Scalping is a trading strategy that focuses on making small profits over short periods of time by executing numerous trades each day. For beginner traders, understanding and applying scalping techniques requires a deep understanding of the fundamentals and effective practices. This article will cover essential aspects of scalping, from basic concepts to practical techniques.
1.
What is Scalping?
Scalping is a short-term trading
technique aimed at profiting from small price movements, typically within the
range of 5-10 pips per trade. Scalpers open and close positions in a very short
time—ranging from a few seconds to a few minutes—within a single day.
Characteristics of Scalping:
- Small Profits:
Focuses on small profit per trade.
- High Frequency:
Involves making many trades each day.
- Short Duration:
Holds positions for a very brief period.
- Strategy Adherence:
Requires discipline and a clear strategy.
Scalping Example:
Time
Frame |
Price
Pattern |
Scalper
Activity |
1-Minute |
Small Fluctuations |
Open and Close Positions Quickly |
5-Minute |
Short Trends |
Capture 5-10 Pips from
Fluctuations |
2.
Basic Knowledge About Scalping Systems
A. Definition and Practice of
Scalping
According to Investopedia, scalping
is "A trading strategy that attempts to make numerous small profits from
small price changes."
Practical Definition:
- Short-Term Trading:
Scalpers open and close positions quickly.
- Small Profits, High Volume: Seek small gains from price fluctuations by executing
many trades.
- Speed Requirement:
Needs fast reaction and high concentration.
B. Requirements for Scalping
- Choose the Right Broker
- Scalping Permission: Ensure your broker allows scalping.
- Low Spread:
Choose a broker with low spreads, as high spreads can reduce your
profits.
- 5-Digit Pricing: Opt for a broker that uses 5-digit pricing for better
price accuracy.
- Stable Internet Connection: Ensure you have a fast and stable internet
connection.
- Platform and Execution
- Execution Speed: Choose a platform that offers fast order execution.
- Platform Testing: Test the platform on a demo account to ensure
execution speed.
Broker Criteria:
Criteria |
Description |
Scalping Permission |
Broker should permit scalping
techniques. |
Low Spread |
Low spread to increase
profitability. |
5-Digit Pricing |
Option for higher price accuracy. |
Internet Connection |
Stable and fast connection for
order execution. |
- Optimal Trading Times
- Asian Session:
Suitable for scalping.
- Pre-European and American Sessions: Times with high trading volume.
Trading Hours:
Session |
Time
(WIB) |
Asian Session |
07:00 - 16:00 WIB |
European Session |
12:00 - 15:00 WIB |
American Session |
20:00 - 22:00 WIB |
Trading Time Tips:
- Avoid trading during major news releases unless using a
news trading strategy.
3.
Techniques and Indicators for Scalping
A. Indicators Used in Scalping
- Moving Average (MA)
- Moving Average:
Identifies short-term trends.
- MA for Scalping: Use Simple Moving Average (SMA) or Exponential Moving
Average (EMA) for 1-5 minute timeframes.
Example MA Settings:
Indicator |
Period |
Type |
MA |
5, 10, 20 |
EMA or SMA |
- Bollinger Bands
- Bollinger Bands: Identifies volatility and potential price reversals.
- Setting:
Period 20, Deviation 2.
Example Bollinger Bands Settings:
Indicator |
Period |
Deviation |
Bollinger Bands |
20 |
2 |
- Relative Strength Index (RSI)
- RSI:
Measures the strength and weakness of trends.
- Setting:
Period 14, Levels 30 and 70.
Example RSI Settings:
Indicator |
Period |
Levels |
RSI |
14 |
30, 70 |
- Stochastic Oscillator
- Stochastic:
Identifies overbought or oversold conditions.
- Setting:
K-period 14, D-period 3.
Example Stochastic Oscillator
Settings:
Indicator |
K-Period |
D-Period |
Stochastic |
14 |
3 |
B. Scalping Trading Techniques
- Entry and Exit
- Entry:
Enter based on signals from technical indicators.
- Exit:
Close positions after reaching target profit or stop loss.
Scalping Strategy Example:
Entry
Signal |
Condition |
MA Cross |
When short-term MA crosses
long-term MA. |
Bollinger Bands |
Enter on price bouncing off outer
bands. |
RSI Overbought/Oversold |
Buy if RSI < 30, Sell if RSI
> 70. |
- Risk Management
- Stop Loss:
Set a stop loss to limit losses.
- Take Profit:
Set realistic profit targets.
Example Risk Management:
Order |
Target
Profit |
Stop
Loss |
Buy |
5-10 Pips |
5-10 Pips |
Sell |
5-10 Pips |
5-10 Pips |
C. Common Scalping Mistakes
- Overtrading:
- Avoid excessive trading. Focus on the quality of
signals.
- Ignoring Trading Plan:
- Stick to your strategy and avoid revenge trading.
- Neglecting Economic News:
- Major news can impact market volatility. Plan your
trades accordingly.
4.
Are You Suitable for Scalping?
Scalping can be an effective
strategy but also comes with its own challenges. Here are some factors that
determine if you are suited for scalping:
A. Suitability in Terms of Character
and Skills
- High Concentration:
You need to focus intensely on the screen for long hours.
- Speed of Reaction:
Ability to make quick and accurate decisions.
- Stress Management:
Ability to handle stress and emotions during trading.
B. Is Scalping for You?
Criteria |
Description |
Time and Focus |
You have time for trading and can
focus. |
Speed and Accuracy |
You can make decisions quickly and
accurately. |
Emotional Stability |
You can handle losses without
being emotionally affected. |
Scalping Infographic
- Infographic about scalping strategies and tips.
Scalping is a trading technique that demands high concentration, speed, and skill. By understanding the basics of scalping, selecting the right broker, and applying appropriate strategies, you can improve your chances of success as a scalper.