What is scalping and day trading – a complete overview of the concepts and best-selling scalping advisors + 5 tips on how to trade on a scalping strategy on Forex7 min read
What is day trading and indicators for scalping on Forex? What are the best selling scalping advisors? What are the features of trading on a scalping strategy on Forex?
1. What is scalping and what is its difference from other trading styles
All trading strategies by duration are divided into three groups: long term, medium and short term.
The latter fall into two subtypes: day trading and scalping.
Day trading (day trading) – this is a trading style, at which transactions open and close during the day.
Prices are constantly moving, if you catch the necessary vibrations, earn a decent amount in a couple of minutes. Therefore, advertising on the Internet about fast and big profits – it’s not always a hoax.
Day traders conduct technical analysis of timeframe charts «1 hour» and «4 hours». Prices do not move particularly intensely, therefore, this trading style cannot be called stressful.
Since most speculators play on the stock exchange exactly intraday, predicting the dynamics of price fluctuations is not so difficult.
Scalping – it is also intraday trading, however, scalpers catch the smallest price spikes in minute and five minute charts.
We’ll talk about the benefits of scalping below, while we note one: if you enter into transactions in large volumes – the profits will be just fantastic.
On minute timeframes, prices move sharply, irregular, jump from one value to another. Look at your open deal, plus it, then minus – heart beating oh oh how.
Shorter time interval, the more on the market noise chart. Performing a technical analysis during scalping is problematic. Candlestick patterns, horizontal and trend levels do not work – unless indicators.
2. What are scalping methods?
Any professional trader will split scalping into subtypes in his own way. We are in the classification we distinguish three types, which are popular among speculators around the world.
Which one to choose – decide for yourself, pros and cons are in each.
Method 1. Glass (classical) scalping
In the stock glass are reflected current market quotes. The arrow is indicated next to, denoting either growth, or decrease relative to the previous price. During trading, the glass is constantly «twitches».
There are periods, when quotes either freeze, either stably show growth. There is a certain «lull». Market «settles down».
When trading securities, especially futures, scalper monitors the status of the stock glass. First of all, attention is paid to the volume of traded positions. If a major deal comes to light – the speculator quickly analyzes and enters the market.
Trade, watching a glass, problematic, because changes happen very quickly, nerves are literally on the limit. However, scalping is scalping.
Method 2. Pulse scalping
Markets mutually influence each other. Especially if they «related»: strong fluctuations in the gold exchange rate will somehow affect silver, rise in price of wheat will not leave calm the schedule of oats or corn.
Pulse scalping – this is the opening of transactions for any financial instrument based on an analysis of its price fluctuations «relatives».
The technique is interesting and effective, but requires an understanding of market processes. This is not a banal following indicators.
Method 3. Hybrid scalping
Hybrid scalping combines features and glass, and pulse. I advise you to first specialize in one direction, to delve into all the subtleties and already after proceeding to «hybridization».
Study one direction carefully first, then start using othersIf we talk about the benefits, then the hybrid method is better than pure glass or pulse. Trader analyzes the market more widely, it’s easier for him to find out the reasons for strong movements, which at first glance seem unfounded.
3. How to trade on scalping strategies on Forex — 5 practical tips
What recommendations should be followed for successful scalping trading? I must say right away, do not go into scalping until, until you reach a stable profit in medium-term trading.
This advice is not just me. Any professional trader will say the same. Must see the market, understand the processes taking place on it.
Tip 1. Prepare a trading plan and adhere strictly to it
When scalping, a trading plan is especially necessary, discipline – especially.
When the price goes your way – you will want to close the deal immediately: «Suddenly turn around now, I will be left without profit?!». If the market moves contrary to the forecast – also pulls to get rid of the position: «And then I’ll lose even more!».
But you will not close on time – guaranteed to drain all the money. Choose a strategy and follow it with confidence. By the way, medium-term trading develops discipline.
it happens, you look at a profitable trade for several days and can’t wait to click on «cross» — make abstract money your own, see them on balance. But we must hold on and not give free rein to emotions.
Tip 2. Develop a trading strategy on a demo account to perfection
Any strategy needs to be tested. Demo account is great for checking. Took a fictional million bucks – and forth.
Eduard Sungatullin, a teacher at the Graduate School of Trading, says, what any strategy needs to be checked in crisis, stagnant years.
When the market has stable upward or downward trends – any trading plans will be profitable. But when stagnation – only the highest quality strategies will survive.
Tip 3. Use trailing stop to take profits
Trading strategy signals you, that it’s time to close the profit deal. But this is the situation on the market, what can you earn more. This usually happens after the news. In order not to miss a profit and not violate a trading plan, set Trailing Stop.
This is a protective order, same Stop Loss, but «floating», walking next to the price.
Thus, if the price is growing steadily, Trailing Stop will protect more and more profit.
Tip 4. Combine technical and fundamental analytical techniques
Even if technical analysis points to future stable price movements, the sudden release of important news overnight will ruin everything. Especially, if you are not working with the foreign exchange market, and with stock exchanges.
It is advisable to start a trading day with an analysis of the economic calendar. Mark the time for the release of market news and closely monitor the situation. If the news is important, upward or downward trends may go flat in a day or two or more.
Tip 5. Know how to exit trading on time
Good opportunities to hold trading positions, open on minute or five minute timeframes, rarely occur. No wonder scalping is included in day trading – positions close during the day.
In a particularly favorable combination of circumstances, traders leave open positions for two days, but this happens infrequently.
On a note
I advise close deals on Friday and do not leave them on the weekend. The market is closed on weekends, however, prices do not sleep and continue to move.
If on Saturday and Sunday the course moves against you, broker will not be able to close the deal on the Stop Loss – you will lose more money, than planned.
Sometimes amateurs do not close losing trades: «The market will turn around and I will earn!». Most often, a similar installation leads to a drain of the deposit. Markets are really turning around, but sometimes one cycle takes decades.
When you open a deal, set Stop Loss and do not move it. Where to install – trading strategy will tell you. If the price moved against you and the position closed at a loss – accept everything as it is and continue trading.
4. What are the risks of scalping? — 3 main risks
Scalpers – the richest «estate» among traders. However, becoming a professional in this trading style is not easy. We list the main risks, inevitable when scalping.
Trading is generally risky, but trading on small timeframes – especially.
Risk 1. High trading costs
We open a deal and close it, as soon as a small profit. However, nothing prevents the market from going against us. In order not to completely drain the deposit , scalpers set Stop Loss.
The profit for each trade is tiny, because speculators «take scalps», But Stop Losses can’t be called tiny, for otherwise it would not have made sense to install them at all.
Poor profits and big risks – what do they lead to? Traded all day, gathered with the world on a string, and the last deal closed on Stop – money no matter how.
Scalper yield chart is a broken line, and the chart of day traders or mid-term/long-term – the line is relatively straight.
For such a trade, stock up on steel nerves.If you are ready to overcome the ups and downs – flag in your hands. But think about your mental state – can you stand?
Risk 2. High psychological stress
I already talked about this above. You will be nervous when manual trading. If you connect a trading robot – things will go better, but there will be several other problems.
Basically, if you deposit, which you are not afraid to lose, problems with psychology will be much less, but they won’t completely leave you.
Risk 3. Low price predictability on small timeframes
When you trade in the medium term, a holistic picture of market movements is built in my head. And if you do it for a long time – you start to feel the market somehow, as if to see it from the inside.
Because the head contains memories of some sharp price spikes, about highly probable and spontaneous turns. Formed trading skill.
Trading on small timeframes, you lose all this. For predicting price spikes in a minute – extremely problematic, and remember them all – especially.