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The Basics of Forex Scalping Strategy

Scalping refers to trading currency pairs in the Forex market based on real-time analysis. With Forex scalping, you hold a position for a very short period and close once you see a profit opportunity. Since scalping involves entering and exiting the market quickly to make small trades with considerably less capital, it is perfect for Forex trading beginners. Although, Forex scalping does require a competitive nature, high discipline, and decisiveness from Forex traders. Let's take a look at what Forex scalping strategy includes:

What is Forex Scalping Strategy?

Forex Scalping Strategy involves placing multiple trades in a single day and benefit from buying and selling currency pairs in a short duration. Its primary purpose is to profit from small price movements to make significant profits. Forex scalpers hold a position for only a few minutes or even seconds to take advantage of price fluctuations. With Forex Scalping Strategy, you aim for 5-10 pips (percentage in points) from every single position you hold. Pip is the smallest exchange price movement that a currency pair can take at a time. You can accumulate high profits over time by making trades with a profit of just a few pips using high leverage.. In most cases, you can get the best results by repeating your most profitable trades, over and over again during the day. It’s also important to remember that scalping isn’t for everybody. It is a rather risky process that requires a lot of concentration. You have to monitor the trading sessions from time to time and even a slight break from the screen can affect your positions drastically.

Top 5 Forex Scalping Strategies

The top 5 Forex Scalping Strategies originate from the top Forex indicators.

1. Relative Strength Index Scalping Strategy (RSI)

The RSI helps you find the ideal entry and exit points and predict future market movement to place trades at the right positions.

  • Whenever the RSI falls below 30, it indicates an upward market trend and sends traders a signal to enter the market and buy more of the currency pair to maximise profits
  • When the RSI moves beyond 70, it indicates a downward trend and sends a signal to traders to exit the market and sell more of the currency pair to minimise losses
Forex Scalping Strategy graphic
2. Moving Averages (MA) Scalping Strategy

Using two short-term moving averages (MA) and one long-term moving average can help scalpers profit in the Forex market. For example, suppose you are trading USD/EUR with one 20-period MA, one 50-period MA and one 200-period MA; you will look for the short term MAs to cross the long term MA from either above or below.

  • If the 20-period MA crosses the 50-period MA from above, it suggests traders place market orders in the market’s direction. This means, if there is an uptrend, it signals traders to place more buy orders, and if there is a downtrend, it signals traders to place more sell orders
  • Similarly, if the 200-period MA starts falling, the traders receive a signal to short their trade as soon as the 200-period MA crosses the 20-period MA and 50-period MA from below
Forex Scalping Strategy graphic
3. Parabolic Stop and Reversal (SAR) Scalping Strategy

When you scalp with the Parabolic Stop and Reversal (SAR) strategy, you are given the current market trend and ideal entry and exit points for the same trend. This strategy involves placing several dots below and above the currency pair price, indicating bullish and bearish market phases.

  • Dots below the currency pair price indicates a bullish market phase that shows a continued uptrend, signalling trader to place buy orders for maximum potential profits
  • Dots above the currency pair price indicates a bearish market phase that shows a continued downtrend, signalling traders to place sell orders for minimum potential losses
  • Whenever the position of the dots changes, it indicates a trend reversal and helps traders identify entry and exit points
Forex Scalping Strategy graphic
4. Stochastic Oscillator Scalping Strategy

Scalpers use the Stochastic Oscillator to compare currency pair prices with its range prices and take better trading positions throughout the day. The Stochastic Oscillator captures the trending market direction and also provides potential market turning/reversal points to let the trader know when to enter and when to exit the market.

  • If the currency pair price trades near to either of the extreme points of the price range, it signals a trend reversal
  • Currency pairs trending near the lowest price in the range signals an upward market trend reversal, suggesting traders to buy more of the currency pair to maximise returns
  • Currency pairs trending near to the highest price in the range signals a downward market trend reversal, suggesting traders to sell more of the currency pair to minimise risk
Forex Scalping Strategy graphic
5. Bollinger Bands Scalping Strategy

Bollinger bands enable scalpers to trade in volatile markets since all the positions are so rapid. The Bollinger bands scalping strategy helps traders identify when the market is going to reverse, providing them with the ideal exit and entry price levels.

  • As soon as the currency pair price touches the upper Bollinger bands, it sends traders a signal to close the position and exit the market
  • As soon as the currency pair price touches the lower Bollinger band, it sends traders a signal to open a position and enter the market
Forex Scalping Strategy graphic

Take multiple positions in a single trading day with these Forex Scalping Strategies

The Forex Scalping Strategies help you place several trade orders in a single day and potentially gain profits. Even the slightest of the price movements can provide trade opportunities. Blueberry Market provides you with real-time charts and makes Forex trading completely effortless. Start by opening up a live trading account or try our risk-free demo account first.

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