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What Is Scalping?

In simple terms, scalping is a trading strategy that specializes in making profits from minor price movements over short trading timeframes. As such, a scalping trader typically makes a large number of small-profit trades instead of long-term trades, and therefore, limits the risk of loss by using a methodological trading framework. Most scalping traders that trade FX currency pairs use a timeframe of around 1 to 15 minutes, though some scalp traders even trade in timeframes of seconds.

Top Scalping Strategies

In general, there are many scalping trading strategies you can use so it is best for you to consider the options and decide which of these strategies you will use in your trading journey. Below, we show you  some of the most common scalping trading strategies being used by traders:

1 Minute Scalping Trading Strategy

This is one of the most popular and easy-to-implement of the forex scalping strategies. As the name implies, this strategy involves opening a large number of positions in one trading day, and close positions within a maximum period of 1 minute.

RSI Scalping Forex Trading Strategy

The Relative Strength Index (RSI) is a technical indicator that helps traders identify overextended prices. Simply put, when the RSI is above 70, the asset you trade on is overbought and vice versa when the RSI shows 30. Generally, there are different versions for using an RSI for scalping. For example, many traders that use technical analysis indicators enter a buying position when the RSI reaches 30 or a short period position when it is on 70.

Bid and Ask Market Making

This is one of the most difficult methods to apply but also one of the most effective scalping strategies you can use. With the market-making scalping strategy, a trader basically places an order on the bid and the ask sides at the same time, trying to make a profit by earning the spread of the buy and sell quote. In order to apply this strategy, you need to use an ECN/STP forex broker that gives you access to a level 2 order book and zero spreads (from our research, VantageFX is the best option).

How To Choose The Right Scalping Broker For You

As previously mentioned, deciding on which platform you’ll be trading is an important decision that you need to make and there are some crucial factors you need to consider before you choose a scalping forex broker. To help you ask the right questions in the process, below we outline some of the most important factors to consider when choosing the best forex broker for scalping.

Type of Broker

One of the most important factors you need to consider is the type of market execution the broker offers – market maker or ECN/STP. There are pros and cons for each type of execution so you should know the difference between the two types before you start trading on a certain platform. On the one hand, market maker brokers do not charge any fixed trading fees and ensure the trader always gets an execution regardless of the trading conditions. On the other hand, ECN brokers are more transparent and provide a trading environment that gives a sense of market with level 2 order book and access to top liquidity providers.

Execution Speed

Another crucial factor to consider is the execution speed the broker provides. In general, market execution  refers to the  speed at which the orders you place are executed. For scalp traders that usually place hundreds of orders per day, the execution speed might be an extremely important factor.

Leverage Ratio

Clearly, a high leverage ratio is an essential tool for scalping trading as this trading strategy involves trying to make a profit from small changes in a certain financial asset. It is, therefore, no wonder that all scalpers use high leverage forex brokers to generate high returns from minor pricing movements. And, while in most cases a high leverage ratio is a double edge sword, in scalping trading it is actually a necessity.

Trading Tools and Features

Finally, it’s also important to make sure that the platform you choose to scalp trade has a strong trading platform and range of trading tools and features. Some of the best scalping forex brokers will give you access to an advanced charting package with lots of technical indicators, social trading tools, automated trading plugins, high leverage ratio, forex signals service, and more.