Scalping in the foreign exchange market is a method of trading certain currencies based on real-time technical analysis. The main goal of scalping is to make a profit through purchasing or selling currencies by holding a position for a very short period of time and closing it for a small profit.
Without further ado, let's dive right in and see what one of the most popular Forex scalping strategies – a 1-minute Forex scalping strategy – has to offer for 2018.
A 1-minute scalping strategy is a good starting point for Forex beginners. However, you should be aware that this strategy will demand a certain amount of time and concentration. If you aren't able or willing to put in effort for at least a few hours a day, FX 1-minute scalping might not be the best strategy for you.
FX 1-minute scalping is a day trading strategy as it involves opening a certain position, gaining a few pips, and then closing the position. It is one of the most basic and resourceful trading strategies.
The main aspect of Forex scalping is quantity. It is not unusual for traders to place more than 100 trades a day. For this reason, it is important to pick a broker with the smallest spreads, as well as the smallest commissions.
Talking about the strategy itself, let's have a look at the strategy validity, time frame, indicators, and sessions.
1 The validity of currency pairs, every currency pair;
2 1-minute time frame;
3 Necessary indicators: Stochastic 5, 3, 3, and 50 EMA, 100 EMA* (available on MetaTrader 4);
4 Preferred sessions: London, New York – high volatility.
* EMA stands for "Exponential Moving Average", the second most popular type of moving averages after the Simple Moving Average (SMA), except for the fact that more importance is given to the latest data.
We recommend to explore entry points and necessary stop-loss levels on your trading terminal.
If you do have the time to try out the strategy, you should absolutely give it a go! The perfect way to do so is with our risk-free demo account.
Firstly, it is important to broaden your understanding of the market. By trying different approaches, you can see your strategies from a new perspective and gain valuable insight into the inner mechanics of trading.
Secondly, even if it doesn't work out for you, the risks are very low. You shouldn't suffer major consequences. The essence of the strategy will not allow for high losses, or high gains for that matter.
FX 1-Minute Scalping Strategy Purchase (Long) Entry Point
The first EMA (50) must be positioned above the second EMA (100). When this has occurred, it is essential to wait until the price comes back to the EMAs. In turn, the Stochastic Oscillator is exploited to cross over the 20 level from below. The moment you observe the three items arranged in a proper way, opening a long (buy) order may be an option.
To stay safe, stop-losses are vital. Stop-losses are arranged around 2-3 pips just below the last low point of a particular swing. As the 1-minute Forex scalping strategy is a short-term one, it is anticipated to gain 8-12 pips on a trade. Hence the take-profits are best to remain within 8-12 pips from the entry price.
FX 1-Minute Scalping Strategy Sell (Short) Entry Point
The first EMA (50) should be positioned below the second EMA (100). As with the buy entry points, we wait until the price returns to the EMAs. Additionally, the Stochastic Oscillator is utilised to cross over the 80 level from above.
As soon as all the items are in place, you may open a short or sell order without any hesitation. The exact same things happen here. Stop-losses are positioned near 2-3 pips below the last low point of the swing accordingly, and take-profits should remain within 8-12 pips from the entry price.
The Pros and Cons of 1-Minute Scalping Strategy
In order to determine whether Forex scalping and Forex 1-minute scalping may prove useful for your type of trading, we are going to look more deeply into the pros and cons of scalping.
First, the pros.
1 Less risk exposure, i.e., a brief exposure to the market reduces the possibility of running into inauspicious events.
2 Relatively small movements are easier to achieve. This implies that a larger supply and demand imbalance is required to ensure bigger price changes.
3 The main logic behind scalping is that smaller moves occur far more frequently than larger ones.
4 Even when the markets are comparatively quiet, a good Forex scalper can utilise many small moves.
Now, these pros sure sound quite tempting, but it is important to look at the disadvantages as well.
1 A large deposit is needed.
2 Bankers and dealers have a certain advantage over amateur scalpers as they have more information about the market.
3 A 1-minute scalper needs quick reflexes, good instincts, and mathematical skills.
4 It can be difficult to scalp and maintain a good risk/reward ratio. For instance, with a ratio of 2:1, your take-profit at 10 pips requires a stop-loss at 5 pips, making it too close not to get stopped out in the majority of cases.
5 1-minute scalping is time-consuming and may lead to stress and an unhealthy lifestyle.
You have to see for yourself whether the cons outweigh the pros and vice-versa.
Final Thoughts
Scalping proves to be an extremely effective strategy – even for those who use it as a purely supplementary strategy. The same goes for Forex 1-minute scalping.
However, it is important to understand that scalping is hard work. Scalpers are rewarded for quantitative work – the more Forex scalping they perform, the bigger the profit they make. In the end, the strategy has to match not only your personality, but also your trading style and abilities.
Comments