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20/10/2021

Everything you need to know about scalping

Scalping is an offensive trading strategy. Unlike other types of trading, scalping involves taking only a few minutes, or even seconds, to take a position. This strategy requires a high level of responsiveness, but can be well worth it. 

What exactly is scalping? Is scalping for you? Which broker should you use for scalping? How can you become successful? Take a look at our article. 

What exactly is scalping ?

Scalping trading training can be useful to both individual and professional traders. What does scalping mean exactly? Put simply, it's a trading technique where buying and selling of financial products takes place in a very short period of time.

Scalping is often done on derivatives with relevant leverage. The scalper can take several positions at the same time, with a minimal return on investment compared to the risk.

The possibility of carrying out numerous operations

When it comes to stock market scalping, gains are relatively small, due to the small movements that are sought. This is why a scalper makes more trades than any other type of trader.

In comparison to swing traders, scalpers use a higher leverage. In very short-term trading, a trader tries to take advantage of the smallest fluctuations in the market. One scalp is not enough to trade. Scalping involves making a large number of trades in order to become profitable.

Short-term trading in Forex

Scalping is short-term trading. Knowing that Forex is a very volatile and liquid market, a scalping trader manages to make money on movements of 100 to 200 pips.

During a scalping course, you are taught that responsiveness is necessary, as orders can be opened and closed in a short period of time, enabling speculations on the currency market in the short term.

Is scalping only for professional traders ?

Scalping is a very popular practice among professional traders. This is because the trader controls the risk by having limited exposure to the market. When the market is very volatile, the number of pips can exceed thirty.

Scalping requires responsiveness

Scalping does not require fundamental market analysis, but rather technical analysis of graphical representations of up to five minutes.

However, it is considered very risky and traders must remain alert at all times. For this reason, scalping is best reserved to experienced traders.

Scalping requires discipline

Discipline is essential in order to master risk management. Scalpers perform many trades with small profits. Their ability to manage risk means they don't stay in a position for very long.

Scalping also requires discipline as you make many trades every day. For these reasons, scalping is rarely practiced by novice traders or by people with a day job, as it requires a lot of attention and time.

Which assets can be scalped ?

Scalping is a very intense activity that requires a lot of effort. During a scalping course, the trainer recommends that you focus your attention on one financial asset. When you reach a steady pace, you can add other assets.

Scalping is compatible with all financial assets, including

  • Forex
  • Indexes
  • Raw materials
  • Cryptocurrencies
  • CFDs

Scalping cryptocurrency focuses only on virtual currencies like Bitcoin, Ethereum or even XRP.

Forex scalping involves scalping a currency pair such as the EUR-USD, for example. In this case, the most liquid currency pairs provide the most gains. These are the pairs that have the highest trading volume in the market such as GBP/USD or EUR/USD. 

Which broker should you use for scalping ?

Although scalping is a strategy favored by many traders, some brokers, such as eToro, do not offer it. Here are some brokers that do:

Avatrade

The trading platform is among the best in its category and offers scalpers a wealth of opportunities. Avatrade offers four types of platforms, including MT4 and MT5.

Avatrade focuses mainly on Forex and CFDs. With this type of broker, the scalper benefits from the services of a regulated and serious broker. In addition, the commissions and spreads are more interesting.

FX pro

This broker offers an attractive catalogue with access to the main commodities of more than 70 currency pairs or nearly 150 stocks listed on the stock exchange.

FX Pro has a good position on derivatives like CFD. However, FxPro has a separate interface for cryptocurrency scalping. 

Which performance indicators are used in scalping ?

Technical indicators are essential in scalping. Among the best known indicators is the Forex indicator Ichimoku, considered the most profitable. The RSI (relative strength index) is also widely used due to its technical performance.

To excel in scalping, you will need an order book as well, which allows you to see the actual volumes of the contracts.

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