such strategies and conducts a lot of trades intraday.

For day traders who are just starting to trade, the Forex scalping trading strategy is considered to be highly risky because the trend is chaotic in the short-term charts (the so-called price noise effect), and therefore, it can be hardly predicted. I, on the contrary, believe that a beginner should train Forex scalping before dealing with middle- and long-term Forex trading strategies. Scalping helps one train attention and reaction speed; it visually shows slippage problems. Although you must be highly concentrated and emotionally stable when using scalping, if you have understood the theory, the Forex scalping strategy is an excellent simulator for practicing these skills.

What we need to know about scalping

  • Forex scalping is one of the high-frequency trading scalping techniques that mean transacting a big deal of orders with small profits.

  • It’s highly liquid volatile financial instruments that are scalped most often.

  • Best Forex scalping strategy does not imply carrying positions over to the next trading day and thus excludes swap expenses.

  • Day trader Forex scalpers do not have to use technical analysis: they catch price movements no matter their direction. Every second matters there because the price can reverse at any moment. As a result, Forex scalpers do not have time for placing and analyzing indicators. Their main tool is one-click trading.

  • Scalping requires good discipline. If trades become loss-making, a Forex scalper makes a pause.

  • Automated trading replaces manual Forex trading. Since constant workload makes a trader less attentive and cautious, it would be advisable to work out a certain strategy in manual Forex trading and then develop an advisor.

Scalp trading and types of scalping

  1. Scalping on the news. At the moment of the important news releases or the publication of the economic data, there is a surge in market volatility and trading volumes that may continue from a few minutes up to a few hours. This is the best time for Forex scalpers. There are two ways of trading.

    • You put opposite pending orders a few minutes before the publication of statistics and cancel the losing order after the publication.
    • You enter several short-term trades for directly correlated pairs in the first minutes of the news publication in the general trend direction.

    It is quite hard to make money by utilizing such a strategy. Both methods have their own advantages and drawbacks. You can learn more in this overview.

  2. Types of scalping according to time frame.
    • Pipsing. This simple best Forex scalping strategy is called the most profitable and most high-risk strategy (in terms of profit, the issue is controversial). Trading is conducted on the M1 interval; transactions are held in the market conditions for a few minutes. It happens that 1-2 points is enough for the scalper, since the maximum leverage (sometimes up to 1: 1000) is used.

    • Middle-term scalping. This best orex scalping strategy suggests a relatively smaller number of trades, the holding time being about 5-10 minutes. The time frame is M5. The leverage size is determined by the trader.

    • Conservative scalping. Holding time is up to 30 minutes, the time frame is M15.
  3. Types of Forex scalping strategies based on technical strategies. 
    • Scalping with analysis of several time frames. Such a strategy is used when trading a short-term trend. It can reverse any moment, so common trend trading strategies for hourly time frames won’t work there. Such a trend may emerge, for example, during a short pause before the news release, which is rather controversial, judging by forecasts. Or it may start during a temporary balance of bulls and bears power. The Forex scalping strategies of this kind suggest that you identify the beginning of a trend on the time frame of H1-H4 by means of a trend indicator or a confirming oscillator. Next, you analyze the market conditions and look for signals on the time frame M5. A practical example of this scalp Forex strategy will be explained a little later.

    • Trading based on major currency pairs. The major pair is the pair based on which the scalper takes trading decisions, but he/she is trading a correlated pair that is a little lagging. For example, the EURUSD pair immediately reacts to the publication of the US statistics. If EURUSD and USDJPY are rising, then EURJPY will also rise.

    • Intuitive scalping. Taking into account that a scalper has little time to make decisions, there is a category of institutional traders who use their intuition. They understand the liquid markets so well that they don’t need any technical indicators.

I won’t describe the subdivision by the indicator type (graphic, level analysis, and so on) as it is rather logical. The classification can be extended, and I will appreciate it if you, my dear readers, help me by offering your variants of Forex scalping strategies in the comments following the overview.

Rules for successful Forex scalping strategies on trading:

  • There must be no restrictions by the broker for employing strategies. There must be no restrictions in the offer concerning the number of trades open and the minimum holding time.

  • Instant execution. It greatly depends on the broker, liquidity providers, internet connection, and the trading platform itself.

  • Big financial leverage. Professional Forex scalpers employ the leverage from 1:500-1:1000 and higher, but according to the rules of European regulators, the maximum financial leverage is 1:50.

  • The instrument must have the best liquidity.

Comparing the Trading Styles

Short-term trading is subdivided into a few types: pipsing, classic scalping, swing trading, and intraday trading. Which one is better? To answer that question, you need to make a couple of steps:

  • Discover new strategies, such as Swing trading or Intraday Forex trading.
  • Test them for a few days, opening 30-50 trades at least.
  • Fix the results. Determine which strategy suits you the best and fits your emotional state, and which strategy is the most efficient.
  • Determine the drawbacks.

I have compared several short-term strategies in the table below:

 

Scalping

Swing trading

Intraday trading

Trade lifespan

from 1-2 to 30 minutes

from 15-30 minutes to several hours

a few hours

Time frame

М1-М15

М5-Н1

from Н1 and longer

Trading assets

Highly liquid volatile assets: major currency pairs, cryptocurrencies with 3-5% volatility and more. Less often: gold, stocks

Volatile assets with frequent trend fluctuations

Any assets

Trading tools

Most often, fundamental analysis

Levels, Price Action

All kinds of technical analysis, fundamental analysis

Trades per day

from 20-30 to 100 in diverse financial instruments

5-10-15 trades a day depending on a trend or corrections

1-3 trades in one instrument, 5-10 trades a day

Number of trades opened at the same time

1-3 trades

1-3 trades depending on a trend

1-10 trades

The table will probably help you get a general idea of short-term strategies. Investment advice: don’t try to stick to strategies too much. Develop your own trading system for Forex scalping strategy, which will cover a few types of trading scalping techniques. Create your individual trading style.

How to Scalp Forex

Main Forex scalping strategies rules:

  • Trade Forex only using highly liquid and complex instruments with the highest trading volume and tightest competitive spreads

  • There exists a perfect period for every trading instrument. For example, European currencies are traded the most during the European session, while the Asian session is the best for trading the Japanese yen. Don’t scalp-trade Forex one or two hours before and after weekends or days off: trading volumes are the lowest.

  • The best trading assets to scalp are the majors. Gold, oil, and stocks are scalped less often. Cryptocurrencies are good for scalping only during important fundamental releases as 1-2% daily volatility won’t be enough to cover competitive spreads.

  • Don’t hold multiple positions for too long. If a loss turns up, close the trade immediately. Then open a trade in an opposite direction or take a pause.

  • The best time to scalp Forex and open trades: fundamentally – market news releases; technically – trading from key support and resistance levels.

What is the Best Time Frame to Scalp Forex?

The best time frame for the Forex scalping strategy is М5-М15. Other time frames are not appropriate for a few reasons:

  • on the M1 time frame, each candlestick corresponds to one minute. Even trading in one click, a trader doesn’t have time to get the lay of the land in the Forex market and analyze the situation properly. One-minute candlestick is 1-3 points on average. Chasing those levels of profit is tiring, and such periods are only acceptable when it’s a trading advisor that opens trades. Price noise brings in some chaos into the chart on the M1 time frame too.

  • As for the M30 time frame and longer, a trader cannot see price fluctuations within a candlestick. Trading those time frames thus becomes intraday trading.

So, Forex scalpers most often pick up the M5 time frame. A trade stays in the market for 1-3 candlesticks while the price covers 5-15 points.

For example, three candlesticks yielded nearly 11 points in short positions for 4-digit quotes in the M5 chart of the EURUSD. It corresponds to 10 USD for a 0.1 lot trade with a spread of 1 point.

Scalping methods

Scalping methods in trading jargon mean the general principles of developing trading systems that allow grouping trading strategies. There exist two classic methods:

1. Trading a huge amount of assets in small lots. A trader can open dozens of trades in various assets simultaneously, trying to exploit every small price fluctuation. Profits can go up to several points, but the total result can compare to other trading systems’ efficiency because of the large amount of trades.

Pros:

  • Relatively low risk because trades are split into small lots

Cons:

  • Control problem. Following a big number of trades at the same time can pose a problem.

2. Having a few trades with maximum volume. A trader opens 1-3 positions to execute trades aiming to make a few points of profit. The maximum leverage size increases the trade volume and one point cost.

Pros:

  • Fast and big profit. High volatility Forex markets.

Cons:

  • High-risk level. Risk management rules are often neglected and don’t exit trades quickly.

Also, there’s one more method: opening in the opposite direction to execute trades in the same asset with equal volumes. This method is called “locking”. Beginner trader may find it difficult: you need to exit trades on time and in the appropriate direction. Locking strategies are more often used for risk insurance instead of stop loss than to amplify profits.

Scalping trading strategies

The most popular Forex scalping strategy is channel trading during high-liquidity assets’ highest volatility period. Graphic elements are often used in the best Forex scalping strategy, such as drawing levels, Fibonacci ratios, patterns, channel indicators, etc. Most Forex scalping strategies are based on small price movements inside channels or key levels, or on breakout price movements. Classic technical indicators are used less often, but scalping strategies can include Stochastic, MACD, or some trend tools. A few examples of such strategies are listed below.

One-minute scalping strategy

One of the best indicators for high-frequency Forex scalping strategies is ADX. It consists of two parts: the main line, which indicates the strength of a trend, and dotted lines, which indicate the price direction. It’s not advisable to use ADX on the M1 time frame in intraday strategies: it produces false signals due to price noise. However, as one-minute Forex scalping does not imply trend trading, ADX helps us catch short impulse movements, which are three-five candlesticks long. More details on this tool can be found in our review Average Directional Index (ADX indicator).

Currency pairs: any major pair.

Conditions for opening a long trade:

  • The blue dotted line + DI crosses the red line – DI from below.

Conditions for opening a short trade:

  • The blue dotted line + DI crosses the red line – DI from above.

Ignore the main indicator line: it measures the trend strength, which is of no interest in one-minute Forex scalping. Open a trade no later than the candlestick on which the two dotted lines have crossed each other. Period of one trade: two-five candlesticks. Close the trade once a small profit is made and the price reverses.

In that example, all the six signals were accurate, but each trade’s profitability was 1-2.5 points without considering the spread. So, this strategy will not be suitable for Classic live accounts with competitive spreads starting from 1.8 points. I recommend using it in ECN accounts with raw spreads.

You can work further on this one-minute strategy as you think best – add other Forex scalping indicators, change ADX default settings, etc. As there can be false signals, I recommend using this strategy for training your skill of searching out signals and controlling trades efficiently. However, I would advise other Forex scalping strategies if you wish to make bigger profits.

Five-minute scalping strategy

Forex Scalping trading strategy based on fundamental analysis without using indicators.

We will need PMI statistics.

  • Reference. PMI (Purchasing Managers Index) reflects business activity in the US industrial sector. It is one of the key economic indicators in the USA. Its value varies from 0 to 100%. Median: 50%. If the index is above 50% and continues growing, the economy grows; if it is below 50% and continues falling, the economy stagnates.

Two conditions must be observed for the strategy to work:

  • The main preliminary signal. The index’s actual published value must be different from the forecast by 2% and more.
  • An additional confirming signal: The index’s actual published value must be opposite to the forecast.

The point is that the EURUSD will start trending if the facts and the forecast are different. If there is no cardinal change, the quotes will remain unchanged.

We had the following market situation on 22 November, the day before PMI stats were published: after the index value was upgraded from 53.3 to 53.4, analysts believed the situation would get worse, and the expected value (the index value) of 53.0 would fall. However, the actual value was totally opposite: PMI grew 3.3% instead of falling 0.4%.

A Forex scalper does not necessarily need to follow the original source at the moment of publication, though it’s advisable. He or she can simply check professional traders’ behavior. The highest volatility is usually observed in the first five minutes following the market news publication. Also, dozens of mass media copy the published stats within the first five minutes. So, wait for the index value to be published, check if the two conditions are observed, wait for the period equal to one candlestick, and open a trade on the next candlestick in the direction of the price.

In that case, the trade can be opened 2-3 minutes earlier because a long downward candlestick, whose body is much bigger than the previous candlesticks’, formed in the chart. Close the trade after the first reversal candlestick ends: it marks the end of a local trend. The trade was held for 40 minutes; the profit was over 45 points on 4-digit quotes.

Similarly, we can earn from other news publications. The release dates can be found in the Economic calendar.

15-Min scalping strategy

The strategy is based on the channel technical indicator. The underlying principle of this Forex scalping strategy is that the price almost always returns to its median value after touching the channel limits. Trades are opened in the following situations:

  • The price touches a channel limit and reverses. A trade is opened in the price reversal direction. Close the trade once the price reaches the middle of the channel or reverses within the channel.
  • The price reaches the middle of the channel. It can continue moving or reverse. Open a tradeprofitably  in the price movement direction.

Time frame: M15. Major currency pairs: any. You can open several pairs’ charts and open trades one by one once signals appear.

  1. The price continues moving upwards, having pulled back from the channel middle. Open a long position in point 1.
  2. The price reaches the limit of the channel. Close a long position and open a short one in point 2.
  3. The price returns to the middle of the channel. You can close the trade ahead of time in point 3, or you can squeeze the maximum out of the trade.
  4. Close the trade on the candlestick following point 4 as the candlestick changes direction. Open a long position.
  5. Close it on the candlestick following point 5 as the price changes direction. Open a short position.
  6. Close it in point 6 as the price touched the channel limit. Open a long position.
  7. Close the trade profitably with the smallest profit in point 7 as the price reversed downwards: the candlestick was red at the lower shadow’s low. Don’t open a trade as we are located between the limit and the middle of the channel.
  8. In point 8, the price touched the middle of the channel and went down. Open a short position.
  9. Close it in point 9 as the price changed direction.

Six trades were opened in 4 hours. The longest candlesticks yielded 8-12 points within 15 minutes, with spreads considered. Without spreads considered, each trade opened in point 6 would have been at least 2.5 points. This strategy is operational but requires constant control over each candlestick and a fast reaction to price reversals.

Advice:

  • Levels for opening a trade are channel limits and the middle.

  • Don’t close a trade if the price only passed the middle of the channel.

  • Close a trade profitably once the price appears to start reversing. Whether or not the price reached the target level is not important. The profit amount doesn’t matter either. What matters is that there is a profit.

  • Once you close a trade, open another one in the opposite direction.

Most profitable scalping strategy

Best scalping indicators

The best scalping indicator is the spread technical indicator. Spreads are the major part of Forex scalpers’ expenses. They don’t depend on a trade’s duration, and they will be due regardless of the amount of future profits. The lowest spreads are floating spreads in ECN accounts, starting with 0.0 points. When volatility is growing, or key price levels are reached, they can increase. So it’s important that a scalper should not miss the moment.

Use spread indicators not to get distracted. For example, Spread.Warner or Monitoring Spread. They differ from each other in visualization and additional options. The simplest one is Spread Warner. It shows a current spread and previous spread values in the form of a small histogram.

To scalp Forex, you can use regular technical indicators. Let’s examine some of them in detail.

Scalp trading using the stochastic oscillator

The Stochastic oscillator is an auxiliary technical indicator in trend strategies. It is used for confirming a signal and detecting a trend reversal moment. It most often produces signals when leaving the overbought/oversold zones. It’s them that we will use in our scalping strategy.

Input data:

Since the Forex scalping strategy is a high-frequency trading strategy, set the level at 60/40 instead of the default ones.

Conditions for opening a long trade:

Conditions for opening a short trade:

Open a trade on a candlestick that observes both conditions. If the gap between the two conditions equals one candlestick, you can open a trade, but such a signal is considered as lagging. Don’t open multiple positions if the gap between the two conditions is two or more candlesticks or if MAs converge and then diverge instead of crossing each other.

Both conditions are observed in point 1, but MAs intertwine before crossing. The intertwinement can point to a flat movement that precedes a strong trend or a high volatility area where neither party prevails. In the first case, you can and should earn when a flat movement ends, but the second example points to an uncertain market in which you’d better not open a trade. There started a directed trend movement in point 1, so opening a trade yielded a profit. You can see examples where the intertwinement of MAs was a false signal on the screenshot below.

In points 2 and 3, there were clear operational signals. The difference is that point 2 caught a short-term trend while point 3 — a strong impulse that was one candlestick long. The essence of the Forex scalping strategy is exactly in catching such short-term impulses.

Read our review Stochastic Oscillator: Guide for Using Indicator in Forex Trading for more details on this indicator.

Ichimoku scalping Forex trading strategy

In contrast to regular tools, the Ichimoku Cloud Indicator uses a more complex formula for plotting lines and can be a basis for an independent trading system. Our review Ichimoku Cloud Indicator in Forex Explained deals with this indicator in detail. I use only one of its signals — the Tenkan-Kijun cross — in this Forex scalping strategy.

Initial conditions:

  • Ichimoku Cloud Indicator (9, 26, 52) — default settings on LiteFinance’s platform.

  • Currency Forex pairs: any major highly liquid Forex pair.

  • Time frame: M5.

Conditions for opening a trade:

  • Long trade: the Tenkan line crosses the Kijun line from below.
  • Short trade: the Tenkan line crosses the Kijun line from above.

Open a trade immediately once the lines cross. The price can change direction as early as on the next candlestick on short time frames, so the speed is key to success. Close the trade 1-3 candlesticks later or when a reversal signal is produced.

  • Tenkan is a black line, and Kijun is a violet line.

  • In point 1, the black line goes up. The crossover of the black and violet lines is a signal for opening a trade. It will be held until the first red candlestick forms.

  • In point 2, the situation is the opposite.

  • A reversal Pin bar pattern formed in point 3 after a signal candlestick, so the trade is closed on the candlestick following the market entry. If you are quick, you can earn 6-8 points from such trades within five minutes.

  • We have a false signal in point 4: Tenkan and Kijun turn into a single line instead of crossing. If you have an opened trade, close it immediately: you’ll lose nothing but the spread.

This scalping strategy does not produce signals frequently. However, you can form more strategies based on Ichimoku if you look into the specifics of this indicator.

Heiken Ashi scalping strategy

Heiken Ashi is a special type of candlesticks visualized in a more convenient way and making a convenient trend change alert. It has a price calculation formula based on an open-high-low-close chart (OHLC), different from classic candlesticks.

  • The scalping strategy is based on the only signal: if candlesticks changed color, a trend direction changed.

  • Once the color changes, each subsequent candlestick must have a bigger body. The first three candlesticks’ bodies must be visually bigger than the previous candlesticks of another color.

Open a trade on the fourth candlestick after the change of color. Currency Forex pairs: any major Forex pairs, time frame: M1-M5.

The arrows mark the candlesticks on which a position could be opened. In the first and the fourth case, a trade could be opened earlier. For example, the first trade could be opened on the first long green candlestick. Those are subtleties, however. Close the trade once a reversal candlestick appears. Note that you don’t have to close a position within the first seconds following the appearance of a differently colored candlestick because it can just continue the main movement. You determine the exit trades time yourself based on circumstances and the number of profits.

MACD scalping

This scalping strategy is based on four basic technical tools combined in a single template: two simple moving averages, Relative Strength Index and MACD. The scalping strategy is classical, based on the principle “Don’t reinvent the wheel, learn to feel the market”. Recommended time frame is M5. The 1-minute time frame will send many false signals, but you can try to search for signals in non-standard time frames from 5 to 15 minutes. Recommended Forex pairs: EURJPYEURGBP. They produced the most effective trading signals.

  • The benefit of the best Forex scalping strategy for beginners. You train the skills of application of standard indicators, improve your attention (by searching for multiple conditions met at the same time).

You can download the Forex scalping strategy template via this link.

Settings of the indicators:

  • МАCD: fast ЕМА (12), slow ЕМА (26), MACD SMA (9), apply to — Close.
  • Relative Strength Index: Period (26). Settings for levels may be left default – (50). Apply to — Close.
  • LWМА (linearly weighted moving average): Period (10), Apply to – Close. Shift — 0.
  • EМА (Exponential Moving Average): Period – (20), Apply to – Close. Shift— 0.

The best time for the Forex scalping strategy is the European session. At this time, these Forex pairs are most actively traded, and Forex market liquidity is the highest. Thus, for traders with a risk appetite they can open a live account and boost their personal finance.

Conditions for entering a buy trade:

  • МАCD has been below a zero level for some time. Afterwards, it paints a graph above zero.
  • RSI in the same candlestick range breaks through level 50 upside.
  • LWМА (orange line) is above the EMA (blue line). A strong signal is when the LWМА in the same interval breaks through the EMA from below.

You enter a trade at the next candlestick after the major condition has been met, the MACD has crossed zero level. The rest of the signals in this case are confirming signals, but you shouldn’t enter a trade unless all the conditions are satisfied. The expected profit is five few pips, not including the spread coverage. When the target profit is reached, you may hedge the trade by a trailing stop or exit it. The second variant is safer.

Pink boxes and arrows in the chart highlight the indicators’ values that provide a signal when they occur at the same time. Horizontal red lines mark from top to bottom: take profit, entry point, and stop. It is also clear from the screenshot that the trade could have been entered one candlestick earlier. During important news releases, this scalping strategy doesn’t work.

Conditions for entering a short trade:

  • МАCD has been above zero level for some time, and then, it paints a graph below zero.
  • RSI in the same candlestick range crosses level 50 from above.
  • LWМА (orange line) is below the EMA (blue line). A strong signal will be if the LWMA in the same interval breaks through the EMA from above.

You enter a trade in the same way: as soon as the MACD breaks through zero level, you may enter a trade.

You shouldn’t count on a big profit. The strategy suggests gaining just a few pips. Signals appear almost every day, so you may trade no more than one or two currency Forex pairs. If you have managed to pick up the start of the trend, the target profit size can be increased.

Trend Line Forex scalping strategy

Unlike other trading systems, this trading approach suggests entering a series of trades at the very beginning of the trend. In theory, one could put a single entry and hold it till the trend reversal, but the Forex scalping strategy also implies taking profits from pullbacks/corrections. In addition, this scalping strategy allows making money on short trends.

The scalping strategy applies the following indicators: Stochastic Oscillator and the Awesome Oscillator. Two moving averages analyze the trend line on the hourly time frame.

  • Advantages of the strategy for beginners: it is a good example of how you can make money from scalping additionally using a longer time frame.

The currency Forex pair is GBPUSD, and the main trading time frame is M5, the auxiliary one is H1. Trading is conducted during the European session. You can download the scalping strategy template here.

Settings of indicators:

  • Stochastic  oscillator: %К — 14, %D — 7, Slowing — 7, Moving Average Method — Simple, levels — 20 and 80 (default).

  • Awesome Oscillator: all settings are default.

  • SMA 1: Period 50 (red line), Apply to – Close.

  • SMA 2: Period 200 (blue line), Apply to – Close.

Conditions for entering a long trade:

  • In-depth analysis of H1 time frame. Both moving averages are directed upward. Red MA is above blue MA.
  • Analysis of M5 time frame. The Stochastic  oscillator was in the oversold zone (in the range between 0-20) and goes beyond the zone at the signal candlestick. Awesome Oscillator paints a green column below zero level.

The more vertically the Stochastic Oscillator goes outside the oversold zone, the more accurate the signal is and the more safe is your personal finance. After all the conditions on the next candlestick are met, you can enter a trade. The target profit is about 10-15 pips; the stop trading point can be put at the same distance or a little further.

Conditions for entering a short trade:

  • Analysis of H1 time frame. Both moving averages are directed downward. Red MA is below blue MA.
  • Analysis of M5 time frame. Stochastic was in the overbought zone (in the range between 80-100) and goes beyond the zone at the signal candlestick. Awesome Oscillator paints a red column above zero level.

The entry rules are similar. If the trend is strong, you may enter a series of trades.

Psychological levels scalping trading strategy

Psychological levels trading suggests two scenarios: breakout of the channel border with the start of the new trend or a rebound from the border (support/resistance level) and a return to the middle of the channel, that is, to the balance level. This is a good scenario. In practice, everything may be a little different:

  • The channel border breakout may be an inertial price movement, and there may not start a new trend; the price may go back to the channel after a short movement.
  • The movement inside the channel can also be chaotic. After a rebound from the border, the price does not manage to reach the middle (let alone the opposite border) and reverses.

All these are risks for a day channel strategy, but not for the Forex scalping strategy that allows you to make profits both from the channel breakout and from the price swings inside the channel. Psychological levels in this case serve as a target reference that helps you at least approximately assume the potential pivot points inside the channel.

The scalping strategy suggests building a Moving Average “Envelope”, where the price will return. Stochastic will identify the probability of the channel’s borders breakout. Internal levels are built based on Fibonacci levels. Stochastic in this case will be a supplementary tool, moving averages, and levels with the coefficients of 61.8; 161.8; 261.8; 361.8 are combined in a single indicator, MaEnv, that you can download via this link. Moving averages in the indicator are constructed by summing 3 LWMAs with periods of 30, 50, and 100, weighted by the closing price.

  • Benefit of the strategy for beginners: an excellent combination of scalping and a channel strategy.

Time frame – М5 (5 minutes), currency Forex pair — EURUSD. MA Env default setting. Stochastic settings: %К — 14, %D — 3, Slowing — 3, Prices — Low/High, Moving Average MEthod — Simple. Levels are standard (20, 80).

Conditions for opening a long position:

  • Candlestick closes below the red line.
  • While the price is below the red line, the oscillator goes down into the oversold zone (below level 20).
  • Both the price and the stochastic must be below the red line for no longer than 10 bars.
  • The price goes up above the red line

After the candlestick closes above the red line, you enter a trade and put a stop at a distance of about ten few pips. You exit trades when the orange line is reached to avoid losing a big amount of your personal finance(Fibonacci level 61.8).

Conditions for entering a short position:

  • Candlestick closes above the red line.
  • When the price is above the red line, the oscillator goes up into the overbought zone (above level 80).
  • Both the price and the stochastic must be above the red line for no longer than ten candlesticks.
  • The price goes down below the red line.

The exit trades conditions are similar. Other lines are auxiliary, but if they start indicating a reversal and the profit has already covered the spread, exit the trade and wait until the price goes beyond the envelope next time. If the price has been between the red and the blue lines for a long time (from 8-10 candles and longer) or outside the red line, you do not enter a trade.

Scalping without indicators

When trades are opened and closed in the shortest periods of time, trading systems with a huge number of indicators are not always appropriate. Decisions should be made in less than a minute because Forex scalpers hunt for a profit of just a few points. Let us see how to trade repeated typical movements and streaming data using orders and pending orders.

Many scalpers trade without indicators

Decisions on numerous intraday transactions must be made quickly. Also, you cannot waste time attempting to use poorly adjusted automation, where many classical indicators are late and in need of constant fine-tuning for trading on smaller time frames, such as M1, M5, M15, M30.

  • Scalper seeks to recognize common Forex market movements and patterns on time frames M1-M30;

  • It is useful to analyze the positions of major players, for example streaming data from the world’s largest currency section on the Chicago Mercantile Exchange (CME);

  • As a rule, without automation one should trade within a day no more than three most common, most liquid and complex instruments — currencies.

Psychology is also relevant here: support-resistance levels, the magic of round numbers. For example, if a quote ending with zeros is not broken at once, then most often, a rollback will follow. Other observations on this subject can be found in the bestseller How to Play and Win on the Stock Exchange by Alexander Elder.

Corrective scalping at support / resistance levels: strategy

When the price crosses 0, we determine the closing price. We place orders for entry or stop orders, taking into account the correction, which is estimated by candles whose shadows crossed the support-resistance levels. If the shadow below the closing level crossed the zeros – we choose support level and an uptrend, and if it is above – then the resistance and the downtrend.

 

The shadow of a five-minute candle should cross the 0 levels:

  • Support (the closing price is lower for the bullish candle, higher – for the bearish one);
  • Resistance (the closing price is higher for the bullish candle, lower – for the bearish one).

The size of the profit depends very much on the activity of the Forex market participants within a day. Activity is usually observed during the opening of the largest exchanges and slows down after 2-3 hours. After 21:00 and in the hours before 10:00 Forex scalpers usually do not trade.

Scalping by VSA methods

Volume Spread Analysis (VSA) is the in-depth analysis of small price movements based on volumes. The direction of the trend depends on the volume of purchases and sales of the instrument, and if the sales volumes are higher, the movement will be downward until the Forex market participants override them with purchases, which will turn the trend upwards.

Today, trading volumes are taken into account in the analysis – as are the opening and closing prices and the high and low of the candle. Usually, the volumes are painted in the color of the candle, but you should not pay attention to this because it does not say anything about how the buyers and sellers behaved inside the candle. Volumes of Forex transactions are calculated by the number of trades – without taking into account the funds expended on each of these trades. Real data on the volume of stream trades can be found on the website of the Chicago Mercantile Exchange (CME).

The difference between the volume of buyers (ask) and sellers (bid) is called delta, and the positive difference indicates that the Forex market is dominated by purchases, and the negative one shows that there are sales in the currency pair.

Strategy based on the VSA method

Many programs, such as Volfix or ATAS allow you to estimate the flow volumes of Ask and Bid for a certain currency pair, that is – inside each candle. Typically, these apps are not free, but they offer trial access.

Let’s say that a trend is clearly visible on the market – an uptrend or a downtrend. Prices are rising, and delta shows that sellers or buyers dominate the market. Here the scalper needs to make a trade against the trend, focusing on arriving countertrend volumes – to profit from a correction.

Volumes of sales and purchases require vigilant examination with subsequent identification of typical ones, so as not to get confused in the “abnormal” volumes, which are different for each currency pair. Therefore, the scalping strategy needs a lot of testing before it begins to bear fruit.

Trading by order book

The order book shows stock information on the total number of contracts and prices based on pending orders.

 

Some Forex scalpers prefer to trade exclusively by the order book and do not use price charts. Levels with a large number of orders can be considered as support and resistance levels, and the basic scalping strategy here is to place pending orders one tick before the “strong” levels.

Do not rush to place orders before the price hits the level. Until then, orders can be rearranged or “disassembled” by orders placed on the other side. Wait until the take profit is triggered to open and close the trade when the volume is exhausted or moved.

Conclusions:

  • You need experience (to recognize candle patterns by eye) and additional software (to analyze the volume of purchases and sales inside a candle);
  • Trade no more than three main instruments;
  • Earn from corrections related to the unbroken support and resistance levels;
  • Remember to track activity within a day and operate large-volume periods of trading sessions.

Best scalping advisors for mt4

Manual Forex scalping is gradually replaced by Forex scalping via MetaTrader EAs. That’s predictable: there is no point in opening trades manually when you can program a robot that will do the same automatically, based on a well-proven work scalping strategy.

  • An EA works according to a pre-set algorithm: it does not miss signals and thus excludes human error.

  • An advisor reacts to signals many times faster than a human.

  • An advisor can open short-term winning trades in several assets, like trading cfds, at the same time.

The disadvantage of using expert advisors is that they cannot consider fundamental factors and Forex market changes. So, I recommend using advisors on specific time frames, which can be determined through testing. The best time frame for using an advisor is the time frame on which you make the most of profit-yielding trades.

What scalp expert advisor is the best? The one that yields the most profits with optimum risk levels and without permanent readjustment. If you need to optimize your advisor almost every day, search for a new one.

I recommend testing Hamster Scalping as an example for acquiring some experience in this field. Its specifics are the following:

  • fully automated trading Forex scalp advisor without Martingale elements. Mostly developed for currency pairs.

  • Night trading.

  • Main indicators: ATR and Relative Strength Index.

  • Minimal deposit: 100 USD.

Hamster Scalping has over 30 settings. If you need a more detailed comment on them, just let me know in the comments section.

If you have a working scalping strategy and you want to get a scalping advisor for MT4, read the review How to order an Expert Advisor. You will learn how to work with freelancers on the MQL5 site: how to specify your technical requirements, choose a freelancer, make an order, estimate risks, etc.

What is the Best Forex scalping broker?

How to choose the best broker for Forex scalping? Choose the one that offers the best trading conditions and meets its commitments.

The main factors in choosing an efficient scalp broker:

  • Minimum floating spread. The lower the spread, the lower a trader’s expenses. Fixed spreads are not a good solution as they are higher than markups. The best Forex scalp broker will offer ECN live accounts with spreads starting from 0 points.

  • No slippage or sudden increases in spread. Slippages and unexpected spread increases are an unpleasant force majeure circumstance for a scalper. They must be excluded.

  • Instant execution of orders. An average trade execution period on Forex is 150-200 ms. If a broker can offer you faster execution of orders, you will have a competitive advantage over other day traders because you can trade at a better price.

  • No limits on a trade’s duration. A broker should not prevent you from Forex scalping.

  • High leverage. Lowers the margin and allows you to increase your trading volume. To learn how to control it, read our review of Forex leverage: What is Leverage in Trading: Ultimate Guide for Beginners.

  • VPS server. A trading platform that helps on specific investment objectives and a trader’s trades are located on the broker’s server. If there’s an electricity or Internet outage, you can control trades via mobile apps: everything will be saved on the server.

Advice: Use the OpenOrderTime script to check the speed of orders execution, spreads, or slippages. Download and install it to MT4: File/Open Data Folder. Download the template into MQL4/Scripts and restart the platform. Allow automated currency trading by ticking the corresponding field in Tools/Options/Expert Advisors. Run the script. In a few seconds, you will have a text file with the check results in MQL4/Files.

Here’s an example of checking LiteFinance’s trading conditions:

The order was opened and closed within 128 ms and 142 ms, respectively. Quite a good result for the Forex scalping strategy. Request Price – price sent to the server. Open/Close Price – real price of execution. Acceptable deviation: no more than 0.00002. If the two values coincide, like in this case, there are no slippages. So, this is a good Forex scalp broker.

Download the script and run it when you suspect slippages or delays in the execution of orders. A screenshot of the script report will be your best argument in dealings with the support team.

LiteFinance’s conditions are perfectly suitable for scalping Forex:

  • The script test showed that orders are executed fast and without slippage.

  • Floating spread starting with 0.0 points in ECN trading accounts.

  • Leverage up to 1:500.

  • VPS service. Click here to check the broker’s tariffs.

Best pairs for Forex scalping

Basic requirements to a currency pair suitable for scalping Forex

  • High liquidity and low floating spreads. This requirement is met by frequently traded currency pairs with large trading volumes, like EURUSDGBPUSD. To compare spreads for different pairs offered by different brokers, you can use the data from MyFxBook.

  • Moderate volatility. Liquidity and volatility have a kind of inverse correlation. It is hard to buy/sell a currency pair with high volatility. And vice versa, high-liquid currency pairs have low volatility. It is very important to retain the balance, and a volatility calculator can help you do it. Based on the calculator, the best currency pair for scalping is EURUSD.

For night (flat) scalping, you can trade the pair with relatively low volatility — USDCADAUDUSD. I want to stress that the meaning of the best currency pair for scalping is subjective. The price movements depend on both external macroeconomic factors and on the FX manipulations by large investors that conduct investment business (market-makers). That is why, at different times, different currency pairs from major Forex pairs or cross-currency ones may turn to be the best for scalping. Therefore, there are a few Forex scalping tips on how you can select the best fx pair for scalping:

  • You should feel comfortable when trading. Find your own trading style and the best-suited currency pair, spending as much time as you need on training on demo retail investor accounts using virtual funds.
  • Be flexible. Today you achieve positive results when trading one currency pair. Tomorrow, you may take profits from scalping another currency pair.
  • Manage Forex risks. In addition to general risk management rules about the volume of open positions, there is one more rule concerning scalping. You should not enter trades for the two rising currency pairs at the same time. Although it can double your profit, it also doubles your potential risks, as both pairs may reverse at the same time.

There are no recommendations regarding the best Forex scalping indicators and technical tools for scalping. Everything is individual here. Someone is satisfied with the MT4 standard Forex scalping indicators, and someone installs unique author’s tools. Your trading style performance depends not so much on the tools as on the ability to use them.

Bitcoin scalping / cryptocurrencies

Scalp-trade cryptocurrencies only if their price changes 3%-5% or more over a few candlesticks under the pressure of fundamental factors.

Advantages. Compared with stocks or currency pairs, cryptocurrencies are more volatile and at the same time highly liquid. Crypto-quotes can change 1%-5% and more in a day.

Disadvantage. Margin can go up to 1%-2% of a cryptocurrency’s price.

Some advice regarding scalping cryptocurrencies:

  • Choose the most liquid cryptocurrencies. The higher the currency trading volumes, the smaller the margin. Scalping bitcoin is one of the best cryptocurrency strategies. Stablecoins – fixed-price cryptocurrency – are unsuitable for scalping.

  • Use the scalp Forex strategy of leading indicators for conservative scalping. The cryptocurrency market’s leader is BTC. Any fundamental news about Bitcoin affects the rest of the market. Other alts’ prices move with a slight lag. So, take BTC quotes as a reference point and open winning trades in TOP 15 coins (ETH, XRP, etc). As we can see on the screenshot below, all the coins have been in the green zone over the past performance of 24 hours and in the red zone over the past performance of a week. So, guided by BTC price’s prior fluctuations, we can open trades in any of the coins.
  • Use the “Pump&Dump” scalp Forex strategy for high risk aggressive scalping. Some coins may show short-term volatility of 15%-30% and more. They suit scalping the best. Read more about the strategy in our review Pump & Dump: how to take advantage of it and not be deceived.

  • Use the following cryptocurrency scalping indicators: spread indicators or Autochartist plugin. Trend indicators and oscillators are hardly efficient.

Here’s advice for beginner traders: pick up the least expensive cryptocurrencies from TOP-15. For example, trade volumes being the same, ETHUSD will cost 30 times less than BTCUSD. Opening a trade of the minimum volume in the Ethereum-pair, you have a relatively risk free deposit amount than when trading Bitcoin. If you wish to learn more about cryptocurrency contracts and spreads, click here.

Gold Scalping

What makes Scalping gold interesting is that you can earn from both technical and fundamental analysis. Gold quotes are highly reactive to the sector news and news concerning inversely correlated complex instruments. One can earn from gold inventory reports, changes in industrial demand, or changes in related volatile markets. As gold is a protective asset, investors’ capital will flow to XAU if stock markets fall, for example.

Most popular gold scalping strategies in trading Forex:

  • News trading. Open trades once stats on commodity and closely-related volatile markets have been published.

  • Levels trading. Plot key resistance and support levels on higher time frames.

Trading robots for gold scalping in trading Forex

I suggest using only manually developed robots tested both by MT4 tester and in practice. It’s not advisable to download advisors from the internet without understanding their work principles.

In contrast to indexes or currency pairs, gold isn’t traders’ main asset. Its price movements are often of psychological nature, so Fibonacci levels scalping works perfectly in the gold market. Here are its principles:

  1. Choose the M5 time frame and linear price scale for specific investment objectives.

  2. Find a growing or falling trend. Plot Fibonacci correction levels at the beginning of the trend. Stretch the grid so that each subsequent extremum is covered.

  1. Open winning trades during short-term corrections on rebounds from the grid’s intermediate levels.

A downtrend replaces an uptrend. Let’s suppose we are in point 2 now. Stretch the Fibo grid from point 1 to point 2. The price retraces a few times from level 0.236, returning to the support level. It’s when you need to open short-term trades. For example, in points 2-7, closing trades when the price reverses. In point 8, there’s a new extremum. Stretch the grid there, and do the same in point 9. You can switch to a candlestick chart from time to time. Each trade is 2-3 candlesticks long.

Continue opening short-term trades when the price pulls back from key levels until it sets a new minimum or a trend reverses. If the trend becomes ascending, draw a new grid from the minimum to the maximum.

If you wish to know more about Fibonacci channels, check our review What is Fibonacci retracement? How to trade using this indicator?

Let’s examine another interesting scalp Forex strategy based on LiteFinance’s analytical toolkit. Its advantage is that necessary analysis has already been done, and you don’t need to install Forex scalping indicators to search for relevant news.

Open the “Signals” tab in the “Analytics” section in your LiteFinance’s Client area.

Check how fast signals are updated. As there’s a 2-3 minute lag, working on M1 time frame would imply high risk and can lead you to start losing trades. So, check the signals on M5 and M15 time frames in the first place. On both time frames, advice for XAUUSD is to “sell actively”, and most Forex scalping indicators are red. Just in case, check the M30 time frame. The advice is “sell” there. Open a short position for 10-30 minutes.

Gold is less liquid than currency pairs, so its spread is bigger. Thus, 1-5 minute trades can be opened only during periods of local fundamental volatility, which happens rarely. However, 30 minutes are often enough for small profits.

The trade of 0.01 lots was in the Forex market for 30 minutes and yielded 1.72 USD. So, the strategy is efficient.

Best stocks for scalping

The best stocks for scalping are those that are as liquid and at the same time volatile as possible. The higher volatility, the more we earn from a local price move. The higher liquidity and trading volumes, the faster we can trade at the best price without slippages.

How to choose the best stocks for scalping?

Option 1. Visit the site of Tradingview. Sort stocks by volatility and liquidity in decreasing order. Pick the company that will be one of the TOPs in both parameters. You can use Excel for a faster search. You can also sort companies by volatility and trade volume in the same window, or you can sort other countries’ stocks.

Option 2. Choose Shares NYSE in the “Trade” section and sort them by volatility.

Tips for a Successful Scalper

A professional scalper’s secrets are hiding in the following Forex scalping tips:

  • Work only with the most liquid tools as they can offer the lowest spreads and less frequent slippages.

  • Choose the most active trading period concerning your tool. For example, the Asian session for the yen.

  • Scalp trade in ECN trading accounts with floating spreads. Such distributions are the smallest ones. That said, there is a small fixed commission for each executed lot. Also, it’s in ECN live accounts that orders are executed the fastest.

  • Do not scatter your attention. Don’t try opening many trades in different complex instruments at the same time. The optimal number of trades is five pips.

  • Observe your risk-management rules strictly and exit trades quickly. Use the biggest leverage possible, but don’t rush to build up your positions.

  • Don’t rush to close a trade earlier. Even if you set your profit target at three points, wait for the trend to complete its movement. Close the trade at the first reversal.

  • Close loss-making trades immediately. What if momentum goes not in the same direction but in the opposite one? Don’t wait for the price to reverse, and don’t let the drawdown increase. Close the trade immediately and open a new one in the necessary direction. A good scalper’s quality is a fast reaction and ability to make decisions without emotion. You will win everything back with Forex scalping profitable trades.

  • Focus more on fundamental analysis. It’s much easier to earn from statistics and reports than trust technical Forex scalping indicators on short time frames. Don’t waste much time on analysis: in the scalp trading style, reaction and intuition are more important than technical analysis.

  • Exploit rebates. It’s free! Rebates are partial spread compensations that you can claim after opening a trading account through a broker’s affiliate link. If you’ve been thinking about opening an account, why not open it via a rebate service? Compensations can go up to 40-70% of spreads. Read more about how it works in our review “What is rebate in trading, and how can a trader reduce such distribution costs?”

Does one need to place Stop Loss and Take Profit in scalping? As theory suggests, stop loss should be placed in any circumstances, but you will lose time then. However, you don’t have much time in scalp trading style. If you’re glued to the screen, there’s no need to place pending orders. If you need to leave your workplace for some time, then place stop loss.

Pros & Cons of Scalping

Advantages of most Forex scalping strategies:

  • It suggests trading based on fundamental analysis. Technical indicators are rather used as supplementary tools due to the price noise in the short-term time frames. However, beginners are not recommended to trade on the news in terms of training and utilizing simulators; this can be easier and more interesting than technical analysis. Everything is subjective, but I would say this is a benefit of scalping.

  • It gives the opportunity to make big profits. Everything is relative, but if you are a professional, high-frequency trading can bring higher returns compared to day trading strategies. In scalping, a day trader manages to have on almost every price change in both directions small gains, while in intraday trading, part of the profit is “lost” due to pullbacks and corrections. Besides, it doesn’t depend on the trend.

  • Scalping allows making profits when the Forex market is trading flat.

  • There are no swap costs (for keeping the position open through the next day).

I would say the biggest advantage of scalp trading is having to learn it. Due to high-frequency trading, the day trader learns to better understand the principles of entering and exiting trades, the nature of the Forex market and learns to develop intuition. After mastering scalping that is far more complex, intraday and long-term strategies will seem easier.

Disadvantages of Forex scalping strategies:

  • Spread. It doesn’t matter how long your position is held open, the spread will be the same. It takes most of the profits in scalping.
  • Technical problems: slippages, a delay in order execution, failure of the equipment, and so on.
  • In scalping, just a second sometimes matters, and a delay may result in a loss that may exceed a small profit.
  • Market noise. Random price swings, insignificant for long-term time frames, may close the order by a stop loss in the short-term periods.
  • Limited choice. Only liquid major currency pairs with moderate volatility are suitable for Forex scalping system. Exotic pairs are not appropriate.
  • Quality of market data and the restrictions by the broker. Some companies either prohibit scalping, or there is a restriction on the minimum holding time for a trade.
  • Emotional stress, you have to be constantly focused on small things. You have to monitor your trades all the time and make your decisions quickly. Sooner or later, a scalper feels emotional exhaustion, loses focus. The problem can be partially solved by scripts and trading robots.

To make profits from scalping, one needs to use high leverage, which comes with high risk. But still, despite all the drawbacks of scalping trading, Forex scalping is, first of all, satisfaction and excitement. That is why most traders like the Forex scalping system so much.

Conclusions

Trading scalping is one of the foreign exchange trading strategies suitable for both major currency pairs and other assets like trading cfds. Most traders can scalp in flat or trending currency markets. Some people consider it to be highly profitable; others say it is comes with high risk. In any case, before you start scalping Forex, any successful Forex scalper strategy needs to be practiced and improved on demo retail investor accounts using virtual funds. I hope this practical case study has helped you answer the questions you had. If it hasn’t, write your questions in the comments, and we will try to answer them together. I also invite you to discuss the best optimal and profitable scalping Forex strategies in the comments, or share them with beginners! I wish you successful trading!


P.S. Did you like my article? Share it in social networks: it will be the best “thank you” 🙂

Ask me questions and comment below. I’ll be glad to answer your questions and give necessary explanations.

Useful links:

  • I recommend trying to trade with a reliable broker here. The system allows you to trade by yourself or copy successful traders from all across the globe.
  • Use my promo-code BLOG for getting deposit bonus 50% on LiteFinance platform. Just enter this code in the appropriate field while depositing your trading account.
  • Telegram chat for traders: https://t.me/litefinancebrokerchat. We are sharing the signals and trading experience
  • Telegram channel with high-quality analytics, Forex reviews, training articles, and other useful things for traders https://t.me/liteforex

Price chart of EURUSD in real time mode

The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteFinance. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.

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