What is Scalping? | Trading Strategy | Instruction

Here, stocks, commodities, currency pairs (Forex) or other assets are traded in very short-term positions, which are held for only a few seconds. In trading, enormously small market movements are exploited. For this, one takes large position sizes to make a corresponding profit.

In the following video I explain scalp trading in detail. In addition, I have created an automatic strategy for the trading platform Metatrader 4. With it you can find very good short-term entries into the market. Download the template for free.

Classic example of the scalp trading strategy

In the picture below you can see a typical example of scalp trading. Movements are traded to a fixed target. As a scalper it is especially important to set your targets (loss and profit). Once a certain profit is reached, the risk is immediately taken out of the market. For this purpose, a stop loss (loss limit can be used). If the market runs in the foreseen direction, one can secure a partial profit with it.

Another strategy for profit protection would be to sell a partial position. In most cases, the trades are executed in the "one-minute chart". This means that a new candle forms after exactly 60 seconds. This is not much time, so scalpers need the highest attention.

Most professionals also set themselves a time limit. For example, they do not want to be in a trade for more than 2 minutes. The position is then closed no matter what the price is. Chart methods are used here, which are also used by longer-term traders. Many methods can be projected to different time units.

Scalpers also take technical aids such as indicators. The platforms of most exness member area login and CFD brokers offer a large portfolio of tools and processing of the chart. Should you want to start scalping, try this trading method in the demo account first.

The boundary conditions of a scalping strategy:

•     Fixed targets of the trade
•     Limited risk
•     Fast profit taking
•     Possible partial sale of positions
•     Set a time limit for a trade

Which markets are suitable for scalping?

The more liquid a market is the slower it will move. The most liquid markets include stock indices, commodities (oil), metals (gold & silver) and currencies (Euro & USD). In general, it is not possible to make a blanket statement here. From my experience, the slower markets are suitable for beginners.

The faster a market moves the less time you have to react. Of course you can make a faster profit by very fast markets, but the trading fees are often higher and there are more false signals. In my opinion you should test many different markets before you concentrate on one market.

Facts about the best markets for scalping: 

•     The faster a market moves the less liquidity there is
•     Slower moving markets are more suitable for beginners
•     Test yourself through several markets
•     S&P500, government bonds, gold, silver, oil, euro, USD are very liquid