Forex Scalping Strategy & Indicators
What is forex scalping? How can you make a profit out of small price movements? Read on.
Introduction
If you want to take advantage of the micro-movements on any of the financial markets, then you will first need to learn a good scalping strategy.
Scalping is not for everyone but, if it sounds like the right fit for you, there are a lot of positives to be enjoyed. You can get scalping pretty quickly after you understand the basics and experience will soon start adding up. These techniques cannot guarantee your success, however well you replicate them. On the other hand, they can dramatically increase your chances over guesswork.
What Is A Scalping Trading Strategy?
One of the main ways traders can be categorised is in terms of their trading timescale. Some prefer to invest their money in stocks over a long time period, others prefer to have their finger on the button at all times, and everything in-between. There are a lot of factors to consider before choosing the frequency of your trading but most of them are personal. The scalping strategy is the most intensive trading technique as it requires you to be at your computer all day, alert to changing prices, drawing and redrawing graphs, making calculations and predictions.
A good scalper can utilize the full movement of an asset’s price behavior, profiting not just from the start and end point, but from every oscillation and fluctuation along the way. These scalpers aren’t just guessing. They will be using a scalping strategy to help them decide when to buy and sell. For some, this will mean following news sources and gauging reactions on social media and elsewhere. Most scalpers will use one or more price chart indicator tools through which they can interpret the data and predict future trends.
The Different Scalping Techniques
Firstly, traders need to choose how reliant they want to be on computer programs. It’s a trade-off between working less and having more input. There are software programs that can make trading decisions using complex algorithms. Still, many traders will prefer data-driven strategies such as the Stochastic Oscillator, Bollinger Bands, Parabolic SAR, RSI (relative strength index) and more. All these analytic programs and indicators work by emphasising different patterns in the data to help predict where the data is likely to lead. Bollinger bands, for example, focuses on the volatility of an asset and elucidates the range where the price is likely to fall (with 90% accuracy).
One simple scalping strategy for 1- to 15-minute trading charts is to apply three rolling averages from the last 50, 15, and 10 periods (periods are minutes in this case). Buy when the price exceeds all three averages and sell when it dips beneath them. There are a lot of techniques out there but you can learn on trading platforms, such as TradeOr, which allow you to practice for free. They also have a forex market (the most popular market for scalpers), if you want to put your FX scalping strategy to the test.
Final Thoughts
Whether you’re looking for a 1-minute scalping strategy, a 15-minute scalping strategy, or to let your computer take the strain, you will need to find the right online broker, such as TradeOr. Not only does TradeOr include the forex market (and many more), it gives you a wide range of data analytic tools and charts to track your own performance. All importantly for scalpers, it has 0% commissions which can otherwise be a huge blow to the scalping strategy.