New and inexperienced traders are continually searching for strategies to improve their trading. In this article, we will take you through a couple of the best one (1) minute scalping trading strategies available.
Each of these strategies can be used for stock, commodity, cryptocurrency, equity or forex trading. We will take you through:
- What is scalping
- The strategies variables
- How to enter buy and sell positions
- Where to place stop-losses and take-profits
- The advantages and disadvantages of scalping
What Is Scalping?
Scalping can be defined as a trading style where a trader capitalises and profits from small price movements. The goal of scalping is to take as many small profits as possible. The trades are usually held for a short period, and the trader executing a scalping strategy will not hold positions overnight.
Scalping requires a very strict exit strategy, as one large loss could eliminate the many small gains you could obtain.
Now let us take a look at how scalping works.
How Scalping Works?
Forex scalping is a trading style used by forex traders to buy or sell a currency pair and then hold it for a short period of time in an attempt to make a profit. While scalping attempts to capture small gains, such as 5 to 20 pips per trade, the profit on these trades can be magnified by increasing the position size.
The main premises of scalping are:
- Lessened exposure limits risk: A brief exposure to the market diminishes the probability of running into an adverse event.
- Smaller moves are easier to obtain: A bigger imbalance of supply and demand is needed to warrant bigger price changes. For example, it is easier for a stock to make a $0.01 move than it is to make a $1 move.
- Smaller moves are more frequent than larger ones: Even during relatively quiet markets, there are many small movements a scalper can exploit.
To understand scalping further, let us take a look at 1-minute scalping strategy variables.
Scalping Strategy 1
This 1 minute scalping strategy is really easy to learn and can be extremely profitable if used correctly.
So, what do you need to get started with this strategy?
- Asset: You ideally want to be trading an asset that is currently trending
- Time frame: Your chart should be set to a one-minute time frame
- Indicators: You'll need to use tStochastic 5, 3, 3 and 50 EMA/100 EMA
- Sessions: Trade in the highly volatile New York and London trading sessions
How To Enter A Long Position
Let's focus on how to enter a long position on the strategy. A buy position in scalping strategy will need to meet the following criteria:
- To enter a buy position, we first need to wait until the 50 EMA (Exponential Moving Average) is above the 100 EMA.
- Secondly, we need to wait for the price action to return to the EMA's.
- Finally, the Stochastic Oscillator must break above the 20 level.
If all three of these have occurred, there is now an opportunity to open a buy order (long position), fantastic!
How To Enter A Short Position
To enter a short position and sell, you will need the following to happen:
- The 50 EMA needs to be under the 100 EMA.
- Similar to the buy entry, you should wait for the price to reach the EMAs.
- The Stochastic Oscillator must then break below the 80 level before you open your sell order.
Stop-Loss & Take-Profit Levels
The SL and TP levels for this strategy are set out below:
- Take-profit: The ideal take-profit level for this strategy is 8-12 pips from your entry.
- Stop-loss: The best place for a stop-loss is around two to three pips under or above the most recent swing level.
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Scalping Strategy 2
The next strategy is easier to understand and follow, so let's get straight into what you will need to make it work:
- Asset: Assets with a lot of volatility ( e.g.currency pair such as the EUR/USD)
- Time frame: For this scalping strategy, you will need to use the thirty-minute and one minute chart.
- Indicators: For this strategy, you will only need the Bollinger band set up.
- Sessions: Again, the ideal sessions for this strategy are the New York and London sessions.
How To Enter A Long Or Short Position
To enter a position using this strategy there are only two things you need to be aware of, so I have grouped them into one.
- Firstly, you need to determine the trend and market conditions using the 30-minute timeframe
- If the price is in an uptrend then you enter a buy position once price has breached the lower Bollinger band.
- If the price is in a downtrend then you enter a sell position once price has breached the upper Bollinger band.
Take-Profit & Stop-Loss Levels
- As you may have seen from the picture, profit targets should be where price touches the opposite Bollinger band.
- Stop-loss levels should be set 2-3 pips above or below the candle that broke the Bollinger band.
Of course, with all types of trading plans, there are advantages and disadvantages, and one-minute scalping trading strategies in the forex market are no different.
Advantages of Scalping
- Minimised risk as the trade is only open for a short period
- The trading plans allow for more frequent trades as they are smaller in size
- Finally, the strategies provide many potential entries throughout the day
Disadvantages of Scalping
- Novice scalpers might be at risk of losing if they haven't carried out thorough backtesting
- Keeping a positive risk-to-reward ratio can be challenging
- There is a high risk of many consecutive losses
- These strategies require you to dedicate a significant amount of time in front of the charts
The Bottom Line
On the surface, scalping strategies appear simple and more lucrative than swing trading due to the fact that traders have the ability to collect a full day’s profit in just a few minutes.
In reality, however, the successful implementation of 1-minute scalping strategies can create unexpected challenges, and so, it should be understood that scalping strategy is only suitable for certain types of trading personalities.
Successful scalpers must show:
- A high level of discipline and
- Be willing to follow the parameters of a trading system at all times.
- Scalpers are often required to make important decisions without hesitating
- At the same time, scalpers are flexible and recognise the differences between a trade that’s working and one that isn’t.
In the end, a successful scalper is a person that’s able to play to the strengths of the market and exit trades at highly favourable moments.
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Scalping can be considered a good strategy as this technique is really easy to learn and can be extremely profitable if used correctly. But keep in mind that scalping requires a very strict exit strategy, as one large loss could eliminate the small gains.
Scalping is usually between 5 to 20 pips per trade, the profit on these trades can be magnified by increasing the position size.