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Learning Scalping Systems for Beginner Forex Traders

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

  1. 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.
  2. 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.

  1. 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

  1. 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

  1. 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

  1. 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

  1. 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

  1. 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.

  1. 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

  1. Overtrading:
    • Avoid excessive trading. Focus on the quality of signals.
  2. Ignoring Trading Plan:
    • Stick to your strategy and avoid revenge trading.
  3. 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.

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