Scalping the Forex market is one of the most difficult tasks for retail traders. Those who have extensive experience in dealing with currency pairs should scalp the market. Until you can make consistent profit for two consecutive years scalping is not the perfect strategy for your skillset. Let’s assume you are trading the market for more than 2 years. You are now confident that you can deal with the lower time frame data. Switching from the conservative trading method to an aggressive one requires strong knowledge and intense skill. You must follow some unique methods to protect your capital. Let’s explore the top three rules you must learn as a new scalper.
Multiple time frame analysis
Using multiple time frame analysis is one of the most effective ways to filter the best possible trades. Think about analyzing the GBPUSD pair in the daily and 1-hour time frame. You might spot a bullish trend in the daily time frame but in the 1-hour time frame the trend might be bearish. So, what should you do in such a situation? You need to give priority to the higher time frame data as it gives better results in terms of technical analysis. So, when you try to scalp a specific level, make sure you analyze the different time frame data so that you can filter out the false signals. Things might be tough at the initial stage but once you learn to trade this market with discipline, it won’t take too much time to develop your skill as a professional scalper.
Use price action trading strategy
If you want to scalp the market, you must use the price action confirmation signals in the Saxo capital markets trading platform. Using the price action confirmation signal is by far the best way to earn money in this market. Though it’s hard to memorize all the candlestick patterns, if you manage to learn the basic pattern you will get a clear idea of this market. Never think you can win big trades without doing the price action analysis. Instead of using a super complicated trading method, try to use a simple strategy so that you can easily make a profit. The price action trading method is one of the best ways to find highly accurate trade setups at the critical supply and demand zone. Before you start using the price action signals, make sure you use the demo account to develop your skills.
Advance risk management policy
The professional scalpers always use advance risk management policy to protect their trading capital. Things might tough but this is the only way to become a profitable trader. Instead of using the traditional risk management policy, you need to focus on 1% risk exposure. Since you will be opening multiple trades as a scalper, you should limit the risk by limiting the number of open trades in this market. Think about the risk to reward ratio since it will act as your recovery factor. If you trade with a 1:1 risk to reward ratio you must have a very high win rate which is nearly impossible for the scalpers. Use 1:2 risk to reward ratio so that one winning trade can cover up 2 losing trades. Once you learn to trade this market with proper money management, it won’t take much time to develop your skills. You can expect to scalp the market like the highly-trained traders.
Scalping might be the most sophisticated trading system, but you can still manage to learn this technique. Make sure you follow the tips in this article or else you are going to be another loser in the Forex market. Stop becoming aggressive with the trading result. Be calm and think about the bigger picture. Forget the fact that you are dealing with the lower time frame. Consider each trade as your investment and you will make significant progress.