Learn the 1 Minute Forex Scalping Strategy
Even if you are a complete beginner in trading, you will have most likely come across the term "scalping" at some point.
In this article, you will learn the answer to ‘what is scalping in Forex’, how it works and how to choose your own Forex scalping trading system. Furthermore, we will also take a look at Forex scalping strategies, focusing in particular on the popular 1 minute scalping strategy.
Table of Contents
- What Is Scalping in Forex?
- Is Forex Scalping Suitable for Me?
- Tips for How to Scalp Forex
- The Best Time for Forex Scalping
- The 1 Minute Scalping Strategy for Forex
- Pros and Cons of the Forex 1 Min Scalping Strategy
- How to Choose a Forex Scalping Broker
- Key Components of the Best Forex Scalping Strategies
- Final Thoughts
What Is Scalping in Forex?
Scalping is a method of trading Forex based on real-time technical analysis. When it comes to Forex, a scalping trading system requires making a large number of trades that each target small profits. Rather than holding a position for several hours, days or weeks, the goal of scalping Forex is to make a profit in minutes, or even seconds, just a few pips at a time.
The FX market is the largest, most liquid and one of the most volatile financial markets in the world. Forex scalpers try to squeeze every possible opportunity out of these fluctuations in foreign exchange quotes, by opening and closing trades with just a few pips of profit.
So, scalping in the Forex market is essentially taking advantage of minor changes in price over a short period of time.
Forex scalping is quite a popular style for many traders, as, thanks to the volatility of the FX market, there are usually ample trading opportunities throughout the course of the day.
During the scalping process, a trader usually does not expect to gain more than 10 pips or to lose more than 7 pips per trade, including the spread. Therefore, in order for those 10 pip gains to add up to a substantial profit, scalping is usually performed with high volumes.
To learn more about the pros and cons of Forex scalping for beginners, as well as the best and worst times to scalp, watch our free webinar video:
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Is Forex Scalping Suitable for Me?
Deciding whether scalping Forex is a suitable trading style for you will largely depend on how much time you are willing to dedicate to trading.
Forex scalping requires constant analysis and the placement of multiple orders a day, which can end up being as demanding as a full-time job. Furthermore, there are only a few hours a day when you can scalp currency pairs. After time availability, the next most important thing is being able to think on your feet.
For a Forex scalping strategy to be profitable, you must quickly predict where the market will go, and then open and close positions within a matter of seconds.
Furthermore, traders interested in implementing Forex scalping strategies must be able to accept losses. This is particularly important when trading with leverage, which, as well as potentially amplifying profits, can have the same effect on losses. Whilst your main task is to generate more profitable positions than losing ones, you must also know how to exit trades when they are not working out.
You should keep in mind that Forex scalping is not a trading style that is suitable for everybody. Some traders will thrive with it, but others perform much better over longer time periods, such as swing traders.
If you think scalping Forex is right for you, keep reading to learn about forex scalping strategies and techniques.
Tips for How to Scalp Forex
Now that you have an understanding of the fundamental aspects of scalping, let's take a closer look at how to scalp Forex.
The Best Time Frame for Scalping Forex
In general, most traders scalp currency pairs using a time frame between 1 and 15 minutes. Whilst there is not really a "best" time frame for scalping, the 15-minute timeframe does tend to be the least popular with most Forex scalping strategies. Both 1-minute and 5-minute timeframes are the most common.
Your acceptable profit or loss per trade will depend on the time frame that you are using. With 1 minute scalping, you would probably be looking for a profit of around 5 pips per trade, whereas a 5-minute scalp could probably provide you with a realistic target of 10 pips per trade.
The Best Forex Pairs for Scalping
When it comes to selecting the currency pairs for the best Forex scalping strategy, it is vital to pick up a pair that is volatile, so that you are more likely to see a high number of moves.
That being said, volatility should not be the only thing you are looking at when choosing a currency pair. You should also look for a pair that is cheap to trade, in other words, the one that will provide you with the lowest possible spread. For a successful scalper, the spread will take between 10% to 30% of their income. Therefore, it goes without saying that you want this value to be as low as possible.
Forex Scalping Trading System
You will need to develop a Forex scalping trading system based on Forex scalping indicators. After this, once you see an entry signal, you have to go for the trade, and if you see an exit signal, or you have come to an acceptable level of profit, you can close your trade.
Stop-loss (SL) and take-profit (TP) management is also important in scalping. Whilst it is usually always recommended to use an SL and TP when trading, scalping may be an exception to this rule.
The reason is simple - you cannot waste time executing your trades because every second matters. You may, of course, set SL and TP levels after you have opened a trade, yet many traders will scalp manually, meaning they will close trades when they hit the maximum acceptable loss or the desired profit, rather than setting automated SL or TP levels.
Now let's focus on the spread. Let's assume a broker has no commission attached to your trading account, but the spread on EUR/USD is 2 pips on average.
When trading 1 lot of EUR/USD, the value of a pip is USD 10. This means your direct expense would be about USD 20 by the time you opened a position.
If you are looking for a 5-pip gain per trade (USD 50), this means that you would actually have to go up 7 pips from your initial starting price (7 pips - 2 pip spread = 5 pips). That is nearly 50% more pips. This is why you should aim to only scalp the Forex pairs with the lowest possible spreads.
Another important aspect of being a successful Forex scalper is to choose the best execution system. 'Execution' refers to when the trades that you place are actually fulfilled by your broker.
In other words, the speed at which, once you say you want to enter a trade, the trade is actually opened on the live market. In volatile markets, prices can change very quickly, which means your trade might open at a different price to what you had originally planned. When you are relying on the tiny profits of Forex scalping, this can make a big difference.
This is why it can be hard to be successful with a Forex scalping strategy. If there is a dealing desk involved, you may find a perfect entry to the market, but you could get your order refused by the broker. The situation may get even worse when you try to close your trade and the broker does not allow it, which can sometimes be deadly for your trading account. This is why it is vital to choose a broker that offers STP or ECN execution, and is able to accommodate scalping Forex.
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The Best Time for Forex Scalping
A scalping trading system requires an asset with sufficient price movement and volatility. In the Forex market, the highest levels of volume and liquidity tend to occur in the London (08:00 - 17:00 GMT/BST) and New York (13:00 - 22:00 GMT/BST) trading sessions, which make them particularly attractive for most Forex scalpers. But it also depends on the type of Forex scalping strategy that you are using.
Trading false breakouts can sometimes work well in an Asian trading session, as the price typically moves up and down in a relatively narrow range.
Traders should be mentally fit and focused when scalping Forex. Any indication of tiredness, illness or distraction presents a reason to stop trading and take a break.
As we have already mentioned, it is also critical to have low costs when scalping Forex and, usually, the lowest spreads are offered at times where there are higher volumes of trading.
The 1 Minute Scalping Strategy for Forex
The Forex 1 minute scalping strategy is a good starting point for Forex beginners, as it is quite a simple strategy to follow. This scalping Forex strategy involves identifying an opportunity, opening a position, aiming to gain a few pips and then closing the position.
Due to the low target per trade, one of the main aspects of forex scalping is quantity, and it is not unusual for traders to place more than 100 trades a day.
The requirements for this strategy are as follows:
- Instruments: any currency pair
- Time frame: 1-minute
- Indicators: Stochastic Oscillator (5, 3, 3) and two Exponential Moving Averages (EMA) 50-period & 100-period
- Preferred sessions: London and New York – high volatility
Whilst you can use this Forex scalping strategy with any currency pair, it might be easier to use it with major currency pairs, as they tend to have the lowest available spreads. Additionally, this approach might be most effective during high volatility trading sessions, which are usually New York closing and London opening times.
Let’s look at an example of how the 1 minute scalping strategy works in action. Below, you can see a chart of the GBP/USD currency pair complete with the Forex scalping indicators highlighted above. The 50-period EMA is red, whilst the 100-period EMA is green.
Buy (Long) Entry Point
Now you have applied the Forex scalping indicators to your chart, you need to wait for an entry signal.
The signal for a long order is as follows:
- Any time the red 50-EMA indicator surpasses the blue 100-EMA indicator, be ready to open a long order.
- Make sure the price is close to the EMA indicators, and when the Stochastic rises above the 20 level, open a long position.
To minimise your risk, you can also place a stop-loss at 2-3 pips below the last low point of a particular swing. As the Forex 1 min scalping strategy is a short-term one, it is generally expected that you will gain between 8-12 pips on a trade, which is where you should place the take profit.
Long Entry Example
In the chart below, the red vertical lines mark where the long entry conditions have been satisfied.
Sell (Short) Entry Point
The signal for a short order is as follows:
- To determine when to make a short order, use the opposite of the buy strategy conditions
- The red 50-EMA indicator should be below green 100-EMA, and the price should be close to these lines.
- The Stochastic Oscillator must be crossing below the 80 level.
Again, stop-losses are positioned near 2-3 pips above the last high point of the swing, and take-profits should remain within 8-12 pips from the entry price.
Short Entry Example
In the chart below, the red vertical lines mark where the short entry conditions have been satisfied.
Pros and Cons of the Forex 1 Min Scalping Strategy
To determine whether the Forex 1 min scalping strategy may prove useful for your style of trading, let’s take a look at the advantages and disadvantages of the scalping strategy.
- Brief exposure to the market reduces the possibility of running into unforeseen, adverse events.
- Relatively small movements are easier to achieve. A larger supply and demand imbalance is required to ensure bigger price changes.
- The main logic behind scalping is that smaller moves occur far more frequently than larger ones.
- Even when the markets are comparatively quiet, a good Forex scalping strategy can still provide opportunities.
- A large deposit is needed.
- A 1-minute scalper requires quick reflexes, good instincts and mathematical skills.
- It can be difficult to follow a Forex scalping strategy and maintain a good risk to reward ratio. For instance, with a ratio of 2:1, your take-profit at 10 pips requires a stop-loss at 5 pips, making it too close not to get stopped out in many cases.
- The 1 minute scalping strategy is time-consuming and may lead to stress.
It all depends on the individual in question. You have to see for yourself whether this is a strategy that would suit your individual preferences.
How to Choose a Forex Scalping Broker
You may be surprised to learn that some brokers do not actually allow scalping and prevent you from closing trades that last for less than three minutes or so. Therefore, when it comes to selecting the Forex scalping broker for your scalping strategy, the obvious first step will be to eliminate any brokers which do not permit Forex scalping trading systems.
As mentioned earlier in this article, you should also generally avoid all of the brokers that cannot provide you with either an STP or an ECN execution system, as scalping Forex with a dealing desk may hinder your ability.
Now, when you have a smaller list of available brokers, you should start looking at the instruments for your trading and their pricing amongst the brokers. Many brokers do have some commissions. This is not necessarily a bad thing - you just need to include the commission into your calculations when you try to determine the cheapest broker. Nevertheless, pricing should not be the only point that matters when you are selecting a broker that will enable you to scalp Forex.
Finding a good, reliable broker is a crucial step, not just for scalpers, but for all types of traders. Several aspects should be taken into consideration before selecting your broker - here are the key criteria:
- Competitive spreads and costs
- High-speed execution
- Order execution quality
- Authorised and regulated by respected financial authorities such as the FCA (Financial Conduct Authority)
- Secured funds with a reliable bank(s)
As well as all of the above, Admirals also offers the following:
- Spreads starting from 0 pips on Forex major pairs
- Market execution with no re-quotes
- Low slippage and rejection rates
- Deep liquidity from top-tier liquidity providers
- High execution speeds from 4 milliseconds
- Advanced tools and platform options
- Education and webinars
- Analysis of the financial markets
Scalpers who are new to trading often do not realise that execution is a key factor, besides the presence of competitive spreads. The best way to find out whether a broker is a good match for you is by simply testing your Forex scalping strategy using a demo trading account.
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Key Components of the Best Forex Scalping Strategies
Any Forex scalping system focuses on exact movements which occur in the currency market, and relies on having the right forex scalping strategy, tools and discipline to take advantage of them.
Here are some of our top tips to keep in mind for successful Forex scalping.
1. Risk Management
As profits from Forex scalping strategies tend to be small, almost all scalping methods use larger than normal leverage. While leverage can amplify profits, it can also amplify losses, leading to higher risk. Therefore, risk management is key. For scalpers who use a stop-loss as part of their trading strategy, a higher leverage ratio may be acceptable.
Using high leverage is particularly risky during news or economic releases, wherein wide spreads can occur, and the stop-loss might not be triggered. To prevent this, it is advisable to use an appropriate leverage ratio when scalping during periods of high unpredictability.
A profitable Forex scalping strategy requires an understanding of market conditions and trading risks. Traders always have to keep in mind that they should never trade more than they can afford to lose.
Trading beyond your safety limits may lead to financially damaging outcomes. Be careful not to take an enormous risk, and be sure to exercise risk management in your trading, whether scalping Forex or otherwise.
2. Trading Discipline
Forex scalping systems demand a certain level of mental endurance. To make profits in scalping, a trader must be able to control their emotions, remain calm and keep their composure. Emotional responses can cause traders to make bad decisions.
3. Understand Market Conditions for Scalping
Gaining profit in a Forex scalping strategy mostly relies on market conditions. Accordingly, Forex scalping often denotes difficult trading market conditions - and scalping systems need to be able to adapt to the changing nature of the market.
4. Define Your Goals
For the best systems, traders should first define their goals. Of course, the purpose of entering the market for traders is to gain profit, but when trading with Forex scalping strategies, you have to remember that the profits will be low.
No matter what style a trader chooses for their trading, they need to make sure it suits them and that they feel comfortable with it. A well planned, disciplined and flexible strategy is the main feature of any successful Forex scalping trading system.
Scalping can be an extremely effective trading style and the same can be said of the Forex 1-minute scalping strategy. However, it is important to understand that scalping is hard work. Scalpers are rewarded for quantitative work. The more they perform, the larger potential profits they achieve. In the end, your trading strategy has to match not only your personality, but also your trading style and abilities.
If you are interested in learning other Forex scalping strategies, you may want to read our articles on Bollinger Bands or the Stochastic Oscillator.
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This material does not contain and should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments. Please note that such trading analysis is not a reliable indicator for any current or future performance, as circumstances may change over time. Before making any investment decisions, you should seek advice from independent financial advisors to ensure you understand the risks.