Scalping Strategy: Making Money from Small Price Moves

Scalping is one of the most active and exciting trading styles, involving dozens or even hundreds of trades per day to capture small price movements. Scalpers aim for quick profits, often holding positions for just seconds to minutes. While demanding and intense, scalping can be highly profitable for traders with the right temperament, fast execution, and strict discipline.

What is Scalping?

Scalping Definition: A high-frequency trading strategy that aims to profit from very small price movements by entering and exiting positions rapidly, sometimes within seconds, multiple times throughout the day.

Typical Characteristics:

• Hold Time: Seconds to minutes
• Profit Target: 5-20 ticks/pips per trade
• Trade Frequency: 20-200+ trades per day
• Win Rate: 60-80% (high frequency requires high accuracy)
• Risk-Reward: Often 1:1 or less (volume makes up for it)

vs Other Styles:

• Day Trading: Hours, 5-10 trades/day
• Swing Trading: Days, 2-5 trades/week
• Scalping: Minutes, 50-100 trades/day

Is Scalping Right for You?

Scalping Suits You If:

✅ You Have Time:

• Can dedicate 4-6 hours of focused attention
• Available during peak market hours
• No distractions during trading

✅ You're Mentally Quick:

• Fast decision-making
• Can process information rapidly
• No hesitation or second-guessing

✅ You Handle Stress Well:

• Comfortable with rapid pace
• Don't get rattled by losses
• Can maintain focus for hours

✅ You're Disciplined:

• Follow rules without deviation
• Cut losses immediately
• Take profits at target

✅ You Have Fast Execution:

• Good broker with fast fills
• Reliable internet connection
• Professional trading platform

Scalping is NOT for You If:

❌ Limited time during market hours ❌ Slow decision-making process ❌ Get stressed by rapid trading ❌ Emotional or revenge trade ❌ Slow internet or platform ❌ Small capital (<$5,000) ❌ Prefer slow-paced analysis

Best Markets for Scalping

Forex (Most Popular)

Why Forex is Best for Scalping:

• Highest liquidity globally
• Tight spreads (1-3 pips)
• Leverage available
• 24-hour market
• Fast execution

Best Pairs:

• EUR/USD: Tightest spreads, highest liquidity
• GBP/USD: Good volatility, decent spreads
• USD/JPY: Stable, predictable
• EUR/GBP: Lower volatility, good for beginners

Best Times:

• London Open (3am-5am ET) - highest volume
• London/NY Overlap (8am-12pm ET) - most volatile
• Avoid: Asian session (low volatility)

Futures

Popular Scalping Instruments:

• ES (E-mini S&P): Most liquid, tight spreads
• NQ (Nasdaq): More volatile, bigger moves
• YM (Dow): Smaller contract size
• CL (Crude Oil): High volatility

Advantages:

• No PDT rule (pattern day trader)
• High leverage
• Pure technical trading
• Tight spreads

Considerations:

• Higher capital requirements
• Commissions per contract
• Fast-moving markets

Stocks (Challenging)

Can Be Scalped But:

• Need $25k minimum (PDT rule)
• Wider spreads than forex
• Commissions add up
• Need very liquid stocks

Best Stocks for Scalping:

• SPY (S&P 500 ETF)
• QQQ (Nasdaq 100 ETF)
• High volume stocks (>10M shares/day)
• Stocks in play (news, earnings)

Best Time:

• First 30-90 minutes after open
• Last 30 minutes before close
• Avoid midday (low volume)

Crypto (24/7 but Risky)

Considerations:

• High volatility (good and bad)
• Spreads can be wide
• Slippage on entries/exits
• Flash crashes possible
• 24/7 can be exhausting

Best Cryptos:

• BTC/USD (most liquid)
• ETH/USD (good volatility)
• Major pairs on large exchanges

Scalping Strategies

Strategy 1: Market Making / Bid-Ask Spread

Concept: Place buy orders at bid, sell orders at ask, capture spread

How It Works:

• Place limit order at bid ($100.00)
• Place limit order at ask ($100.05)
• Get filled on both = Profit the spread ($0.05)
• Repeat hundreds of times

Requirements:

• Very fast execution
• Advanced platform
• Extremely liquid markets
• Understanding of order flow

Pros: No directional bias needed Cons: Requires very fast fills, advanced skill

Strategy 2: Momentum Scalping

Concept: Trade in direction of short-term momentum burst

Setup:

• Watch for quick momentum move
• Enter in direction of move
• Take quick profit (5-10 pips)
• Exit before momentum fades

Entry Signals:

• Strong candle breaks recent high/low
• Volume surge
• Order flow showing direction
• Level 2 confirms

Exit:

• Fixed profit (5-10 pips)
• Or when momentum slows
• Or at resistance/support

Example:

• EUR/USD at 1.1000
• Strong buying pressure
• Break 1.1005
• Enter long immediately
• Target: 1.1010 (5 pips)
• Stop: 1.0998 (7 pips)
• Hold: 30 seconds to 2 minutes

Strategy 3: Range Scalping

Concept: Buy at support, sell at resistance in ranging market

Setup:

• Identify clear range (tested levels)
• Wait for price at support/resistance
• Enter mean-reversion trade
• Quick exit at middle or opposite

Entry:

• Price touches support (buy)
• Or touches resistance (sell)
• Reversal candle or order flow

Exit:

• Middle of range
• Or opposite side
• Or fixed profit (range dependent)

Example:

• EUR/USD range 1.0950-1.1000
• Price touches 1.0950 (support)
• Enter long
• Target: 1.0975 (middle) = 25 pips
• Stop: 1.0945 = 5 pips
• Risk-reward: 1:5

Strategy 4: Breakout Scalping

Concept: Trade breakouts from small consolidation patterns

Setup:

• Identify 5-15 minute consolidation
• Mark support/resistance
• Wait for breakout
• Enter immediately

Entry:

• Price breaks level
• Volume confirms
• Enter in breakout direction
• Very quick entry (seconds matter)

Exit:

• Quick profit (measured move)
• Or when momentum fades
• Usually 1-3 minutes

Example:

• ES consolidates 4500-4505 for 10 minutes
• Breaks 4505 on volume
• Enter long 4505.25
• Target: 4510 (measured move)
• Stop: 4502
• Hold: 1-2 minutes

Strategy 5: News Scalping

Concept: Trade immediate reaction to economic news

Setup:

• Know major news times (8:30am ET, etc.)
• Wait for release
• Trade initial momentum
• Very quick entry/exit

Entry:

• News released
• Immediate directional move
• Enter in direction of spike
• Within seconds

Exit:

• Take quick profit (volatility high)
• Usually 30-90 seconds
• Before reversal/consolidation

Risk:

• High volatility
• Wide spreads at release
• Slippage common
• Requires experience

Scalping Timeframes

1-Minute Chart (Most Common)

Characteristics:

• Very fast-paced
• Lots of noise
• Clear trends still visible
• Good balance speed/clarity

Best For:

• Active scalpers
• 50-100 trades/day
• Quick reactions

Tick Charts (Advanced)

Characteristics:

• New bar every X ticks (e.g., 233 ticks)
• Faster during high volume
• Slower during low volume
• More responsive than time-based

Best For:

• Experienced scalpers
• Order flow trading
• Futures scalping

5-Minute Chart (Slower Scalping)

Characteristics:

• Less noise
• Clearer trends
• Longer holds (5-15 minutes)
• Good for beginners

Best For:

• Learning scalping
• Less stressful
• Still high frequency (20-40 trades/day)

Essential Scalping Tools

Platform Requirements

Must-Haves:

• Fast Execution: Sub-second fills
• Stable: No crashes or freezes
• Hotkeys: One-click trading
• Level 2 / DOM: Order flow visibility
• Good Charts: Clear, fast-updating

Recommended Platforms:

• Forex: MetaTrader 4/5, cTrader
• Futures: NinjaTrader, Sierra Chart, TradingView
• Stocks: Thinkorswim, Interactive Brokers

Indicators for Scalping

Volume:

• Shows activity and interest
• Volume spikes = opportunities
• Essential for all styles

Moving Averages:

• 9 EMA, 20 EMA (trend direction)
• Price above = long bias
• Price below = short bias
• Simple and effective

VWAP (Volume Weighted Average Price):

• Institutional level
• Price above = bullish
• Price below = bearish
• Mean reversion trades

Order Flow / DOM:

• Shows real-time orders
• Buying/selling pressure
• Large orders at levels
• Advanced but powerful

Tape Reading:

• Shows executed trades
• Size and aggression
• Institutional activity
• Takes time to master

Internet and Hardware

Internet:

• Minimum: 50 Mbps down, 10 Mbps up
• Wired connection (not WiFi)
• Backup connection (mobile hotspot)
• <50ms latency to broker

Computer:

• Fast processor (Intel i5 or better)
• 8GB+ RAM
• SSD hard drive
• Multiple monitors (optional but helpful)

Risk Management for Scalpers

Position Sizing

The 0.5% Rule:

• Scalpers often risk less per trade (0.5%)
• Higher frequency = more risks per day
• Protects from one bad session

Example:

• $10,000 account
• 0.5% risk = $50 per trade
• Stop loss: 5 pips
• Position size: $10 per pip (0.1 lot EUR/USD)

Stop Loss (Critical!)

Always Use Stops:

• 5-10 pips typically
• Technical-based (support/resistance)
• Never trade without stop
• Mental stops DON'T work in scalping

Stop Placement:

• Below recent swing low (long)
• Above recent swing high (short)
• Or fixed (5 pips, 2 points, etc.)
• Tight but realistic

Cut Quickly:

• If wrong, exit immediately
• Don't wait for stop
• Small losses are fine
• Many trades ahead

Daily Loss Limit

Critical for Scalpers:

• Set maximum daily loss (e.g., 3% of account)
• If hit, STOP trading for the day
• Prevents blowup
• Protects capital

Example:

• $10,000 account
• Daily loss limit: 3% = $300
• Lose $300 in morning = done for day
• No exceptions

Scalping Rules

Rule 1: Pick ONE Market

Why:

• Each market has personality
• Need to know it intimately
• Master one before expanding
• Trying multiple = confusion

Recommendation:

• Start with EUR/USD (forex)
• Or ES (futures)
• Trade ONLY that for 3-6 months
• Become expert in one market

Rule 2: Trade Peak Hours Only

Why:

• Volume = liquidity = tight spreads
• Low volume = wide spreads = unprofitable
• Predictable behavior during peak times

Best Hours:

• Forex: London session, London/NY overlap
• Futures: 9:30am-11:30am ET, 2pm-4pm ET
• Stocks: First 90 min after open
• Avoid: Lunch, overnight, holidays

Rule 3: Never Add to Losers

Critical:

• In scalping, if wrong, you're WRONG
• Don't average down
• Don't hope for reversal
• Exit immediately

Why:

• Small loss becomes big loss fast
• Scalping requires high win rate
• One big loss wipes many small wins
• Discipline is everything

Rule 4: Take Profits at Target

Problem:

• Greed makes you hold
• Momentum fades
• Profit becomes loss

Solution:

• Set profit target before entry
• Take profit when hit
• Don't hope for more
• Many trades ahead

Rule 5: Track Everything

What to Track:

• Every trade (entry, exit, P&L)
• Win rate per session
• Average win vs average loss
• Best times of day
• Which setups work best

Why:

• Find what works
• Eliminate what doesn't
• Continuous improvement
• Objective data

Common Scalping Mistakes

Mistake 1: Over-Trading

Problem:

• Taking too many trades
• Lowering standards
• Forcing trades
• Giving back profits

Solution:

• Quality over quantity
• Only A+ setups
• Take breaks every hour
• Walk away when daily target hit

Mistake 2: Wrong Market Conditions

Problem:

• Scalping in low volatility
• Wide spreads
• Choppy, directionless
• Frustrating, unprofitable

Solution:

• Only trade during peak hours
• Need volatility and volume
• Check ATR (volatility)
• Walk away if conditions poor

Mistake 3: Holding Too Long

Problem:

• Quick scalp becomes swing trade
• Small loss becomes big loss
• Defeats purpose of scalping

Solution:

• Set time limit (e.g., 5 min max)
• If not working quickly, exit
• Don't hope for recovery
• Next trade is opportunity

Mistake 4: Ignoring Costs

Problem:

• Spreads and commissions eat profits
• Need to calculate cost per trade
• Many small trades = big costs

Solution:

• Use ECN broker (tight spreads)
• Negotiate commissions
• Calculate: Profit must exceed costs
• Track net profit after costs

Mistake 5: No Trading Plan

Problem:

• Random entries
• Inconsistent rules
• Can't improve
• Emotional trading

Solution:

• Written scalping plan
• Define setups clearly
• Entry/exit rules
• Review daily

Scalping Mindset

Stay Mechanical

Key:

• Follow rules robotically
• No emotions
• No revenge trading
• No euphoria on wins
• No depression on losses
• Next trade is all that matters

Accept Losses

Reality:

• You will have losing trades
• Many of them
• Even with 70% win rate = 30% losers
• Small losses are EXPECTED
• Part of the business

Focus on Process

Not Results:

• Don't focus on P&L during session
• Focus on executing plan
• Following rules = success
• Money is byproduct

Take Breaks

Essential:

• 5-10 minute break every hour
• Clear head
• Avoid fatigue
• Maintain sharpness

Scalping Performance Metrics

Target Win Rate

Realistic:

• Beginners: 60-65%
• Experienced: 70-75%
• Experts: 75-80%

• 80% = rare, unsustainable

Profit Target

Daily:

• 1% of account = good day
• 2% = great day
• 3% = exceptional day
• Consistent 1%/day = 20%/month

Example:

• $10,000 account
• Target: 1% = $100/day
• 20 trading days = $2,000/month
• Very achievable

Risk-Reward

Typical:

• 1:1 to 1:2 risk-reward
• Volume compensates
• Win rate must be >60%

Example:

• Risk: 5 pips
• Reward: 7 pips
• Win rate: 70%
• Profitable system

Conclusion: Speed and Discipline

Scalping is not for everyone, but for those with the right temperament, fast execution, and unwavering discipline, it can be highly profitable. Success requires complete focus, mechanical execution, and acceptance that losses are part of the business.

Key Takeaways:

• Start with EUR/USD or ES - learn one market deeply
• Trade peak hours only - volume and liquidity essential
• Risk 0.5% per trade - high frequency requires smaller risk
• Always use stop losses - 5-10 pips typical
• Daily loss limit - 3% max, then stop
• Track everything - data reveals what works
• Stay mechanical - emotions = death in scalping

Getting Started:

1. Demo trade for 1 month minimum
2. Master one strategy
3. Trade one market only
4. Start with 0.5% risk
5. Track all trades
6. Review daily performance
7. Improve continuously

Ready to master scalping and profit from small price moves? Join our comprehensive trading course where we teach professional scalping strategies, execution techniques, and risk management specifically designed for high-frequency trading.

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