Whether you’re a beginner, intermediate or professional trader, nailing your trading strategy is essential. While there are many ways traders can turn profits on the market, one popular strategy among traders seeking quick returns is scalp trading.
Let’s explore what scalp trading is and the ways beginners can utilise this short-term strategy.
Let’s explore what scalp trading is and the ways beginners can utilise this short-term strategy.
What is scalping in trading?
Scalp trading is a very short-term trading strategy that involves hunting for small profits often. While a position trader may hold their position for days or weeks, scalpers generally hold their trades for minutes or less. The goal with scalping trading is to make back the spread paid to get into the trade, plus a small profit on top — and repeat.
On their own, these scalp trading positions don’t bring much of a profit. However, scalpers usually engage in a high number of trades every day. This high volume of trading increases profits throughout the trading session.
Some scalpers seek to hold a position for fifteen seconds or less, while others will hold for a couple of minutes — regardless, scalpers should not hold positions overnight.
So then, what is the best scalp trading strategy?
On their own, these scalp trading positions don’t bring much of a profit. However, scalpers usually engage in a high number of trades every day. This high volume of trading increases profits throughout the trading session.
Some scalpers seek to hold a position for fifteen seconds or less, while others will hold for a couple of minutes — regardless, scalpers should not hold positions overnight.
So then, what is the best scalp trading strategy?
Best scalping strategy for beginners
The best scalping strategy for you depends on the market you trade, the indicators and price action patterns you choose, and your risk tolerance. To help you decide on the best course of action, let’s look at the best scalping strategies.
The Stochastic Oscillator method
The Stochastic Oscillator method uses the stochastic indicator, which is available on MT4 for forex trading. The stochastic indicator is a very short-term momentum indicator calculated by the closing price of a prior period.
The indicator has two lines — the faster, more responsive %K line and the slightly slower, less responsive %D line. It is the relationship between these two lines that the scalper focuses on, as each line calculates the moment of the underlying market over slightly different time frames.
As an oscillator, its readings will always be between 0 and 100. This indicator is frequently used as an “oversold” (below 30) and “overbought” indicator (above 70). However, that is not the way a scalper will use the oscillator.
A scalper holds onto the position until the lines cross the other way and hold flat, awaiting a new signal. The scalper will buy long when the fast line crosses above the slow line and hold that position until the fast line crosses below the slow line. A short position is initiated when the fast line crosses below the slower line and is closed when the fast line crosses back above the fast line.
The indicator has two lines — the faster, more responsive %K line and the slightly slower, less responsive %D line. It is the relationship between these two lines that the scalper focuses on, as each line calculates the moment of the underlying market over slightly different time frames.
As an oscillator, its readings will always be between 0 and 100. This indicator is frequently used as an “oversold” (below 30) and “overbought” indicator (above 70). However, that is not the way a scalper will use the oscillator.
A scalper holds onto the position until the lines cross the other way and hold flat, awaiting a new signal. The scalper will buy long when the fast line crosses above the slow line and hold that position until the fast line crosses below the slow line. A short position is initiated when the fast line crosses below the slower line and is closed when the fast line crosses back above the fast line.
Moving averages
Some scalpers rely on moving averages, which measure the momentum of trends in the market. The trader will use two or three moving averages. For example, they will rely on a short-term one, which measures the average movement over five periods. They will also put a 10-period or 20-period moving average on the chart.
When the short-term moving average line crosses over the longer-term one, it is a bullish signal. Scalpers will enter the market seeking quick profits. When the longer-term average crosses below the short-term line, you might consider opening a short position to profit from a downward market move.
You can use simple moving averages (SMAs) or exponential moving averages (EMAs), which are weighted to give more value to recent price movements. EMAs are more sensitive, so many scalpers prefer them because they allow them to enter the market slightly earlier.
When the short-term moving average line crosses over the longer-term one, it is a bullish signal. Scalpers will enter the market seeking quick profits. When the longer-term average crosses below the short-term line, you might consider opening a short position to profit from a downward market move.
You can use simple moving averages (SMAs) or exponential moving averages (EMAs), which are weighted to give more value to recent price movements. EMAs are more sensitive, so many scalpers prefer them because they allow them to enter the market slightly earlier.
Relative strength index (RSI)
The Relative Strength Index (RSI) is another indicator that measures supply and demand in the market. Like the Stochastic Oscillator, it has a 0-100 scale. Some traders think the RSI is slightly easier to read because its lines are smoother than the Stochastic Oscillator. The market is overbought when the RSI line rises above 70 and oversold when it drops below 30.
Like the stochastic strategy, you’ll want to exit the trade as soon as the indicator reaches the other extreme.
Like the stochastic strategy, you’ll want to exit the trade as soon as the indicator reaches the other extreme.
Support and resistance levels
Scalp trade strategies can also use established price levels when the market reverses, typically when it reaches a specific price level. Scalpers can add these price levels to their charts and look for additional indicator signals or candlestick patterns when the market gets close to the lines.
TMGM - Experts in scalp trading
Before beginning scalp trading, traders must do their research to find a regulated and distinguished broker who can provide the cutting-edge resources you need. At TMGM, we offer access to MetaTrader 4, which provides the charting features and rapid execution necessary to engage in scalping strategies.
We also provide access to 10+ liquidity providers and use NY4 servers to ensure the quick execution of your trades.
We also provide access to 10+ liquidity providers and use NY4 servers to ensure the quick execution of your trades.
If you want to try scalping trading, visit TMGM to open an account today.
Frequently Asked Questions
Scalping trading is a viable option for beginners because it offers a chance to quickly get into and out of the market. Traders can target profits without worrying about the many factors that can affect the market in the mid and long term.
The best scalping strategy approaches typically call for short time frames. Depending on the strategy and the market, you will usually use 1-minute to 15-minute charts — 3-minute and 5-minute charts are also popular for scalping.
There are several methods scalpers use to execute their trades rapidly. They rely on fast platforms like MetaTrader 4 and brokers like TMGM, which offers liquidity and top-notch servers for fast trade execution.
Some traders also use automated strategies that handle execution automatically once all market conditions are met for a trade.
Some traders also use automated strategies that handle execution automatically once all market conditions are met for a trade.
You can scalp any market. Some traders use CFDs, which you can trade using leverage. With leverage, you can control a large position using a small amount of capital. At TMGM, you can trade forex, indices, crypto, commodities, and shares using CFDs.