Forex Scalping: How To Get Started?

The global currency market is known for its high liquidity along with frequent price fluctuations due to the high volatility. Both these features make it a perfect place for scalpers as this combination is ideal for entering and exiting multiple trades with ease which is what scalping is all about. Scalpers try to catch a few pips only in a single trade and need more wins to reach their daily profit target. You can use a pip calculator to determine the value of pips converted into currency you wish to trade in, and with this, you can decide the number of pips to gain for making enough profits.  However, getting started as a forex scalper can be a tough task for an average beginner as this trading style requires great timing and precision to become consistently profitable.

In this forex scalping guide, I will be sharing some valuable information on how to get started as a scalper in the fore market by explaining how it works and how you can prepare for it to get the desired trading results.

How Forex scalping works?

Many people confuse scalping with day trading as they are both short-term trading strategies but they are very different approaches and the time frame for scalping is way shorter. Day traders, just as the name implies, open and close their trade positions within the same day to make profits. The duration of the trades is not rigid and the only rule here is to exit all positions before the day ends having no overnight trades kept open. They may use 15-minute charts, 30-minute charts or hourly charts for analysis and spotting suitable trade setups.

But a scalper will be placing trades for shorter duration using minute charts, which are only a few minutes long and some scalpers exit their trades in just 1 or 2 minutes. Day traders will wait until they reach their profit target and the trading style will be less intense whereas scalpers don’t wait as they just want the price to move a bit resulting in gains of a few pips or closing the trade with a few pips loss if it doesn’t work out.

Then, they just go for the next trading opportunity that they come across and this type of strategy works well with the major pairs that provide high liquidity which is very much needed for entering and exiting multiple trades with ease. Many scalpers also use tick charts to add more precision to their analysis, especially during volatile hours when there is a lot happening in a short span of time.

The traditional time charts are more suitable for analysing a longer time frame but tick charts can be an ideal match for scalpers who are solely focused on minor fluctuations that happen in a minute or two. Tick charts update the data when a number of trades are placed and would not be based on the timeframe which makes it an apt analysis tool for scalpers trading at the peak market hours with high trade volume and a lot of noise.  

Scalpers usually trade with high leverage because they don’t stay in a trade for too long, so with higher leverage, they can expect to make decent profits. However, scalpers should keep the margin requirements in mind because if they risk a higher margin in a single trade, then they might receive a margin call if the trade doesn’t go as planned. For accurate margin requirements, scalpers can rely on a margin calculator, which is very easy to use. By adding a few values, one can easily find out the right margin required to enter a trade.

Scalpers are mostly focused on technical analysis to plan their trades with precision but can also try out strategies like news trading if they have a good amount of knowledge about market fundamentals and how various economic news events or data releases can impact currency price movements. However, it can be risky as the volatility tends to peak when there is a news release which makes it harder to predict the market direction. 

Should you become a scalper?

Now many of you must be wondering if you should get into scalping in the forex market and if it will be profitable. There is no doubt in the fact that scalping can be a lucrative venture for those who are skilled enough to pull off this trading style. However, it may not be suitable for everyone as many traders will get overwhelmed and intimidated by how short the timeframes are and will struggle to get the expected results in the end. The risk of overtrading is also high as scalpers have to spend more time monitoring the market and analysing the charts.

They may feel the urge to jump in and catch every opportunity that they come across due to FOMO which comes after a losing streak or a winning streak when there is greed. When you get into overtrading mode, you will fail to apply logic and reasoning and make decisions based on what you feel at the moment. Scalping can make you more prone to emotional trading as you will have to make quick decisions which can be burdensome when you are not someone with enough experience in the forex market.

However, many beginners do step into the market as scalpers since they are excited to make some quick profits in the fast-moving market. But becoming a profitable scalper does take time and a good amount of practice. However, those who are responsive to market fluctuations and confident in their ability to make timely decisions can surely consider scalping as their trading style after devising a strategy that is suitable for scalping. 

How To Prepare for Scalping?

The first thing to do before becoming a scalper in the forex market is to take your time to research the market and watch how it moves in real-time by practising on a demo account. Demo accounts are apt for practical learning and you will have to get good at the technical concepts for mastering this trading style. You should also learn to use various trading tools like forex calculators which can help you in making informed trading decisions by providing accurate results for the required metrics that you are calculating.

You should make use of the backtesting feature on trading platforms to check how your strategy would have worked in the past by placing hypothetical trades using historical price data. Backtesting is very important to check the performance of your trading system and the risk that comes with it before going live with real funds at stake. When it comes to scalping, you should stick with major pairs and try to trade during active market hours during major sessions and session overlaps. It would be better to focus on one pair at a time.

You should refrain from trading less liquid pairs or during times when there is not sufficient liquidity for the smooth execution of trades. You can trade using price action strategies and also use various indicators like Moving Averages, RSI or Bollinger bands to confirm your analysis. But you should not crowd the charts with too many indicators as you will be watching a very short timeframe and there should not be an overload of information as ambiguity needs to be avoided. Keeping it simple with the strategy and paying more attention to risk management is the key to success in scalping.

Choosing a Broker

Choosing a cost-effective broker is very important for a scalper, otherwise, they will end up sacrificing their profits due to high spreads and commissions while placing several trades in a single session. You need to ensure that the broker supports scalping strategies with solid trading conditions and check their platform functionality through demo account trading. Fast execution of trades without significant slippage or latency is essential for a scalper. Many scalpers trade with ECN brokers as they get to take advantage of the raw spreads, deep liquidity pool and seamless execution of trades with a lot of transparency.

Choosing the right broker allows you to optimise your profit potential by minimising the trading cost. Another thing to consider while choosing a forex broker is their regulatory status and reputation. It would be safer to trade with a regulated broker as you can ensure a secure trading experience and trust the broker with your funds. You need to check what trading tools they provide and what platform support they offer before signing up for a live account with them. 

Finalising the Trading Platform

Talking about trading platforms, MT4 and MT5 are the most commonly used trading softwares in the forex community. Both MT4 and MT5 are suitable for scalping and offer powerful functionality and trading tools. MT4 is very beginner-friendly whereas MT5 is way more advanced with additional tools and features. You need to make a wise choice based on your preferences and also have a look at the other platforms that your broker offers.

In the end, the first step to getting started as a forex scalper is not just about finding the right broker or platform. You need to spare some time to learn about the market before stepping into it. Work on your strategy and stick to demo trading until you develop the required skills for implementing your trading plan with perfection. Always, prioritise risk management and follow a disciplined approach.

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