One of the most common Forex trading strategies is known as scalping. Not only is it a simple trading system, it carries low risk and can be performed in a very short amount of time. The problem is, the spreads you have to pay for will often eat a great deal of your profits and the reward / risk ratio is usually too low.
Many traders don't like the scalping system. This may be due to the fact that they haven't combined it with some more advanced strategies. In combination with other strategies, scalping can be more profitable and less risky over the long term. Before we discuss the more advanced strategies known as "alignment" and the "martingale" strategies, it will help to take a closer look at scalping itself.
In scalping, it is usually best to trade currency pairs with high volatility and low spreads. These include pairs like EUR / JPY, GBP / USD, EUR / USD and USD / JPY. It is also best to stay focused on the lower timeframe charts like one hour or less. The best trading times for a scalper are usually during the intersection of the European / US session and the US / Asian session. Once you think you have "caught" the short-term trend, you can enter a position. Just make sure there aren't any big news events coming up and you feel confident about your short-term trend.
This is where some advanced strategies can help you in scalping. The first advanced strategy for scalping will be discussed in this article. It has to do with alignment. A second strategy will be discussed in the next article entitled 'Scalping With Martingale Insurance.' It involves something else known as the Martingale strategy.
In this article we are looking to combine scalping with an alignment of two types of trend. As we all know in Forex trading, sometimes the short-term price trend is different from the long term trend. In this strategy, we make it clear that this is not a good time to be scalping. This is because the trends are not in alignment and, when the short-term trend suddenly decides to re-align itself with the long-term trend, you will start to get in big trouble.
Avoid trading against the long term trend and wait for the short term trend to show signs of agreement. You can use EMA's on the daily and 1 hour charts to determine these trends or you can use your own strategy for determining trends. Whatever you do, wait until both the short-term and the long-term trends are in alignment. This provides you with a nice form of insurance as you begin your scalping. If you don't see alignment of your trends, come back tomorrow and try again.
Remember, you are really only scalping so don't get greedy when things go in your favor. Get out at a 10-20 pip profit and call it a successful trade! Combine this with another advanced strategy which is discussed in the next article 'Scalping With Martingale Insurance.' These are only one of the many Forex trading strategies that can really help you to make scalping a more profitable means trading.