There are dozens of scalping strategies that are used by traders of all experience, some will require the use of a variety of technical indicators, multi-time frame analysis, important economic announcements and the list goes on. We have highlighted a couple of simple scalping strategies below that can be implemented by beginner traders.
Support And Resistance Scalping
Trading the Forex markets is often about interpreting market sentiment and determining whether traders believe a currency to be over or under valued. This is essentially technical analysis in a nutshell, and understanding support and resistance are nothing more than psychological price points, can prove invaluable in forecasting price action.
Support and resistance refer to price levels identified on a technical chart that act as barriers, preventing prices to move beyond them and instead forcing them to rebound. Understanding how support and resistance levels work and being able to identify them, is a useful tool for identifying entry and exit points for a trade.
On the above EUR/GBP 1min technical chart we have drawn both support and resistance. These are psychological price points where traders begin to exit their positions as they become weary that prices will not move beyond them. As this market sentiment occurs, prices can rebound off support and head towards resistance and visa versa, this price movement is known as range trading.
Scalping With The Trend
Trend trading is a strategy that is incorporated into many successful trading plans, particularly those that are written to be more risk adverse. It is such a popular technical tool for traders of all experience, as understanding price movement and momentum will go a long way to reducing potential risk and creating higher probability trading.
Looking at the EUR/GBP 1min technical chart we can see that a trend line has been drawn that identifies price movement being bullish. Trend scalping focuses on taking positions only in the direction of the trend, with the trend line acting as support. As prices reach the trend line, Forex scalpers will take a long position as prices re-bound off of it.
Protect Your Trades
Understanding the importance of protecting a trade from unexpected losses is important for every trade placed, but is imperative when scalping. Remember that the premise of scalping is to hold trades for short periods of time and accumulate several small gains throughout a trading essential. Experienced traders will understand that it is impossible to be successful 100% of the time and that losses will occur and should be looked at as an expense of trading.
That said, a single unprotected trade has the potential to wipe out the accumulated value of several small gains, this is why positions should always be protected.
