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A Step-by-Step Guide to Scalping the Forex Market

A Step-by-Step Guide to Scalping the Forex Market

There are many approaches to trading in the Forex market. In fact, as a novice trader, you will never have a dearth of options. It has even been purported that there are as many of them as there are traders in the world. Wow! Hence, the only challenge you can have is perfectly encapsulated in the question: which one should I pick?

From position and swing trading today trading and scalping, our subscribers have a number of functional alternatives from which to pick. And it is our hope that each of them will be able to find and adopt an approach that will work best for them. Because it is when they do that they will be able to recognize high-quality Trading Signals and then win at the game.

Here, we will be talking about scalping.

Scalping: What is It?

Scalping. What is it? Well, scalping is a trading strategy that seeks to “scalp” out tiny profits on multiple trades in a short time over a day. Hence, it is highly fast-paced. And it is because of that that a scalper has to analyse charts as quickly as possible and extract profits from the market as many times as possible. The good news, however, is that scalping is as fast as it is exciting.

Indeed, it can be extremely profitable, too. But you can only realize its full potentials by doing it right. We show you how to do exactly that in this 4-step guide.

Step 1: Identify the Trend

Like with every other strategy, the first challenge is identifying the right time to initiate a trade. With this scalping Forex trading strategy, do not worry. What you should just do is to identify the prevailing trend and trade in its direction. Having identified the trend, you should then wait for a pullback to be able to capture the best opportunities. A pullback is a relatively short drop in price.

Ensure that you are using a higher time-frame chart though, like the hourly chart and also the 8-period and 21-period Exponential Moving Averages (EMA). The hourly chart and this EMA indicator will determine the direction of your trading by helping you realize the ideal times to buy or sell.

Step 2: Analyze The Charts

As you have known, the technical indicator we will be using on the hourly chart is the EMA, the 8-period and 21-period EMA. With its indications on the chart, it can help us easily recognize some of the best tradable setups ourselves. For example, when both EMAs are pointing down and the price is below them, you should watch out for if the 8-period EMA is below the 21-period EMA.


If it is, the formed pattern is often an indication of sell trades. Other times, however, both EMAs and the price can be moving up with the 8-period EMA above the 21-period EMA. Those times are often very good times to buy. You see, you can easily generate top trading signals using this scalping Forex trading strategy.

Step 3: Beware of False Signals

Beware of false signals. It is very important. For example, sometimes, the previous conditions can all be met. However, you should still be cautious. Why? Because if the price is above or below the moving averages, the set-up is immediately invalidated. Even though to you, such a setup can look real, it is false.

In fact, as far as our scalping Forex trading strategy is concerned, there is no set up at all in such cases. Hence, you should always ensure that the price is on the right side in the direction of the trend before you act.

Step 4: Enter Your Buy/Sell Trade Using the 5M Chart

Next, move on to the 5-minute chart and add one more EMA, the 13-period EMA. No matter the nature of the signal, whether buy or sell, that you have confirmed on the hourly chart, now is the time to place your trade. If it has been a buy, check the 5-minute chart for the 8-period EMA touching any candlestick bar. That bar will become your trigger bar.

Then, count five bars behind it and place your buy trade on the highest of them (Bar 3 in this example). That is, put your buy stop order three pips above this particular candle bar (the highest of the five) and three pips below your trigger bar as your stop. Similarly, for a sell trade, you should also check for a pullback to the 8-period EMA.

The bar touching the 8-period EMA also then becomes your trigger bar. Next, also count back five candles to check for the lowest low. Then, place your sell trade three pips below the lowest bar and put your stop loss three pips above the trigger bar. That is it.

Conclusion

Scalping is an awesome strategy, especially for fast-tempo Forex traders. You can identify some great trading opportunities with it. But you have to learn how to do it well first. However, if you intend to approach the market as a scalper, we have already incorporated it into our unique blend of trading strategies at Technical Trading Signals to make it easier for you. Hence, you should subscribe to our signals here.