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Scalping: When Seconds Count


Today we will be talking about scalping as a trading approach. Scalping is characterized by very short-term trades with minor price changes and a profit of several ticks. Typically, a trader opens a trade and holds the position from a few seconds to several minutes. Trading is carried out on minute timeframes. The scalping strategy is usually applied in volatile markets where the spread between the bid and ask is very small. Sluggish and slow instruments are not suitable for a scalper. As a rule, scalpers prefer to trade gold and oil, stock indices, as well as major currency pairs.

Like any trading strategy, scalping has strict rules for opening and closing a trade. But in this case, you have to observe them even more meticulously than in day trading. Any mistake will cancel out all the previous small earnings.

Let’s hear some pros and cons of scalping.

Scalping advantages:

Scalping drawbacks:

Scalping strategies

Moving from theory to practice. Let’s take a look at the scalping strategy based on news trading. You don’t need to use any technical indicators with this strategy. All you need is the Economic calendar and a small cushion of time before the news release. A trader enters the market through pending orders. A couple of minutes before the publication, he sets pending orders above and below the price. Stop-loss is usually set 5-10 pips away from the price, Take-Profit should be two times further. After the news is published, the price should hit one of the trades. The trade is then closed at profit, the second order is canceled. If both trades are activated, and one of them closes in the red, profit received in the second trade offsets the losses.

We recommend trading only on significant, high-impact news such as inflation and labor market reports. The main disadvantage of this method is that sometimes both trades are closed at a loss.

Scalping is a high-risk strategy and it’s not suitable for everyone. First of all, a trader should have a good risk tolerance and has to be able to work under pressure. Scalping can be very stressful. You need to trade with the minimum lot size, and your deposit should be at least $500. The method is definitely not for beginners, it requires months of practice on a demo-account and won’t be suitable for those making their first steps in the financial markets. If you like our articles, follow us on Facebook and Instagram. Stay tuned for more interesting posts on our blog. We post new material several times a week.

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