Scalping is a popular trading method that is well-known among traders of all levels worldwide. So it is never too late to go further into this interesting technique and learn valuable lessons for our trading careers.. Follow this article to answer the most frequently asked questions about this topic.
Table of Contents
1. Why should I trade scalping?
Scalping trading is a popular short-term method in the forex market. When using it, traders will continuously open and close trades during the day because holding orders only takes place from a few seconds to a few minutes.
To learn more about the definition and some pros and cons of scalping trading, you should click here: Maximize Your Profits With Scalping Strategies
Once you understand this concept, many traders will surely ask the question: “Is scalping trading a good style?”
In fact, no one can say for sure which trade style is good and which is bad. Because each style has its own characteristics, a trader’s ability to tell if it’s appropriate for him depends a lot on how he trades.
In this article, we will only cover some of the common reasons that many people “fall into” this style of trading:
- First, traders are easily “convinced” by the outstanding advantages of scalping that make them profitable in a short time. Thanks to the small fluctuations in each price move in the market, traders were able to seize that opportunity and add up quick profits.
- Second, in comparison to scalping trading, the daily entry opportunities for several other trading strategies are very limited. You don’t have to be certain about the trading results, but I suppose you’ll be more excited if there are many good trading possibilities during the day.
- Lastly, traders will get better at trading, not just in terms of making money, when they have a lot of chances to work with the market. They avoid making small mistakes that don’t need to be made, which is especially helpful for big deals.
2. What is the difference between scalping and day trading?
In addition to scalping, there is another short-term trading strategy known as day trading. These two strategies may appear to be similar at first look, but they have significant differences.
Some of the key differences are shown in the table below:
|
Comparison
|
Scalping Trading
|
Day Trading
|
|---|---|---|
|
Timeframe
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Trades are held for a few seconds to minutes
|
Trades are held for hours
|
|
Number of Trades
|
Multiple trades are taken per day
|
Fewer trades are taken per day
|
|
Profit Target
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Small profit target per trade
|
Larger profit target per trade
|
|
Risk Management
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Tight stop-loss is used
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Stop-loss is used but not as tight as scalping
|
|
Emotional Control
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Requires strict discipline and quick decision-making skills
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Requires patience and ability to hold positions for longer periods
|
|
Market Analysis
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Focused on short-term price movements
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Analyzes longer-term trends and market movements
|
|
Strategy
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Based on technical analysis and price action
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May include fundamental analysis and news events
|
|
Capital Requirement
|
Can require a larger capital due to higher transaction costs
|
May require less capital due to lower transaction costs
|
In addition, you can read more about the difference between scalping and swing trading here.
3. Top indicators for the best scalping trading strategy
The scalping method, like most other trading styles, works best when combined with other indicators. Here are the top five indicators for developing an efficient scalping trading strategy.
3.1 Moving Average
Moving Averages (MA) is a widely used technical indicator that measures the average price of an asset over a certain period of time. For scalping in forex, the 5-period and 10-period moving averages are commonly used to indicate short-term price movements. MAs are useful in providing a visual representation of the trend, making it easier for scalpers to make quick decisions based on the direction of the market.
3.2 RSI
The Relative Strength Index (RSI) is another popular technical indicator used by scalpers to measure the strength of price action. It’s a useful indicator for forex scalping because it can help identify overbought and oversold conditions.
3.3 Parabolic SAR
The Parabolic SAR is a technical indicator that was developed to identify trends in the market. It is commonly used by scalpers due to its ability to quickly signal a change in direction. It’s particularly useful in forex scalping because it can quickly catch sudden trend reversals, allowing traders to enter and exit trades quickly.
3.4 Scientific Scalper indicator for TradingView
The Scientific Scalper indicator is a great choice for forex traders looking to implement a successful scalping strategy.
It does most of the heavy lifting for you and identify high-probability trade setups for scalping on the 5-minute, 15-minute, and 1-hour time frames. The indicator uses an approach called “double confirmation”:
First confirmation: The indicator analyzes the underlying trend to make sure you always trade with the trend.
Second confirmation: The indicator’s algorithm detects when the market is overbought or oversold. So you can be sure the trade setup you get is high-probability.
3.5 Divergence Solution indicator for TradingView
This indicator is not also developed specifically for scalpers, but also can be effectively utilized for those who love trading reversals.
This indicator eliminates most false signals and shows you only the very best trade entries. In addition, it uses a triple confirmation algorithm to rank these trade setups by winning probably to always ensure that the Reward:Risk ratio of every trade is 3:1.
Click here to see an example of the Divergence Solution in action (on the 5-minute timeframe).
4. The bottom line
Hopefully through our sharing, you have understood a bit more about scalping trading as well as effectively applying it to your trading strategies.
If you’re looking for some knowledge-trading articles or an update on our newest indicators, you can find them here:
Feel free to leave a comment and share your thoughts with me. And don’t forget to share this blog with your friends on social media!
