Learn Forex Trading: Scalper Trader

The scalper trader has the goal of a quick trade for small but leveraged profits. The scalper prefers to trade frequently for small moves instead of working for larger moves. The scalper trader focuses on the goal of taking profits quickly from the market and trades in a very limited time frame. Scalpers focus on the most recent price action and on small time intervals, from 10-minute candles to 1-minute candles. The trader seeing a high probable trade can decide to put on multiple lots and then attempt to obtain 5 to 10 pips or more. Parabolic patterns are excellent conditions for a scalp. After a parabolic move up, the probability of a fading of the sentiment is great. The scalper has to minimize the risk of a whipsaw.

Their actions are mostly centered around the overlapping sessions of the major regions, typically during the Asia close/Europe open, Europe close/U.S. open. Scalpers trade during these hours mainly because these are the busiest hours in the forex market on any given day. This business tends

to generate more volume, which in turn presents more trading opportunities.

As they need to react to market movements quickly, scalping is most suitable for traders who can devote their undivided attention and focus on the charts for a couple of hours at a time. In addition, scalpers need the ability to think on their feet and switch the direction of their trades fast if

the situation calls for it.

Due to the numerous times in which scalpers enter and exit the markets, there are three simple rules in their toolbox:

1. Spreads. The spread on currency pairs is a signifi cant factor in the scalper ’s strategy. Scalpers tend to stay away from currency pairs with large spreads and focus only on the major pairs, such as

EUR/USD, GBP/USD, and USD/JPY. They do this because the spread on the majors is normally the tightest, and the majors have the highest liquidity.

2. News. Scalpers tend to avoid trading during major news announce- ments. This is because major news can evoke different emotions in the markets and cause wild swings in currency pairs. The unwelcome volatility during such news announcements can be the difference between a winning trade and a losing one.

3. Leverage. Scalpers tend to use high leverage because they are in and out of the market repeatedly with only a small profi t. The high leverage amplifies their returns signifi cantly.

Due to the fast-paced nature of scalping, it is not uncommon for traders to employ automated trading systems to execute trades on their behalf.

Scalping offers these top three advantages:

1. Risk exposure. Due to the nature of scalping, traders stay in the market for brief periods each time. This reduces their risk of getting stopped out by any unforeseen adverse events.

2. Easier bites. Markets can ’t make big moves without fi rst making small ones. As commonsensical as that sounds, it is also why scalpers love small moves—they happen more frequently, so scalpers’ chances of winning are bumped up.

3. Frequency. For markets to achieve signifi cant up or down moves, a major change in expectations is required. Such changes normally are caused by primers, such as a major news release. The good news for scalpers is that even in the absence of news, profi ts can still be made.