This article is dedicated to highlighting different scalping strategies to emphasise the multiple systems utilised within the main forex scalping strategy and the use of technical anlaysis.
Forex scalping requires a considerable technical analysis, strategies and indicators. Since mistakes can lead to loss of profits from many successful trades from previous day trading activity. Fundamental analysis in scalping is very limited, however technical analysis is featured more in successful scalping strategies. During the time frames preferred by scalping systems, markets movement are random, however news events can influence the forex markets when day trading.
As it is difficult for retail traders to make trading profits, especially as there are multiple news and economic throughout the day, technical analysis can assist as part of a profitable scalping system. The market’s price reaction is too unpredictable to rely on basic fundamental analysis.
Many forex traders combine scalping strategies with another approach such as following the trend or range trading and only differ these trading strategies to manage their risk or market exposure. By mixing usually successful strategies can complicate trading and cause confusion and a higher risk strategy. Trend following strategies usually need less technical analysis and forex execution.
Different Scalping Methods
Forex scalping can be seen in two different trading styles. One approach, the forex trader focused on price fluctuations over a short period of time and uses technical methods. The other approach the scalping system follows the market trend or swing trading, but executes very small and fast trades. The trader exploits fast price movements but follows the market trend. The first scalping system relies on the trader benefiting from price movements. When the market moves up and down slowly it will generally return to price level it started during day trading, and it is possible to make forex profits without taking large trading risks.
Both scalping systems can take advantage of ranging markets where market volatility is the main method for generating forex trading profits. Forex scalping using the Fibonacci technical analysis in trending markets can be beneficial, as can be other technical analysis strategies that can be applied in day trading or swing trading. All are valid in scalping strategies there’s no difference (apart from the role of the spread) between a 5-minute or 5-month chart as far as technical analysis is concerned.