You’ve just started looking into forex trading. That means that you’re still learning the expressions and the lingo. When you see what some of the more experienced guys in the industry write, it probably looks like Swahili to you. One of the terms you probably see a lot is “forex scalping.”
While you know that this is one of the best forex trading strategies, you probably don’t know what does it mean. But worry not, that’s just what we’re here today. To explain the scalping strategy.
“Experienced traders can use candlestick patterns to recognize recurring trends in the market, and use these signals to gain an edge in predicting future market movements “, says Rob Colville, CEO and Founder of The Lazy Trader. “Creating a profitable trading strategy will inevitably include the analysis of candlestick patterns”
For starters, forex scalping is a short-term strategy that aims to make a profit out of small price movements within the market. Scalpers buy and sell foreign pairs and hold on to them for a couple of minutes, only to sell them and make a tiny profit.
Of course, there’s much more to scalping than this. Today, we’re going to talk about that and see what the best forex indicator for scalp traders is. Without wasting any more time…
How Does Forex Scalping Work Exactly?
In the foreign exchange market, most traders refer to the smallest price movements as pips. That stands for Percentage In Point. Professional traders use this to measure their losses and profits. A scalper usually aims to “scalp” somewhere around 5 to 10 pips from each position.
By doing that, the scalper can make a noticeable profit by the day’s end.
Scalping strategies often involve leveraged forex trading. This is a strategy that allows traders to borrow a certain amount of capital from other brokers in order to get more exposure in the forex market. When you’re a small trader and want to make it big, this makes sense.
In return, the trader that barrows the capital gets a small percentage of the full asset value.
In theory, the strategy pas off for both parties. However, when things go wrong, both parties can lose a lot of money. That’s why scalping is pretty risky and why most traders don’t recommend it for newcomers that have never traded before.
Forex Price Action Scalping
Another technique we should discuss today is price action trading. Now, this marketing tactic doesn’t actually require you to use forex indicators. Instead, the scalper analyzes different elements of the technical analysis, focusing only on the price.
You can observe the price through a candlestick chart, using nothing but resistance and support levels to decipher the information that you’d otherwise get from an indicator.
By analyzing the price, scalpers can make data-driven decisions based on the continuations of the trend. When dabbling in price action scalping, a trader will only scalp a trade if the target has just the right ratio of risk and reward.
Forex Scalping Signals
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In volatile markets such as forex, trading signals are mainly generated by pierces of software and tech indicators to notify the traders about entry and exit points for certain trades. If you want to give scalping a go, you need to find the best forex signals for that strategy.
You need to find signals that give you results right away. That’s because scalping is all about speed. In the foreign exchange market, long- and short-term signal provides target only a handful of pips to give scalpers a chance of identifying trading opportunities when the market is volatile.
Scalping signals are mainly based on big, real-world events that have an instant effect on the market. Most traders use a scalping system, which gives them full exposure to pops, tech indicators, as well as graphs.
Scalpers also need to have access to every major market across the globe, no matter the time zone. Technical analysis study price charts to find opportunities at the times of the day when the market is the busiest.
Best Indicators for Forex Scalping
All of this brings us to the following question – what exactly is the best indicator for scalping? Well, in reality, there’s no single best indicator. There are more than a few of them like the Bollinger Bands, Moving Averages, and many more.
Here are a few of them that will help scalpers make the most out of their efforts…
- Bollinger Band Scalping
A Bollinger Band is a great way to see just how volatile the forex market is at any given moment. If you’ve been following along, then you know just how useful this is to scalpers who usually have around 5 to 10 minutes for each position in the market.
- Moving Averages Scalping
Next up we have the ever-popular moving average. There are many MA lines on a standard forex graph. Some of the most widely-used indicators are SMAs or simple moving averages and EMAs, exponential moving averages. These indicators can be used to show short-term variance in trends of a given currency.
- Relative Strength Index Scalping
The last indicator we’re going to discuss today is the Relative Strength Index or RSI. This is a momentum oscillator used to predict the direction of the entire forex market during a certain period. If you’re a short-term trader, you can simply use it to predict the direction for the next couple of minutes.
Is Forex Scalping Profitable?
The forex market is volatile and will always be like that. Instead of showing small price changes, it can change completely in a matter of hours. This means that the scalper needs to monitor the market constantly, watch for changes, and think of ways to react to them instantly.
You need to know how to ensure that market position doesn’t cause you many losses and that the subsequent trades you make are profitable. If you’re a complete beginner, you might not try scalping instantly. You may want to get some more experience.
Try out different strategies, learn about the market, and see how it functions before trying scalping. Once you finally try it, you’ll know how to react to every single change in the market and use the best forex indicators for scalping. Good luck with your efforts.
