Top Forex scalping strategies that work

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Among the different trading styles, scalping is one of the most popular and effective methods for traders looking to capture small price movements in a short amount of time. Likewise, Forex scalping is a high-intensity trading style that involves entering and exiting trades within a matter of seconds or minutes. In this article, the experts at TU will discuss the top 5 Forex scalping strategies that have been proven to work effectively in the market. This will cover different approaches such as the 1-minute scalping strategy, moving average scalping strategy, and other powerful systems that active traders use to achieve great performance. By the end of this article, you can expect to have a better understanding of Forex scalping and the strategies that you can implement in your own trading.

According to Traders Union’s experts, the top 5 Forex scalping strategies to learn are:

1 Minute scalping strategy;

Moving average ribbon entry strategy;

Bollinger Band scalping;

RSI scalping;

Parabolic SAR indicator scalping.

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What is Forex scalping?

Forex scalping is a trading strategy that involves making multiple trades in a short period of time to profit from small price movements in the market. The goal of a scalper is to take advantage of small price changes, typically in the range of a few pips, and to exit the trades quickly with a small profit.

Some key features of Forex scalping include:

Short timeframes: Scalpers typically use short timeframes such as one minute or five minutes to execute trades.

Quick trades: Scalpers aim to enter and exit trades quickly, often within a matter of seconds or minutes.

High-frequency trading: Scalpers make many trades in a short period of time, which can result in high trading volumes.

Tight spreads: Scalpers rely on tight bid-ask spreads to make their profits, which means they need to choose a broker that offers low spreads.

Risk management: Successful scalping requires a disciplined approach to risk management, including setting stop-loss orders and managing position sizes.

Through the above mentioned points, we can conclude that Forex scalping is a popular trading strategy for traders who have a high-risk tolerance and enjoy a fast-paced trading environment. Do note that while it can be profitable, it also requires a lot of skill and discipline to execute effectively.

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Best Forex scalping strategies

In this section, TU experts will discuss some of the best Forex scalping strategies that you can use to improve your trading performance.

1 Minute scalping strategy

The 1-minute scalping strategy is a popular choice for Forex traders who are looking to make quick profits in a short amount of time. While it is relatively simple to follow, it still requires a certain level of skill and discipline to execute effectively.

One of the key features of this strategy is the low target per trade, which means that traders need to focus on quantity rather than quality. Here, it is not unusual for traders to place more than 100 trades a day to achieve their profit targets.

To use this strategy, traders should use the Stochastic Oscillator and two Exponential Moving Averages (EMA) with a 13-period and 26-period setting. These indicators can help traders identify entry and exit points for their trades. It is also important to note that the period settings can change according to a trader’s preference.

This approach can be implemented with any currency pair, but it is advisable to use it with major currency pairs with narrow spreads. Besides, traders should give priority to executing trades during high-volatility trading sessions, which usually take place during the New York closing and London opening times.

Overall, the 1-minute scalping strategy can be an effective way for Forex traders to make quick profits, given that it is backed by a lot of practice and discipline. Traders should always use risk management tools like stop-loss orders to protect their capital and avoid taking on excessive risk.

1 Minute scalping strategy

1 Minute scalping strategy

How Does 1 Minute Scalping Strategy Work?

Moving average ribbon entry strategy

The Moving Average Ribbon Entry Strategy is a popular scalping technique among Forex traders due to its straightforwardness and efficiency. This strategy utilizes a combination of simple moving averages (SMAs) on a two-minute chart to identify robust trends that can be either bought or sold short on counter swings.

To execute this strategy, traders must place a combination of 5-8-13 SMAs on the chart. When the ribbons align and indicate an upward or downward trend, it implies a strong trend that is likely to persist. Consequently, traders can enter either a buy or sell short position, depending on the trend's direction.

If the market is experiencing range swings, the ribbons on the chart will level out, and the price may cross the ribbon frequently. This implies that the momentum is declining, which is favorable for a range or reversal. Consequently, traders must pay attention to the realignment of the ribbons, with them either rising or falling and spreading out, indicating more room between each line. This delicate pattern serves as a signal to buy or sell short.

This is an uncomplicated scalping strategy for Forex traders to master and can identify robust trends and enable quick profits on counter swings. Nevertheless, as with any trading strategy, traders should use appropriate risk management tools to safeguard their capital and avoid assuming excessive risk.

Moving Average Ribbon Entry Strategy

Moving Average Ribbon Entry Strategy

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Bollinger Band scalping

For Forex scalpers, Bollinger Bands can be an effective tool for trading in a volatile market. It is a technical analysis indicator that shows the standard deviation of the price relative to its moving average.

This strategy can be used with currency pairs that have low spreads in the Forex market. These pairs are usually the least volatile, making them ideal for scalpers who are looking to execute multiple trades within a short period of time.

To use the Bollinger Band scalping strategy, scalpers should first plot Bollinger Bands on their chart. The bands consist of three lines: the upper band, the lower band, and the middle band. The middle band is typically a 20-period simple moving average, while the upper and lower bands are usually set two standard deviations away from the middle band.

When the price touches the upper band, it may be overbought, indicating that the price is due for a correction. Conversely, when the price touches the lower band, it may be oversold, indicating that the price is due for a rebound. Scalpers can use this information to enter and exit trades quickly and make a profit.

Bollinger Band scalping strategy

Bollinger Band scalping strategy

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Parabolic SAR indicator scalping

The Parabolic SAR (Stop and Reverse) is an indicator commonly used in Forex trading to determine trend direction and potential reversals. It can also be a useful tool for scalping strategies. This indicator forms a series of dots above or below the price, which are used to signal potential changes in trend direction.

When using the Parabolic SAR for scalping, traders will typically look for the dots to be positioned below the price, signaling a bullish trend, or above price, signaling a bearish trend. Once a trend direction has been established, traders can then use the dots as stop loss levels for their trades, aiming to capture a few pips of profit before closing the position.

Parabolic SAR indicator scalping

Parabolic SAR indicator scalping

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RSI scalping

The RSI scalping strategy is a popular choice among Forex traders due to its effectiveness in identifying potential market reversals. The RSI is an oscillator that measures the speed and change of price movements, indicating when a currency pair is oversold or overbought. By setting the RSI to a shorter time frame, scalpers can quickly identify these signals and enter or exit trades accordingly. However, it's important to note that this strategy requires a thorough understanding of the RSI and market conditions, as false signals can occur. Traders should also consider combining the RSI with other indicators for confirmation before entering a trade.

RSI scalping strategy

RSI scalping strategy

How do you use the RSI indicator effectively?

How to choose your scalping strategy?

Experts have outlined some crucial points to consider when choosing your scalping strategy:

Research and evaluate your abilities: Before choosing a scalping strategy, it is essential to determine whether it is suitable for your personality, risk tolerance, and trading experience. Research different strategies and assess their compatibility with your skills and preferences.

Test on demo: It is recommended to test the chosen strategy on a demo account before using it in a live trading environment. This way, you can evaluate its effectiveness and see how it performs under different market conditions.

Focus on one currency pair: It is best to concentrate on one currency pair when scalping. This allows traders to better monitor technical charts and helps maintain focus, leading to better decision-making.

Choose high liquidity and volume pairs: Scalping requires quick entry and exit into the market, and trading in high liquidity and volume pairs allows traders to do so more easily.

Consider your temperament: Scalping requires a specific temperament, such as concentration, analytical skills, and patience. If you are someone who tends to make hasty decisions, then scalping may not be suitable for you. Take the time to assess your personality traits and whether they are compatible with this type of trading.

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What is the best scalping strategy for beginners?

For beginners, experts recommend starting with a simple and easy-to-understand scalping strategy. Here are a few examples:

Price Action scalping: This strategy relies on analyzing the price movements and patterns of the currency pair being traded. Traders using this strategy focus on identifying key levels of support and resistance, as well as chart patterns such as triangles and flags, to enter and exit trades quickly.

Scalping with Stochastic and MACD: This strategy combines the use of two technical indicators, the stochastic oscillator and the moving average convergence divergence (MACD). Traders using this strategy look for buy or sell signals based on the crossovers and divergences of these two indicators, and aim to exit positions quickly for a small profit.

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How to scalp in Forex?

Experts have prepared the following 5-step guide intended to help you learn the art of scalping in Forex market:

Choose your scalping strategy: As discussed earlier, there are various scalping strategies available such as Moving Average Ribbon Entry Strategy, Bollinger Band scalping, Parabolic SAR indicator scalping, and RSI scalping. Choose the one that aligns with your trading style, risk tolerance, and time commitment.

Choose a currency pair with good liquidity and volatility: Liquidity and volatility are essential for scalping as it requires rapid trading. Choose a currency pair that has high liquidity and volatility. For example, major currency pairs such as EUR/USD, GBP/USD, USD/JPY, etc. are more liquid and volatile.

Test your trading ideas on demo: Before jumping into live trading, it's important to test your trading ideas on demo accounts. This will help you understand the effectiveness of your strategy and identify any flaws in it. It's better to refine your strategy on a demo account rather than risking real money.

Understand market conditions for scalping: Scalping requires a good understanding of market conditions. Traders should be able to identify the best time to enter and exit the market. For example, volatile market conditions such as economic news releases or major market events can make scalping a highly risky strategy.

Finding the broker and currency pairs with tight spread ranges: The spread is the difference between the bid and ask price of a currency pair. It's important to find a broker that offers tight spread ranges as it can significantly impact your profits. In addition, choose a currency pair that has a tight spread range to minimize trading costs.

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What are the best currency pairs for Forex scalpers?

According to experts, major currency pairs are the best for Forex scalpers, especially for beginners. The reason for this is that major currency pairs have the highest liquidity, which allows for fast and efficient execution of trades. The higher liquidity also leads to tighter spreads, which is essential for scalping as the trader aims to make small profits on multiple trades.

Examples of major currency pairs that are suitable for scalping include EUR/USD, USD/JPY, GBP/USD, and USD/CHF. These pairs have consistent volatility throughout the trading day, allowing for ample opportunities to enter and exit trades quickly.

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What chart settings should I use?

Analysts suggest that most scalpers tend to use time frames between 1 and 15 minutes, with 1-minute and 5-minute time frames being the most common. While there is no "best" time frame for scalping, the 15-minute time frame is not typically preferred by most traders.

Ultimately, the chart settings should be chosen based on individual preferences and trading style, but it is important to keep in mind the potential profitability and risk associated with each time frame.

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What is the best indicator for scalping Forex?

There are many indicators that can be used for scalping in Forex, and the best one will depend on the trader's strategy and preferences. That being said, experts suggest the following options:

Moving Averages: This is a simple and popular indicator used by many scalpers. Moving averages can help traders identify trends and potential entry and exit points.

Stochastic Oscillator: This indicator measures the momentum of price movements and can be used to identify potential buy and sell signals. It's particularly useful for range-bound markets.

MACD (Moving Average Convergence Divergence): This indicator is a combination of moving averages and can be used to identify trend reversals and entry and exit points.

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How to manage your risks scalping in Forex?

As with any trading strategy, risk management is a crucial element for successful scalping in the Forex market. Here are some expert tips that can help manage your risks while scalping:

Set a stop loss: A stop loss order is an order to automatically close out a trade at a certain price level in order to limit losses. As a scalper, you should always use a stop loss to limit your risk.

Determine your risk-reward ratio: Analysts suggest that scalpers should aim for a risk-reward ratio of at least 1:2, which means that for every dollar risked, the potential profit should be at least two dollars.

Use proper position sizing: It's important to properly size your positions according to your account balance and risk tolerance. Generally, it's recommended to risk no more than 1-2% of your account balance on each trade.

Avoid trading during news releases: Economic news releases can cause significant volatility in the market, making it difficult to manage risks. So, it's ideal to avoid scalping during major news releases.

Keep an eye on your leverage: Scalping typically involves using high leverage, which can increase both potential profits and losses. Be sure to use leverage responsibly and avoid overleveraging your account.

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Is Forex scalping profitable?

Scalpers aim to make small profits on numerous trades, and the potential profit can add up over time. However, it is important to note that Forex scalping is also risky and can lead to significant losses if not executed properly.

The potential profit in Forex scalping depends on the trader's strategy and risk management. As mentioned earlier, scalpers aim to make small profits on multiple trades, usually ranging from a few pips to 10 or 15 pips per trade. Although the profits may seem small, they can add up quickly if the trader executes multiple successful trades.

Overall, Forex scalping can be profitable, but it requires a lot of practice, discipline, and a sound risk management plan to minimize potential losses. Traders should always remember that there are risks involved in any form of trading and should never risk more than they can afford to lose.

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FAQ

What is the best strategy for Forex scalping?

The best strategy for Forex scalping varies depending on your personal preferences and trading style. That being said, commonly used strategies include Bollinger Bands, Parabolic SAR, and RSI.

Is scalping in Forex profitable?

Yes, Forex scalping can be profitable, given that it is backed by a lot of practice, discipline, and risk management skills.

Can I become rich by scalping?

While it is possible to make significant profits through Forex scalping, it is not a guaranteed way to get rich quickly. It requires dedication, discipline, and risk management skills to achieve consistent profits over time.

What time frames should I use?

The time frame used for Forex scalping typically falls between 1 and 15 minutes, with 1-minute and 5-minute time frames being the most common. The acceptable profit or loss per trade will depend on the time frame being used.

Team that worked on the article

Chinmay Soni
Contributor

Chinmay is a certified Investment Analyst and Portfolio Manager by the National Stock Exchange (NSE) Academy. He is currently associated with a $75 million VC fund and assists them in identifying and researching investable sectors and start-ups. He has completed his Bachelors of Business Administration from the Institute of Management, Nirma University and is currently pursuing MBA majoring in Finance from the same. He has 4 years of hands-on investment experience in a variety of asset classes and his professional qualifications include being a CFA Level 2 candidate and NSE Certified Market Professional Level 2.

He finds writing as a way to express his thoughts and share his knowledge with people eager to learn. He himself happens to be an avid reader of personal finance books and on top of his recommendation list are the international bestsellers ‘The Psychology of Money’ and ‘Think and Grow Rich’

He has this one strong belief as his motto: Life is what you make of it.

Dr. BJ Johnson
Dr. BJ Johnson
Developmental English Editor

Dr. BJ Johnson is a PhD in English Language and an editor with over 15 years of experience. He earned his degree in English Language in the U.S and the UK. In 2020, Dr. Johnson joined the Traders Union team. Since then, he has created over 100 exclusive articles and edited over 300 articles of other authors.

The topics he covers include trading signals, cryptocurrencies, Forex brokers, stock brokers, expert advisors, binary options. He has also worked on the ratings of brokers and many other materials.

Dr. BJ Johnson’s motto: It always seems impossible until it’s done. You can do it.

Mirjan Hipolito
Cryptocurrency and stock expert

Mirjan Hipolito is a journalist and news editor at Traders Union. She is an expert crypto writer with five years of experience in the financial markets. Her specialties are daily market news, price predictions, and Initial Coin Offerings (ICO). Mirjan is a cryptocurrency and stock trader. This deep understanding of the finance sector allows her to create informative and engaging content that helps readers easily navigate the complexities of the crypto world.