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Scalping Trading 101: A Guide to Transform You into a profitable Scalper Today

|Updated July 29, 2022 10:28

If scalp trading (scalping) were a movie, we would say it is an action-packed, fast-paced thriller. This trading strategy takes a short period between opening and closing a trade, spanning seconds and at most a few minutes. The goal is to open as many trades as possible in a day. Typically, scalpers open dozens of trades throughout the day to make multiple profits, however small.

The Basic Principle of Scalping

The idea behind scalping is to capitalize on the small market moves throughout the trading sessions. Remember, the market is choppy. In other words, it moves up and down. Scalpers open positions at the beginning of these small trends and close a few seconds or minutes later before the trend ends. 

Yes, if you open a trade and close at the end of the day, that's not scalping. But you are still a day trader. 

Scalpers take advantage of the small bursts of market volatility, hoping the market will complete the initial movement quickly. The price should move fast enough to close the spread.

The demanding and fast nature of scalping makes it appealing to only a section of traders. You must be a full-time trader with undivided attention and ready to be glued to the charts the whole day. 

Essentially, scalp traders make small profits over the long run. This can add up quickly to massive gains.

You don't need fundamental analysis, only an understanding of market mechanics and quick decision-making.

Advantages And Disadvantages of Scalp Trading

Scalp trading is demanding. Why do traders find it attractive?

✔️ Massive profits from small positions

While long-term trading makes big profits per trade, scalpers surpass it with numerous trades. For instance, a 30% long-term profit on a modest $200 won't sustain you for long. But making 3% profits on tens of trades is quite a flex.

✔️ Gives Returns in a Short Time 

Scalping makes you a massive profit quickly. For instance, the trade can move ten pips in a minute or two.  Since there are numerous positions, your profits will be substantial.  Do you really need to hold a trade for weeks when you can close profits in a minute? You said it right! You don’t have to once you understand scalping. 

✔️ Easy Training

Lastly, mastering scalping is not complicated. You only need to understand technical analysis and market patterns. This is unlike long-term trading, which requires understanding the fundamental analysis. That’s right. If you decide to go the long-term way, you should be up to date with every new event coming from Ukraine today. 

High risk 

On the downside, scalping comes with high risk due to the high-profit potential. The market moves in a short time and can be pretty unpredictable.

Demanding and tedious

Scalping is quite demanding and tedious - you have to sit in front of the screens looking for short gains in dozens of trades. It also requires using the same kind of data again and again.

Transaction costs can water down the profits

If the broker has a high commission, it will eat into the wins. Even a $5 commission on dozen trades will make it hard to close the day with wins.

How to Scalp Profitably?Must-Know Scalping Tips

Scalping works best when the volume and the liquidity are high. Therefore, you want to consider trading major currencies that offer high liquidity to match the fast-paced nature of scalping. This will enable you to enter and exit the market quickly. 

While the market provides numerous trading opportunities for scalpers at go, it is advisable to focus on one currency pair. Monitoring the chart patterns and the price action when scalping is challenging and, in most cases, can make you lose focus. 

Before you start using the "scalping" strategy, you need to confirm the following:

  • Make sure your broker supports scalping trading.

  • Choose pairs with high volume and tight spreads such as the EURUSD, USDJPY, and the cable.

  • Focus one pair at a time to avoid distractions. This increases the chances of success, especially if you are a beginner. You can add more pairs with time

  • The busiest time of the day offers the highest trading volume, ideal for scalping. The New York and London sessions overlap is perhaps the most active trading period.

  • Be cautious of news events. Prices can change quickly after the release of economic reports. If the trade goes against you, high volatility can lead to massive losses because of slippage.

  • Risk management- None of the trading strategies is foolproof. You, therefore, need good risk management to mitigate losing trades. The idea is to minimize losses.

  • As a scalper, you should be able to put an exit strategy without batting an eye when the trade goes against your analysis. 

  • Choose the right trading instrument. One of the best ways to scalp profitably is through trading contracts for difference (CFDs). They allow you to leverage your capital, open larger positions with small amounts and magnify returns. 

  • Brokers with slow platforms won't help you scalp profitably. The trick is to find a platform capable of handling lightning-speed executions. 

  • Speed is of essence scalping. The platform should therefore be designed with fast, advanced charting tools that can detect trade entry signals.

  • Scalpers can open hundreds of trades every day. The charges will significantly affect your profits if each trade is charged a commission. Therefore, you need a broker with zero commissions or who offers excellent discounts and low commissions for high-volume traders.

Is Scalping for You?

Scalping trading is not for everyone. Ensure your personality matches the scalping trading method.  If you don't know, here are some points to help know whether you have what it takes to be a scalper.

● You don't mind spending hours in front of the charts 

● Fast trading excites you 

● You are impatient to wait for long-term trades to close 

● You can think and change trading decisions fast

Scalping is not for you if:

● You take time to analyze and make trading decisions 

● Don't have enough time to commit in front of the screen 

● Fast-moving environments stress you 

● You prefer a few high-profit trades

Three Practical Scalping Strategies You Should Know

Now You need a tested and proven strategy to start trading that gives you an edge in the market. Here are some common strategies scalpers use. 

1. Price Action Strategy

Price action involves using the price movement without indicators to identify signals. Traders use candlesticks, chart patterns, and trend lines to identify trading signals. Traders can analyze the market and decide whether a trend continuation or reversal is more prominent and if the trade offers a good risk-to-reward ratio. 

2. Range Trading 

Range trading involves waiting for the market to trend sideways within a range. As such, the traders scalp long trades as the market rebounds from the support and short positions after the market hits resistance. In addition, they prepare for range breakout, which involves using tight stop losses.

3. Bid-ask Trading 

This involves identifying instruments that have significant differences between the highest bid and lowest ask. However, this strategy works best in quantitative and algorithmic trading. This strategy is highly saturated with bots which are reliable in identifying the small efficiencies. 

Most Useful Indicators for Scalping

Scalpers who depend on technical analysis use indicators that provide accurate signals. Ideal indicators show suitable trade entry and exit points and help quickly identify high-profit potential trades. 

Below are some top indicators that most traders use.

  • Relative Strength Index 

RSI is a momentum oscillator that helps traders determine the market momentum. Scalpers can tweak the setting to make the indicator more sensitive to price changes. Essentially, you want to scalp when the momentum is increasing.

  • Bollinger Bands 

Bollinger bands show volatility in the market.  Since scalpers look for rapid trades, they can use the indicator to identify currency pairs with less volatility and tight spreads. It can help you make massive profits at once.

  • Moving Average

The moving average indicator is one of the most popular in the market. It quickly identifies changes in the market prices. There are different moving averages, including smoothed moving averages (SMA) and exponential moving averages (EMA). You should quickly enter a trade or exit if you identify price changes.

Some scalpers go the extra mile and create their trading indicators. Others incorporate complex indicators such as the volume profile and real-time order book analysis. In addition, high-frequency traders use bots. This is because machines can process data at a very high frequency.


What is the Best Time to Scalp?

The general consensus is that the most active trading time offers the best scalping time. For instance, the best time to scalp GBP-dominated pairs is the first hours of the London trading sessions. Nevertheless, the New York trading sessions are a suitable time to scalp USD majors. This is the time when the pairs have a high volume. 

Also, you might want to trade the morning hours when volatility is high. However, this time is ideal for seasoned scalpers as the risk might overwhelm amateurs. 

Typically, scalpers use the lower time frames of 1 minute and 5 minutes. Others check 15 minutes or 1 hour at most for multi-timeframe analysis. We all know that higher time frames offer the most reasonable signals. 

Scalpers, therefore, start from higher time frames to get the general trend and scale down to lower time frames to find the most suitable entry point. 

Mitrade is Your Broker for Scalping

Mitrade is an award-winning broker based in Australia. It enables traders to profit from indices, commodities, shares, and forex. Enjoy zero commissions and fast and reliable order execution. You also get flexible leverage and competitive spreads on simple and interactive interfaces. 

The platform comes with risk management tools to reduce the impact of losing trades and negative balance protection. Mitrade is regulated by various bodies, including the Cayman Islands Monetary Authority (CIMA) and the Australian Securities and Investment Commission (ASIC). The brokerage firm holds an Australian Financial Services Licence. Customer service is happy to answer your queries and concerns through a 24-hour support system. 

You only need to start scalping in three steps.

Find The best currency pairs for scalping on Mitrade: 

Commodities: Gold, Silver, Crude Oil 


Index: NAS100, US30, SPX500, AUS200, FRA40, GER30

Cryptocurrencies: Bitcoin, Ether, Ripple, Litecoin, Dogecoin, Cardano, DOTUSD, UNIUSD

Open an account with Mitrade today, open trades, and enjoy the ride!

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    1. What Are the types of scalpers?

    Scalpers can be broadly divided into systematic and discretionary.  Systematic scalpers enter a trade using a well-defined trading system that determines the entry and exit points.  It is more of an algorithm and data-driven method rather than intuition. Discretionary scalpers open positions depending on the situation at hand. They do not have specific rules and make trading decisions as the market unfolds. 

    2. Which brokerage is best for scalping?

    Features of a Good Broker for Scalping 

    ● Numerous custom indicators to help analyze the market 

    ● Intuitive, fast, and easy-to-use platform 

    ● High order execution 

    ● Availing high liquid assets such as forex and stocks, and indices 

    ● High financial leverage 

    ● Low margin fees.

    3. Which currency pairs are best for scalping?

    The currency pairs have a high trading volume and the tightest spread suits scalping, such as the EUR/USD, AUDUSD, and GBPUSD. With time, you can scalp minor and exotic pairs with higher volatility and risks.

    * The content presented above, whether from a third party or not, is considered as general advice only.  This article should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments.

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