Posted by forex at 7:18 AM
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1. Ensure you are trading with a broker filling orders through an electronic communications network (ECN) or straight-through processing (STP) of trade orders. Avoid Forex brokers using their own dealing desks. To scalp, you want a broker providing typical spreads of two pips or less on the major currency pairs.
2. Download the broker's charting software and set up the software using candlestick price indicators at one- and five-minute intervals. If you have not used the broker before, sign up for a demo account and practice trading using simulated money until you are proficient with the broker's order system.
3. Select trading indicators to provide guidance of buy and sell points. Support and resistance lines, pivot points and parabolic SAR are some indicators often used by scalping traders. The price chart software will allow you to install these indicators as overlays or in separate boxes, tracking with the currency values.
4. Develop profit and stop-loss targets for each trade. Use the daily average true range (ATR) indicator to set a profit goal per trade. For example, a currency pair may have a daily ATR of 100 pips. As a scalper, you may want to make 10 percent of the ATR, or 10 pips with each trade. To limit losses, you could set a stop loss for each trade at six pips. With this plan, even if only 50 percent of your trades are successful, you will be a profitable Forex scalper.
5. Scalp trade Forex using your trading plan during those periods when the exchange prices are fluctuating between support and resistance levels or at specific times each day when the market has shown patterns you can profitably trade. A scalping trade should be entered following the guidance of your chosen indicators and you should be out of the trade within several minutes.