10 Forex Scalping Tips That Will Surprise You
The majority of Forex scalping tips you'll find on the internet are not helpful on a practical level. I know, I know... it's not politically correct to say this.
But you see, although most of those scalping tips are dispensed with good intentions, they are too often vague and not actionable.
What you need is not more philosophical concepts about “how to make money scalping”, but practical tips on how to train your skills to get results. The former focuses on the goal, while the latter focuses on the process.
The thing about trading is that the more you focus on the money, the more difficult it is for you to succeed.
Competitive athletes don’t win by thinking about the prize money. They win by focusing on the training process and performing the right actions at the right time. Scalping is no different.
So if you’re ready to fine-tune your training process, here are 10 Forex scalping tips that you can implement right away.
Forex Scalping Tip 1: Stick to one scalping strategy
One of the things that differentiate successful traders from everyone else is the relentless focus on one trading strategy.
Choose one scalping strategy that you’re comfortable with, and focus on it.
Ignore all other scalping techniques and get good at ONE method.
In concentrating your energy on a single strategy, you’ll learn the subtle nuances that escape the attention of the wannabes that spread themselves thin over six different scalping techniques.
Amateurs try to trade ranges, price swings and breakouts all at the same time. So they can’t tell the difference between a good setup and a bad setup because they’re too busy looking out for any kind of opportunity that looks tradable.
Like an overly-excited hound puppy chasing a litter of rabbits, the amateur scalper gets distracted by all kinds of pseudo opportunities that appears in front of them. He expands his energy running all over the place trying to catch all of them, but ends up tired and frustrated.
What he doesn’t realise is that he doesn’t need to chase every single opportunity. The market is always here, and there'll always be another trade right around the corner.
A good surfer knows which waves he can take, and rides only those waves while ignoring all others that comes his way. In doing this, he conserves his energy for the waves he knows how to ride well.
Similarly, as a Forex scalper all you need is to thoroughly understand ONE scalping strategy, and to implement it well.
Forex Scalping Tip 2: Focus on one (or two) currency pairs
Each currency pair moves to a unique rhythm, and the only way you’ll pick up on that rhythm is by observing the price action over a variety of situations.
In an ideal world, we’d be able to follow various currency pairs at the same time and be able to remember the nuances of each. But the reality is that human minds are not designed to reliably follow more than a couple of “storylines” at the same time.
This is why TV shows do a re-cap of the previous episode before showing each new episode — people tend to watch multiple shows over the week and forget what they’ve watched the week before.
In Forex scalping, trading multiple currency pairs at the same time is like watching five simultaneous drama serials and expecting to remember the details of what happened in each.
That’s not going to happen.
So instead of scalping multiple pairs, focus on scalping just one or two pairs and you’ll start to develop an intuitive feel of the price action and get much better results.
Forex Scalping Tip 3: Shut out all distractions while scalping
In my early trading years, I took this tip lightly.
Too often, I’d be scalping while watching YouTube videos and eating lunch at the same time.
This resulted in countless mistakes that were completely avoidable, which took a big toll on my trading profits.
It was only after I tracked down those unnecessary mistakes that I realised how much the distractions were costing me: up to 30% of my profits!
That’s why when I scalp now, I shut out all potential distractions before they even happen.
- I switch my cell phone to silent mode and put it away from my trading desk.
- I shut down Skype and turn off email notifications on my computer
- When people are around, I give polite but firm instructions not to be disturbed unless there’s a real emergency
- I listen to white noise tracks that tune out auditory distractions
These days, my scalping hours have become a scared space where I don’t think about anything else.
The results of this simple change turned out to be far better than expected. I highly recommend that you try this out yourself. You’ll be surprised at how much of a difference it makes.
Forex Scalping Tip 4: Let scalping opportunities come to you
If you feel like you have to look for a scalp trade, you’re forcing it. The best trades are those that present themselves to you. They look so obvious that the charts are practically screaming for you to take them.
Now when the markets are less active or you don’t see any obvious trade setup, just wait it out. Being scalper doesn’t mean that you have to trade every hour, or every day for that matter. There will be times when there are simply no good trades to take.
You need to learn when those times are, and conserve your energy then.
Forex Scalping Tip 5: Don’t chase a daily goal
Many Forex scalpers set an arbitrary amount of profits or pips that they have to make each day. They tell themselves they have to make $200 a day or 50 pips a day before their job is done.
This is both stupid and destructive because these people are assuming that there’s $200 or 50 pips (or whatever) to be safely made every day in the markets.
In imposing a fixed target on their trading, they set themselves up to chase poor quality trades in order to meet it.
This inevitably leads to desperate trading and if there's one the thing market loves, its desperate traders.
The only goal you should have as a Forex scalper is not to lose money. To me, a day in which I make 50 pips is as good as the day in which I close shop at break even.
In fact, I would celebrate the break even day even more, because recovering from a loss is considerably more challenging than simply making money right from the start.
Now despite what some people might say, you can’t play offence and defence at the same time. At any single moment, you are either scalping aggressively or defensively. 90% of the time, you should be trading defensively.
Forex Scalping Tip 6: Scalp lightly
Part of the allure with scalping is the potential of making a lot of money in a short period of time.
Technically speaking however, this can only happen if one scalps with a big lot size.
And the problem with scalping big is that very few people in this world can handle it.
Now I’m proud of my trading but I don’t confuse my confidence with blind arrogance.
If I scalp with 5 standard lots lose $1,000 within 15 minutes I know I’ll be emotionally affected.
- So you know what I do? I don’t trade with 5 standard lots. I trade just small enough so that I feel nothing when taking a loss. That’s when I can be objective enough to be taking a loss when I should be.
Peter Brandt has a good saying with which he applies to his trading, “strong opinions weakly held”. You might want to remember that.
Scalpers almost by necessity have to be confident with their decisions, but that doesn’t mean that we have to the farm on them.
To keep winning, we have to remain objective. But we can’t remain objective if our losses makes us emotional.
So, the only real way forward is to trade small, and trade lightly.
Forex Scalping Tip 7: Review your trades every weekend
For many traders, scalping is a game. They get a kick out of trading short term market price action and don’t take it seriously.
The best way to know if a scalper is taking his trading seriously is to see his trade records. Most don’t even keep one.
Trade records are so important I can’t overstate how big of a deal they are. Your records will allow you to see the mistakes you’re making that are invisible to you during the trading week.
You won’t believe how many mistakes I’ve spotted over the weekend that I was totally blind to before. If I had to start trading from scratch again, the first thing I would do is to keep a detailed trade journal.
If you haven’t been keeping detailed records of your trades, start now. And set some time aside every weekend to review them. That’s the most reliable way to improve.
Forex Scalping Tip 8: Learn economic fundamentals
Too many scalpers think that just because they’re trading price action, they can safely ignore fundamental analysis.
The problem with this type of thinking is that when the fundamentals come into play, all they've learned about price action gets thrown out the window.
You can make money scalping the EUR/USD for 19 out of 20 trading days in a month, but a surprise interest rate hike can eat up two months worth of profit.
Now, you don’t have to speculate on the outcome of economic data releases. You just have to know which ones are important enough for you to get flat before they are released.
If you want to be successful as a Forex scalper, you can’t avoid learning at least the basics about economic fundamentals.
Forex Scalping Tip 9: Take your profits fast
Forget about letting your profits run.
Every second you stay in a trade, you are assuming the risk of the market moving against you. This is especially true In the scalping time frames, where paper profits rarely stay on the table for long.
- The whole point of scalping is that you can get out of the market quickly, so stick to the script and don’t get fancy.
Forex Scalping Tip 10: Set a maximum loss “failsafe switch”
The fastest way to wipe out as a scalper is to hold on to losses. A good rule of thumb is thus to set a maximum loss limit after which you’ll close out all your trades, no matter what.
- For example, you can set a maximum $50 or $100 (or whatever) loss limit for each trading day. The moment you hit that amount in paper losses, close out all trades and stop trading for the day, no exceptions.
Another rule I personally follow is to stop trading for the day when I suffer two consecutive losses. Scalpers live and die by their win rate, and if I’m losing on two scalp trades in a row then something is probably wrong.
After I force myself to stop trading, I can get back to the markets the next day refreshed and ready to start making pips again.
Tell Me What You Think!
Well, that’s it for now. If you follow these Forex scalping tips you should start seeing an immediate improvement in your experience of the scalping process.
If there’s something I mentioned here that you particularly agree or disagree with, let me know in the comments below. I’d like to know that you think.
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