Top Low Spread Scalping Strategies For Forex Traders
Scalping strategies allow traders to leverage on the small price changes in the forex market to turn the trends in their favour. The strategies expose them to less risk and allow them to trade the current short-term trend. In our article, we will understand everything about the top low spread scalping strategy.
What is a forex spread?
A forex spread is the difference between the buying and selling price of a currency pair. The higher the difference between the two prices, the higher the spread and vice versa. A higher spread means low liquidity and high volatility, whereas a small spread means high liquidity and low validity.
What is scalping in forex?
Scalping in forex enables traders to placing multiple trading orders within a short period of time, like a few minutes and even seconds. Traders benefit from the minor price changes and accumulate small gains to become huge gains at the end of the trading day.
What are low spread scalping strategies?
Low spread scalping strategies make use of narrow spreads and provide trading opportunities to traders. These strategies help traders place orders and take minor moves in the market when the buying and selling price difference is low so that trading costs are also low. The benefit these strategies provide are –
- Achieving a greater level of profits by adding up all the small profits
- Not spending too much time to wait for trading a long-term trade
- Less pressure to analyse the overall market
- Profiting from short-term trends
Factors affecting the top low spread scalping strategy
Average True Range is a volatility indicator that can identify a high and low range of the currency pair. In low spread trading, ATR provides traders with a high volatility and high liquidity scenario that helps in identifying a low spread.
Correlation refers to the relationship between two currency pairs. It gives values between -1 and +1, where the positive value denotes high correlation, and the negative value denotes low or no correlation. During low spread betting, when two currency pairs are highly correlated and moving in the same direction, it provides traders with an opportunity to place orders in both currency pairs with lower costs.
When you are trading a currency pair with high spreads, you pay a heavy amount when your stop-loss order is hit. On the other hand, when your spread is low, your costs are low too, if the stop loss is hit as the difference between the buying and selling price is lesser. Hence, the size of the spread affects how a stop loss order impacts your trade.
The spread of a currency pair is divided by the daily average range price of a currency pair which gives us a percentage that tells us about the cost of spread. The lower the spread percentage, the better it is, as it signifies lower cost and vice versa.
Types of top low spread scalping strategies in forex
Gold CFD trading
Gold CFD trading refers to trading the yellow metal through CFDs by speculating its price in the commodities market. It is a beneficial strategy since you only have to invest a certain percentage of the total investment amount, whereas profits are made based on the entire investment amount. It allows you to trade both rising and falling markets, and since gold is one of the most valuable metals around the globe, its market liquidity is high, and volatility is low, resulting in a low spread. With this strategy, you can place multiple long orders by entering the position near a price that is close to the currency pair’s support price. Combine this strategy with a long-term and short-term exponential moving average to confirm the success of the trade. When the short-term exponential moving average crosses the long-term exponential moving average from above, it confirms that the spreads are low and long positions will be profitable. On the other hand, if you are trading a falling market and want to place a short order, you can do so by entering a position at the price level close to the currency pair’s resistance level. Once the short-term exponential moving average crosses the long-term exponential moving average from below, the falling trend is confirmed, and short entries are considered profitable.
This is the second type of low spread scalping strategy that allows traders to place multiple orders in a few seconds to minutes. This strategy is combined with indicators such as Bollinger bands and exponential moving averages to confirm the market momentum. You can place a long order in this strategy the moment the short-term exponential moving average line crosses the Bollinger band’s middle line from above. This provides traders with an uptrend momentum and confirms a profitable long entry. On the other hand, if you are trading a falling market, you can place a short order as soon as the short-term exponential moving average crosses the Bollinger band’s middle line from below. This confirms that there is a bearish trend going on right now, wherein you can profit from short orders. Stop loss orders during a bullish market trend can be placed a little below the Bollinger band’s lower band and above the Bollinger band’s upper band in case of a short order. Similarly, take profit orders in this strategy are placed on the upper band during a short trade and the lower band during a long trade. This ensures that if the market suddenly moves against your order, the profits are still protected.
Scalp with low spreads
Scalping with low spreads accounts for a lower cost of transaction and reaps higher profits. You can sign up with our forex trading platform and use different scalping strategies and combine them with technical indicators to place successful trading orders every minute. Sign up for a live trading account or try a risk-free demo account.
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