8 Golden Rules For Scalping Forex & Stock Market ~ SAM Trading Tips

Scalping trading might seem like a fast, easy way to make money. Place a trade at high leverage, aim for a few pips, and collect your reward.

Until you lose a couple of times in a row and find that your losses are much bigger than your wins. Scalping seems fun when you're winning, but as soon as you start losing, it's not fun anymore.

So, if you want to scalp the market successfully, you should consider following these rules to improve your odds of succeeding.

1.MINIMIZE THE USE OF INDICATORS

All trading platforms will have a lot of indicators and oscillators. As a trader, you would want to double check every trade before placing it, so it would be tempting to add as many indicators as you can, and then you end up with a cluttered workspace filled with indicators. This is never advisable, for any kind of trader,but when you’re scalping the market, this could end your trading career very quickly.

As a scalper, you would like to catch any minor trends or shifts within the market,which means you would like to form quick decisions. As much as indicators are useful, having too many of them will cause an overload of information, and before you can place a trade after interpreting every single indicator, the price move you were looking for will be gone.

Beginner scalpers always love to trade with lots of indicators. They think this is the best way to find great trades. They overload their charts with too many indicators with a hope to find the best possible trade setups. But when you take readings from too many tools,it’s really hard to predict the price movement of a certain asset, especially on lower timeframes.

You need to have 1 or 2 indicators which you have tried and tested, and put your faith in just those. Do not second-guess your self by adding on more indicators to your workspace.

2. MARRY A TRADING POSITIONS

From a trading perspective, marrying a position means a trader has become emotionally attached to holding it, especially in the face of strong evidence that this is not the right position to be in.

This particular trading error can often result in excessive losses and wasted margin because a transaction intended to be a scalping trade can turn into a day trading position, or, even worst, a swing trading one if you trade without stop loss order.

Successful scalpers generally avoid getting emotionally involved with holding a particular position, especially when the market is clearly telling them they are on the wrong side.

This is especially true if you make the mistake of not using stop loss orders, aka using mental stops.

3. AVOID OVER-TRADING

One of the most important obstacles standing within the way of amateur traders becoming professionals is their lack of recognition and(or) acceptance of the very fact that trading less frequently nearly always produces more consistent and more profitable long-term market performance than

over-trading and interacting with the market too often.

If you have had any experience trading real money in the markets you very likely have experienced first-hand just how slippery the“slope” becomes once you start over-trading, even when you are scalping.

Most traders don’t even recognize they are guilty of over-trading until they have lost so much money that they are forced to take a break from the market. It is when they realize that they entered too many trades with no sound logic or rational behind them.

In essence, amateur scalpers that get caught up in over-trading are simply gambling; continually entering the market randomly while hoping for a windfall profit.

Professional scalping traders have mastered their trading strategy, they trade less frequently than novice traders because they are looking for a very specific event to occur in the market, rather than throwing darts in the dark like so many amateurs do.

4. DON'T NEGLECT RISK MANAGEMENT

Given the number of trades a scalper makes in any single day, it is paramount to lower the amount of margin dedicated to any single trade and minimize risk.

Most scalpers end up giving too much of their focus and time to the wrong aspects of trading. Yes, scalping strategies, trade entries, technical analysis are all very important and you have to know what you’re doing and have a trading plan and understand what your edge is to make money.

But, those things alone are simply not enough. You need the right “fuel” on the fire to make money while scalping the markets.That “fuel” is risk management. The common rule is to never risk more than 1% of your initial deposit on a single trade, so if you have an account with $1,000 in it,you should not place any trade that is above $10 in margin. First, this limits the hit an account can take if the trade goes south.

It also allows you to place multiple trade sat a time without infringing on the margin requirements, even if the trading account as a small capital. By keeping low stakes, the scalper can keep trading even if they make a few losses along the way, which by the way, will happen. Otherwise, if you ignore this rule, you will receive a margin call that can quickly lead to the account being wiped out.

5. CLEAR ENTRIES AND EXITS

Have a solid strategy in place,with clear entries and exits Unlike swing trading or other forms of long-term trading whereby the trader can switch up their trading strategies from one trade to the next, you shouldn’t do this when scalping.

Imagine placing tens of trades in a single day without any specific strategy, that would be chaos, wouldn’t it? You would have no idea which strategy worked,which one didn’t, and it would be impossible to tell what went wrong that made you lose money.

This is why scalping is not meant for beginner traders, but for seasoned traders who have tested and mastered a specific strategy which have worked out in the past.

So you need to master at least one trading setup to be a consistently profitable scalper. And screen time will allow you to master this one setup.After you have mastered one setup and “ownit” you can add another setup.

This can be an ongoing process developing your own style. Before scalping any market, test your strategy in a demo account, and then apply your strategy to your trading day.

6. SCALPING PERSONALITY

The Right Scalping Personality Scalping trading is not for everybody. You have to have the temperament for this risky process.

Scalpers need to love sitting in front of their screens for the entire session,and they need to enjoy the intense concentration that it takes. You cannot take your eye off the market when you are trying to scalp a small move. You will need to be at your screen, staring at the charts continuously for hours. During this time, you will need to be completely focused and put away any distractions. Even if you think you have the temperament to sit in front of the computer all day, you must be the kind of person who can react very quickly without analyzing your every move.

Being able to "pull the trigger" may be a necessary key quality for a scalper. This is also true in order to cut a position when it moves against you. Scalping is very fast-paced. If you like the action and like to focus on one-minute or tick charts, then scalping may be for you.

If you have the temperament to react quickly and have no problems in taking very quick losses, then scalping may be for you. But if you wish to research and think through each decision you create , perhaps you're not suited to scalp trading.

7. KEEP AN EYE ON FINANCIAL ANNOUNCEMENTS

If you compare fundamental and technical analysis of the Forex market, you'll quickly
see that scalpers are mostly technical traders.

However, this does not mean that, as a scalper,you should disregard any data or information on the economic calendar. You should actually be aware of any major financial news announcements on the day you’re trading.

For example, if the Federal Reserve (FED)is about to announce changes in fiscal policies, you might want to be a bit more careful with any trades involving US Dollar pairs or US stocks. Such news announcements can cause the markets to interrupt faraway from the direction your trading instruments were pointing at.

It might cause support and resistance levels to be crossed, perhaps, causing you to be stopped out. Now, I’m not saying that scalpers should avoid these news releases because they can be very profitable, but only if you are on the right side of the trend.

8. CONTROL THE NUMBER OF SIMULTANEOUS TRADES

The beauty of scalping is that you can place numerous trades with low stakes, leaving you with plenty of free margin.

There is nothing wrong with running simultaneous trades at any given time, but you should try to limit the number of trades you have depending on your capital.

Another rule to remember is ever to place more than 3 simultaneous trades based on one currency, if your scalping Forex market. For example, you should not make more than 3 trades that each have the US dollar as the base currency. If you do so, and for some reason the US dollar performs contrary to what you had predicted, then all those trades will be losers, and that will create a huge dent on your capital.

Therefore, if you’re going to place simultaneous trades, make sure you have a variety of currency pairs.

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