Forex Scalping Strategy: Best Indicators and Techniques for Beginners

Things to consider before starting Forex scalping

Before adopting a Forex scalping strategy, it is important to understand what the liquidity and volatility of the currency is and the advantages and disadvantages of this style of trading.

Liquidity and scalping in Forex

The equivalent of $ 6.6 trillion in Forex transactions are made every day, making it the most liquid market in the world. Liquidity refers to the ability to buy and sell quickly without affecting market prices. The high liquidity of the Forex market makes it an ideal market for scalpers, who need to get in and out of their positions quickly, sometimes within seconds.

The liquidity of a currency is not fixed. This is because it changes based on several factors, including the time of day, the number of active investors in the market at any given time, and broader economic conditions such as inflation rates and countries’ GDP. The most liquid currency pairs are usually the most traded ones, such as EUR / USD, GBP / USD and USD / JPY.

In very liquid markets such as Forex, the buy / sell spread is tighter, which reduces transaction costs despite the large number of positions opened by the scalpers. Since the gains are progressive, the lower spreads allow for greater gains.

In other markets, liquidity is usually a sign of stability, but Forex is extremely volatile. This means that large short-term price changes can occur at any time, which can cause currencies to rise and fall very quickly. This volatility allows for greater gains. This is one of the reasons why scalpers generally prefer Forex. However, it can also lead to increased risk exposure.

Volatility and Scalping in Forex

Volatility is an advantage when trading derivatives. Indeed, it allows investors to take advantage of rising and falling prices.

However, it is important to have a risk management strategy to reduce losses, especially when using leverage to open a position. Since scalping is most effective when markets are volatile, it makes more sense to open a position when markets open and close.

Some currency pairs such as AUD / JPY, GBP / EUR and USD / MXN are more volatile due to reduced liquidity and economic factors such as trade deals, exports and natural resources. Plus, with our weekend markets available, including GBP / USD, EUR / USD and JPY / USD, you don’t have to wait for the markets to open on Monday to take a position if volatility is high on Saturday and Sunday.

When learning how to scalp Forex, keep in mind that this trading style has its pros and cons:

Leave a Comment