forex scalping strategies pdf

forex scalping strategies pdf

Forex scalping is a popular method in which positions are opened and closed quickly. The term “fast”
is imprecise, but it generally refers to a time frame of 3-5 minutes at most, while most scalpers hold their positions for only one minute.

The popularity of scalping is based on its perceived safety as a trading style. Many traders argue that since scalpers only hold their positions for a short period of time compared to regular traders, the market exposure of a scalper is much shorter than that of a trend follower or even a day trader, and consequently the risk of large losses due to strong market movements is lower. In fact, it can be argued that the typical scalper only cares about the bid-ask spread, while concepts such as trend or spread are not very important to him. Although scalpers have to ignore these market phenomena, they are not obliged to trade them as they are only concerned with the short periods of volatility they create.

Forex scalping is not a suitable strategy for every type of trader.

The returns made on each position opened by the scalper are usually small, but large profits are made as the profits from each small position closed are combined. Scalpers do not like to take large risks, which means that they are willing to give up large profit opportunities in exchange for the security of small but frequent profits. Consequently, the scalper must be a patient, diligent person who is willing to wait until the fruits of their labor translate into large profits over time. An impulsive, excited character who seeks instant gratification and wants to “make it big” with each successive trade is likely to experience only frustration with this strategy.

Scalping also requires much more attention from the trader compared to other trading styles such as swing trading or trend following. A typical scalper opens and closes dozens, in some cases even more than a hundred positions in an ordinary trading day, and since none of the positions can suffer large losses (so that we can protect the bottom line), the scalper cannot afford to be cautious with some of his positions and careless with others. At first glance, it may seem a daunting task, but scalping can be an involving, even enjoyable trading style once the trader becomes familiar with its practices and habits. However, it is clear that the successful forex scalper needs attention and strong concentration skills. One does not have to be born with these talents, but practice and dedication are essential if a trader is serious about becoming a true scalper.

Scalping can be demanding and time consuming for those who are not full-time traders. Many of us simply trade as a source of additional income and do not want to spend five to six hours a day on this activity. Automated trading systems have been developed to tackle this problem and are being sold all over the internet with incredible claims. We do not advise our readers to waste their time trying to make such strategies work for them; at best you will lose some money and at the same time learn a lesson about not trusting the words of others so easily.

However, if you develop your own automated systems for trading
(with some guidance from seasoned experts and self-study through practice), you can cut down on the time you have to spend trading and still apply scalping techniques. And an automated forex scalping technique does not have to be fully automated; you can leave the routine and systematic tasks such as stop-loss and take-profit orders to the automated system, while you do the analytical part of the task yourself. This approach is obviously not for everyone, but it is certainly a worthwhile option.

Finally, scalpers should always pay attention to the consistency of trade sizes when using their preferred method. Using irregular trade sizes when scalping is the surest way to ensure you have an empty forex account in no time, unless you stop scalping before the inevitable end. . Scalping is based on the principle that profitable trades will offset the losses of failed trades in due course, but if position sizes are chosen arbitrarily, the rules of probability dictate that sooner or later an outsized, leveraged loss will wipe out a whole day’s hard work, if not longer. The scalper must therefore ensure that he follows a predefined strategy with attention, patience and constant trade sizes. Of course, this is just the beginning, but without a good start we would reduce our chances of success or at least reduce our profit potential.