Scalping in Detail

There is one thing that we can say about Forex scalping strategies for sure: many people criticize them, others adore them, and only a few traders are indifferent to them. Why is this? First of all, scalping is one of the few ways to get rich quickly (as supporters of this trading method get used to thinking). Theoretically it is possible to become rich at once using a scalping strategy. You can, for example, make a fortune within a month earning 1000% or more from an initial deposit. The trading history of winners of trading competitions as sometimes published by dealing centers is a good example. When analyzing these transactions it becomes obvious that, as a rule, it is a large number of transactions per small period of time. This is a very aggressive trading style which is very risky but can bring enormous profit. Such success can be easily explained. You trade using virtual money, dont lose anything in the great scheme of things and if you risked skillfully, you could only win. Do you think it is possible to repeat such success on a real account? We are sure it is not possible and even if you succeeded, you would do it no more than once or twice. So you can conclude that you should study and use other strategies apart from scalping. But that is just one opinion. You may have a talent for that kind of trading that other traders would envy. If you constantly trade using scalping strategies you are very likely to lose your deposit. It might take some time to happen but everyone has their own date and time. So before you decide to repeat the heroic deeds of winners of trading competitions, you should think twice. First of all, you should have nerves of steel to withstand the scalping trading mode as you have almost no scope to make a mistake. But there are some positive aspects of Forex scalping strategies. For many traders, scalping is the most acceptable and available trading method and allows them to stay in the market (but not to waste their deposit). There are several reasons why: some people only use a small amount of money, for others it is their temper; they simply cannot wait and sit idly, though it is quite exhausting work for them. Lets suppose that you want to try this method of fast enrichment without significant investment. What do you need to take into account? Firstly, you need to have the right emotional disposition. Dont burden yourself with thoughts about urgently needing to open a position or you will spend a day or an evening in vain. However, you need to have some set pieces available. In fact you always need these. Improvisation is not necessary and all techniques should first be perfected on a demo account. Scalping trading is also quite complicated because of the high level of noise on small time-frames, i.e. quotes movements that cant be analysed and small price movements. Besides, the amount of commission for opening positions (spread) is considerable. Depending on the conditions of dealing centers this will be 2-3 pips. So the overheads can increase. The advantages of Forex scalping strategies are also obvious: fast, positive results and the possibility to earn money on small price movements. If someone thinks that it is very easy, they are mistaken. To use scalping strategies, you should have enough trading experience and the ability to make decisions instantly.

You should have skills and talent if you want to analyze a situation quickly and make the right decision. If you start weighing up the pros and cons carefully and look for logic in everything you most probably wont achieve positive results when using Forex scalping strategies. If this is your style, then strategies which require careful analysis and balanced decisions would be more suitable. It is impossible to become a Forex scalper straight away but almost everyone can learn how to do it. It is very difficult to use scalping successfully over a long period of time because it is very tiring. There are many scalping methods and everyone has their own indicators, oscillators, level of subconscious development and vision of the market. But there is one common theme; you come, you snatch, and you go away. You should be able to make instant decisions and follow the market. The trading Forex scalping strategy, given below is not a dogma but a guide to action. Anyone can add something of their own, trade a bit and draw some conclusions. Use different currency pairs, change entry and exit rules, etc. and in the end you should develop your own technique and rules for Forex scalping. We will use two trading sessions for scalping: 1. The European session. It starts at 11:00 Moscow time, when London opens. 2. The American session. First orders of this session appear on the market at 15:45 Moscow time. Trading time 11:00 Moscow time. Actually, you dont need to rush to open trades exactly at that time. Start two terminals (training and trading), watch after performance of night bids (let big investors set the levels of supports and resistance for the forthcoming day). Then we watch the news calendar and turn on the digital indicator of group movement on the training terminal i.e. open union tools in any direction on the demo account. Trading tools: cable (GBP/USD), USD/CHF on dollar group, and yen EUR/JPY, on yen. Recommended timeframe: M5, M15, M30 Entry rules: Having detected group movement, we enter from the market with a small lot. You should have a good broker, who executes instantly, without slippage. If the terminal allows it, some people place pending orders in close proximity to price. Here is a more cautious approach. We place a pending order on a breakout of a days extremes (if its close) or on a breakout of some recent appropriate local extremes.

Additional positions
This is a very important part of scalping. They are placed every 10 points after the first order. As a rule, there are no more than three additional positions. It is not necessary to place additional positions but why are they needed? Initially we enter with a small lot and exit with small losses in case of wrong entry. If everything is perfect and price is moving in our direction, we increase the open position. That is the reason. On the one hand, we want to make profit but on the other hand, we dont want to lose much money in case things go wrong.

Theoretically, when you get more experienced and start to feel the market, you will be able to place heavier first orders. After passing 30-40 points the morning trend runs out and inter-session flat starts. Money management It is recommended to divide a working lot into 6-9 parts. Round it down. You can use simple additional positions, such as equal shares. For example, if a working lot is 100 000 (leverage 1:100), then the lot with 30 000 falls to each pair (at least, 3 pairs are in plans). Take into account forthcoming additional positions of 10 000 for the first order (1 mini lot for MT4) and the same amount for additional positions. The first and second additional positions will occur with the use of our deposit and the third additional position will be possible thanks to the current profit made by the first order. Stops. Everything is classic here. If a day corridor is narrow on its opposite border. If far beyond a local extreme. As a rule, stop size is no more than 30 points. To give you a more detailed example of scalping, we will show the example of trade from August 14th 2009.

The timeframe is M15. After the night movement of the market, we place a pending order on breakout of a day extreme on GBP 1.6531 (pending buy and sell orders at a distance of 10 points from the days extreme) at 11:00 Moscow time.

Additional positions are planned accordingly: 1.6521, 1.6511 and 1.6501. First orders were executed at the next bar. Having got over the mark of 15 points of profit, we place a stop at +5 points and wait for the further developments. Having got over the mark of 15 points, we place a trailing stop at a distance of 20 points. 45 minutes after the beginning of the movement, we can start preparing to close orders at the slightest signs of drawback. As a result, three positions were closed on trailing stop and the fourth position was closed on break-even (+5 p.): 26 + 16 + 6 + 5 = 53 p. Good luck! Forex Scalping