There are many effective ways to trade Forex on Olymp Trade. But to choose the right trading style, traders need to spend a lot of time researching and experimenting. In this article, I will introduce the Scalping trading method that is loved by many traders. What is Scalping? Should I use this method? Which Scalping trading strategy is most effective? If you’re asking these questions, then this article is for you.
What is Scalping?
Scalping is a form of Forex trading done in a very short time from opening to closing an order aiming for a small profit. Compared to other forms of trading, Scalping is an action that is repeated continuously throughout the day.
Orders are never held overnight because traders just want to make a lot of small profits in the short term. The time from opening an order to closing it is sometimes extremely short, only a few minutes. Therefore, even when the market is sideways, scalpers still make profits. Only a small movement of a wave running 3 -10 pips is enough for them to make a profitable trade.
Why do traders love Scalping?
Hearing about small profits has diminished the appeal of Scalping to you. But do not rush to judge it. Let’s continue reading to know why it is so attractive to traders.
First, traders see the advantages of short-term trading. Small fluctuations of the market bring a small but steady source of profit. Especially, it is much faster than long-term transactions.
Second, Scalping can help scalpers to sum up huge profits in a “small-to-large” style if used correctly.
Finally, with Scalping, traders have a lot of opportunities to enter orders to find profits in a day, both increasing their income and forging forex trading skills.
Many people have long believed that Scalping must be done manually. And many traders do not have time to keep their eyes on the screen 24/7. So most investors ignore this form. However, currently, MetaTrader 4 (MT4) and MetaTrader 5 (MT5) software both allow traders to fully automate the entry of orders as well as stop loss or take profit, enabling traders to not have to sit still in front of a computer screen all day long.
Advantages of trading by Scalping method
– The trading system is simple so that anyone can understand. Even if you are a newcomer to the Forex market, you can still use it effectively.
– Low level of risk – Because Scalping mainly works on short time frames, traders never leave orders overnight and usually close orders during the day. Therefore, it is possible to limit dangerous situations such as reversal orders due to objective factors.
– Take advantage of many opportunities – Scalping trading methods mainly make a small number of pips. If you seize the right opportunity within a few minutes, you can lose the order at the desired profit. That’s why you can still make money when trading this way in the sideways market.
– Avoid psychological influences – The advantage for scalpers, in this case, is that most orders are opened and closed immediately after. So they don’t need to look at the chart to know how the price is doing, thereby limiting psychological problems when the price fluctuates.
– Not greatly affected by the news – With Scalping, the hold time is short and the time to enter is usually when the market does not have much important news. So traders will not be affected when the market is volatile due to unexpected news.
Disadvantages of Scalping trading
Without mentioning the disadvantages of scalping, this article is extremely flawed. The disadvantages below will help you take a closer look if you want to become a scalper.
– Losing too many transaction fees due to the large volume of transactions made throughout the day. Commission or spread fees are often very high. Therefore, you need to understand the types of costs before using Scalping.
– High risk if subjective – Scalpers who enter orders with a large volume often make the mistake of “earning money for 3 years and losing it in 1 hour”. It is because they don’t use stop loss when thinking that the trade is so short that placing a stop loss is not necessary.
Conditions to become a scalper
As stated above, Scalping is not for all traders. So what characteristics do you need to become a scalper?
– Monitor the market regularly – Because this is a fast trading method, it is imperative that you monitor the market regularly so as not to miss the opportunity to make a profit.
– Risk-loving – Scalping usually takes place in a very short time and doesn’t use market analysis, so the risk is extremely high. If you’re not a risk-taker, scalping isn’t for you.
– Flexible, passionate about trading – Scalping is suitable for flexible investors and passionate about Forex trading. Because the transaction time is very fast, if you are not flexible, you will not catch a good opportunity to enter and close orders.
– Know how to choose a reputable trading platform – Besides, to use scalping proficiently, you need to choose a reputable and quality broker so that you do not have to incur too large transaction costs.
Some effective Scalping trading strategies
Using the Scalping trading style in combination with other indicators is the best choice. It helps traders increase the success rate and profits also increase exponentially if you apply it correctly and have a strict closing strategy.
With moving averages
Moving Average is a technical analysis indicator. This is a noise reduction tool for price fluctuations and reversals of real market trends.
Using the MA indicator with Scalping makes it easy to spot price trends by eliminating random price fluctuations. Thereby, you can make good use of market fluctuations. From there, predict the direction and come up with the most reasonable trading strategy.
Like the MA, the RSI is a commonly used relative strength indicator for candlestick chart analysis. It is an oscillator from 0 to 100 and helps to indicate the most recent level of price movement and determine the overbought and oversold zones of the currency pair. Combining these indicators as a catalyst helps the Scalping strategy to be more effective.
With MACD indicator
The MACD indicator will help investors identify price trends and reversal points. From there, investors will know when the price trend will change to close the order.
Using MACD in short-term trading will measure short-term momentum. You will find the most appropriate stop loss and take profit points.
Important notes when using Scalping
As you know, Scalping takes place in a very fast time. Therefore, to avoid risks, scalpers should remember these important notes.
First, choose a reputable broker like Olymp Trade for example because it means nothing when you earn a lot of profits and then get scammed.
Second, liquidity is also an equally important factor. You should only trade the major forex pairs with high liquidity to have a high chance of making a profit.
Third, ensure a stable internet connection. This is very obvious but many traders often do not pay attention. Scalping trading requires fast and accurate trading, so even a small connection failure will cost you time and opportunity to enter a trade.
Fourth, to trade several times a day. You need to predefine the chart time frame like the M1, M2, or M5 chart. Because scalping doesn’t allow you to spend a lot of time analyzing thoroughly before making a trade.
Finally, you should always set take profit and stop loss in every trade.
Through this article, I hope you could understand what Scalping is and whether it is right for you or not. However, no matter which style you choose, you should keep the following advice in mind, “Look no further, focus on price because it is the most accurate reflection of what is happening”.
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