Scalping: The quick trading strategy you need to know

What Does It Really Mean to Do Scalping?

In the trading universe, there are multiple approaches to making profits: scalping, day trading, and swing trading. The main difference lies in how long your positions remain open. Scalping stands out as the fastest method, where traders seek to capitalize on price movements over extremely short periods—from seconds to a few minutes.

Unlike other styles, scalping is simultaneously the quickest way to multiply or lose capital. This happens because it works with very tight profit margins but involves numerous trades throughout the day. The number of entries you can execute depends on the asset’s liquidity and the market timing when you trade.

The main goal of scalping is simple: make small profits with high volume. While a swing trader waits days or weeks, the scalper executes dozens of transactions, each aiming for 10, 20, or 30 pips of movement.

Fundamental Requirements Before Starting

Before diving into scalping, you need to be honest with yourself: do you really have what it takes? This strategy demands more than just capital—it requires specific tools and, above all, mental strength.

Essential technological tools:

A platform with real-time, delay-free charts is mandatory. Specialized analysts recommend TradingView or similar platforms that offer instant speed. Charts should use 5-minute candles or less—preferably shorter timeframes that allow you to identify short-term patterns.

Your broker connection must have minimal latency. A delay of just 5 seconds can turn a winning trade into a losing one. Infrastructure matters: you need a stable computer with high-speed internet, not necessarily luxury equipment, but not outdated either.

The factor many forget: trader psychology

Technical knowledge is important, but the mind is even more so. Scalping requires extreme discipline: following your system without deviations, controlling your emotions after consecutive gains and losses, and managing the money you risk in each move.

You must define beforehand: what percentage of your account will you use per trade? What will be your maximum acceptable loss on each trade? What profit are you aiming for? Without these decisions made before trading, scalping becomes gambling.

The 4 Pillars That Make Scalping Viable

1. Liquidity: your main ally

Liquidity is how easily a price can move. Assets with high liquidity offer multiple entry and exit opportunities during the day. The forex market leads in global liquidity—thousands of traders operate simultaneously, generating constant movements.

The higher the liquidity, the more executable opportunities. Remember, you profit from both upward and downward moves, so having many chances to trade means more profit possibilities.

2. Volatility: the silent enemy

Here comes the paradox: although you need price movement, too much volatility is dangerous in scalping. Extreme volatility—like Bitcoin, which can fluctuate $200 in a minute—can liquidate a position before you can react.

The cryptocurrency market exemplifies this: high movement yes, but unpredictable. If you master technical analysis deeply, cryptos can be profitable for scalping; if not, they can ruin you.

3. Spread and commissions: hidden costs

Every broker charges a spread—the difference between the buy and sell price. Example: in EURUSD, you might see Sell 1.05430 - Buy 1.05424, generating a spread of 0.6 pips. In scalping, where you aim for 10-30 pips per trade, these costs matter significantly.

Lower spreads and low commissions are critical. A 3-pip spread on a 15-pip gain consumes 20% of your profit. Compare brokers before choosing.

4. Timing: not all moments are equal

Trading when London and New York are active maximizes liquidity. During the Asian session, movements are so slow that scalping becomes practically unviable.

The best assets for scalping are currencies and indices. Both offer high liquidity, moderate volatility, extended hours (Monday to Friday), and multiple opportunities. Currencies like EURUSD, GBPUSD, and USDJPY generate constant entries and exits.

Individual stocks have issues: short sessions (8 hours), limited liquidity, and for most, only buying opportunities. Cryptocurrencies are 24/7 but excessively volatile—only for experienced scalpers.

Technical Indicators: Your Entry Signals

Every trader builds their own arsenal, but some indicators are popular for specific reasons:

Exponential Moving Average (EMA): Shows the overall trend. Many strategies work on crossovers between two EMAs of different periods. It’s simple but effective for identifying directions.

Relative Strength Index (RSI): Measures price impulses. RSI above 70 suggests overbought (sell); below 30 indicates oversold (buy). Especially useful in defined ranges.

Stochastic: Similar to RSI but with values of 80 (s overbought) and 20 (s oversold). Some scalpers prefer it because it reacts differently under the same market conditions.

MACD (Moving Average Convergence Divergence): Generates trend change signals by measuring convergence/divergence between moving averages. Crossovers provide potential entry points.

The choice depends on you. Test on a demo account and discover which best suits your analysis.

Practical Example: How to Execute a Scalping Trade

Let’s take EURUSD with prices: Sell 1.05430 - Buy 1.05424

Your buy occurs at 1.05430. To profit, you need the subsequent buy price to be higher. You assume 2% risk per trade on a $100 account ($2 at risk).

The trade:

• Lot size: 0.01 contracts
• Entry: 1.05430
• Stop loss: 1.05230 (protects against a 20 pip loss = $2)
• Take profit: 1.05630 (profit of 20 pips = $2, ratio 1:1)

The price reaches 1.05630. Your position closes at take profit. You earned $2, now your balance is $102.

If you repeat this 10 times in a day, closing 8 trades in profit and 2 in loss, your balance rises to $116. This is how compounding works: small consistent gains generate exponential growth.