Scalping: The quick trading strategy you need to know

What is scalping and why choose it?

In the trading universe, there are three main approaches based on the time horizon: scalping, day trading, and swing trading. Scalping stands out as the modality that generates the fastest movements, where traders open and close positions within minutes or even seconds, seeking to capitalize on small but consistent price variations.

This strategy requires active and almost continuous participation in the markets. Unlike other approaches that allow for more relaxed trading, scalping demands constant attention throughout the trading session. It is simultaneously the fastest way to multiply gains and, if not managed properly, the quickest way to lose capital.

The volume of trades you can execute depends directly on two key factors: the liquidity available in the asset you are trading and the specific market hours. An experienced scalper can perform between 10 and 20 trades in a single session, aiming for modest returns on each transaction but maintaining consistency throughout the day.

The practice of scalping: A concrete example

Suppose you open an account with 100 USD and decide to risk 2% of your balance per trade. This means you will risk 2 USD on each trade. Your goal is to earn profits equivalent to that amount with a risk-reward ratio of 1:1.

You observe the EURUSD pair with the following prices:

• Sell price: 1.05430
• Buy price: 1.05424

You decide to buy 0.01 contracts at the sell price (1.05430). You set your stop loss at 1.05230 and your take profit at 1.05630. The market moves in your favor and hits your take profit, generating 20 pips of profit, which translates to 2 USD. Now your balance is 102 USD.

This trade increased your capital by 2%, and if you repeat this process successfully during the day, the gains accumulate quickly. However, trades that hit the stop loss will result in losses of the same percentage, so discipline is essential.

What every scalper needs before starting

Scalping is not just about opening and closing positions quickly. It requires robust technical and mental infrastructure:

Essential technological tools:

Your charting platform must update instantly, without delays that distort real prices. Platforms like TradingView are standard in the industry. Analyze with candles of 5 minutes or less, never with timeframes over 15 minutes.

Your connection to your broker’s servers must be ultra-fast. A slow connection can mean your order executes with a 5-second delay, which in scalping equates to unanticipated losses.

Your (computer or smartphone) must have decent specifications. You don’t need high-end equipment, but a device with limited resources can cause crashes at critical moments.

Your internet connection must be stable and high-speed. A disconnection during an open trade can be disastrous.

The psychological factor:

This is, paradoxically, more important than any tool. Emotional management defines the difference between profitable traders and those who lose all their capital. You must master:

• Self-control: maintaining composure after consecutive losses
• Discipline: following your system regardless of recent wins or losses
• Capital management: correctly applying lot sizes and never deviating from the plan
• Clear boundary setting: knowing exactly how much you can lose (stop loss) and how much you expect to gain (take profit)

The four pillars of successful scalping

1. Liquidity: your best ally

Liquidity indicates how much supply and demand exists for an asset. The higher the liquidity, the easier it is to enter and exit the market without distorting the price. The global forex market is the most liquid, followed by major indices.

High liquidity allows you to execute multiple trades during the session and find opportunities in both directions: buy and sell. With low liquidity, spreads widen and opportunities decrease.

2. Volatility: the potential enemy

Volatility measures the magnitude of price movements. Although it may seem that higher volatility is better for scalping, it actually poses a risk. An excessively volatile market can cause movements of 200 USD in seconds, unexpectedly liquidating positions.

Cryptocurrencies, for example, are extremely volatile. Bitcoin can fluctuate 200 USD in a minute. For crypto scalping, advanced experience is required.

3. Spread and commissions: the silent cost

The spread is the difference between the price at which you buy and the price at which you sell. In the EURUSD pair, if the spread is 0.6 pips, that means from the moment you open your position, you are already “in the red” by that amount.

Commissions are the percentage charged by the broker per trade or for account management. In scalping, where many transactions are made, commissions accumulate quickly. A high spread or excessive commissions can wipe out your profits.

4. Market hours: when to trade is crucial

The best times for scalping are when New York and London markets operate simultaneously. This is roughly between 12:00 and 17:00 UTC. Liquidity peaks during these hours.

The Asian session has very small movements, making scalping practically impossible. If you are a trader in Asia, consider trading during European or American hours.

Ideal assets vs. problematic assets for scalping

The best:

Currency pairs (are the holy grail of scalping). They have massive liquidity, low spreads, and generate constant opportunities. Especially pairs involving US dollars: EURUSD, USDJPY, GBPUSD.

Indices are also excellent. With high liquidity and low volatility, they offer predictable movements. They operate Monday to Friday with well-defined hours.

The problematic:

Individual stocks have low liquidity, wide spreads, and most only offer buying opportunities. Additionally, their sessions last only 8 hours.

Cryptocurrencies are too volatile for beginners, although they operate 24/7 and have good liquidity. If you master technical analysis, they can be very profitable.

Technical indicators: your eyes on the market

Exponential Moving Average (EMA)

This indicator smooths price information and shows the current trend. Many traders use crossovers of two EMAs of different periods as entry or exit signals. When a fast EMA crosses above a slow EMA, it’s a buy signal. The opposite crossover suggests selling.

Relative Strength Index (RSI)

Measures the momentum of price changes. When RSI exceeds 70, the asset is overbought and may present a selling opportunity. When it drops below 30, it is oversold and could be a good time to buy.

Stochastic

Similar to RSI, but measures how long the current trend will last. Uses the same principles: values above 80 indicate overbought, below 20 indicate oversold.

MACD (Moving Average Convergence Divergence)

Compares two moving averages and generates signals when they converge or diverge. Each crossover of MACD lines can be interpreted as an entry or exit opportunity.

No indicator is perfect. Every trader should experiment with these and others to develop a personalized system that fits their style.

Advantages that make scalping attractive

Scalping offers several advantages that explain its popularity:

• Less exposure to overnight risk: Since you close your positions quickly, you are not exposed to gap openings or overnight news.
• Potential for accelerated gains: Multiple daily trades allow for rapid profit accumulation.
• Diversification: You can rotate between different currency pairs, indices, or cryptocurrencies depending on market conditions.
• Independence: You are fully responsible for your decisions, without relying on third-party recommendations.
• Immediate results: You know within minutes if your strategy worked during that session.

The real challenges of scalping

But scalping also presents significant challenges:

• Mental exhaustion: It requires extreme concentration for 6 to 8 hours daily. A day with few movements can be frustrating despite being attentive.
• Accumulating commissions: With 15 trades daily, commissions add up quickly and can erase profits.
• Psychological stress: Three or four consecutive losing trades can undermine your confidence and lead to impulsive decisions.
• Time commitment: If you want to trade in New York, you need to be available almost all day.
• Overleverage risk: The ease of quick trading can tempt you to increase your lot size beyond the recommended 2%, amplifying losses.

Do you have the profile to be a scalper?

Before risking real money, answer these questions honestly:

What are my actual income goals with this strategy? Am I looking for a second income or do I want to live off trading?

How much capital can I afford to lose completely without affecting my life? (Many brokers require minimum deposits that can be significant).

Do I have 6 to 8 hours daily available to analyze charts and execute trades during the best sessions?

How do I react emotionally and mentally to adversities? Am I resilient or do I break down easily?

Am I disciplined overall? Can I stick to a plan without deviations?

If you answered “yes” to all these questions, you have potential. If you have doubts, recognize them now before losing money.

Preparation path for future scalpers

Theoretical phase:

Take courses, read books, attend seminars. Master concepts like: pip, lot size, leverage, spread, liquidity, volatility, commissions, buy/sell stop and limit orders, take profit, stop loss.

Initial practical phase:

Create a demo account. Here, there is no real money, only fictitious figures. Experiment without fear, make mistakes, test systems. When you can be consistently profitable on demo for 2-3 months, then consider real money.

Development of technical skills:

Master technical analysis tools: support and resistance levels, trends, Fibonacci extensions, candlestick patterns. Combine this with the indicators mentioned above.

Broker selection:

Research regulated brokers offering competitive spreads, fast execution speed, and good terms of commissions. Read reviews from other traders. Compare conditions among several before committing.

Continuous learning:

Even if you achieve consistent profitability, never stop updating your knowledge. Markets evolve, strategies lose effectiveness, new tools emerge. Stagnation is the trader’s enemy.

The reality of scalping

Scalping is not an automatic money-making machine. Many traders lose money because they do not follow these recommendations. Some lose everything they deposit. Without mastering risk management techniques like stop loss, you can reach situations where losses exceed your initial deposit.

Some brokers implement protections to automatically close your positions before your account goes into negative, but relying on this is a gamble, not a strategy.

Scalping is viable, profitable, and even exciting for those who prepare properly, respect their risk plan, and develop the required mindset. If you follow these guidelines and cultivate the necessary patience, the world of short-term trading can offer you significant satisfaction.