The Ultimate Guide to Scalping: Master This Short-Term Trading Strategy

▶ What does scalping mean in the trading world?

Within the stock market universe, we find multiple approaches to generate returns: scalping, which is a methodology that seeks to execute a high volume of trades in extremely short time frames; intraday trading; and longer-term positions. The fundamental distinction lies in the duration of each open position.

Scalping is the strategy that requires the most vigilance from the trader, as movements are minimal and transactions can be closed within minutes or even seconds. This approach simultaneously represents the fastest way to multiply or lose capital in the market. The number of viable trades in a day depends on available liquidity and trading hours.

The main goal is to execute numerous entries that generate small profits per trade, accumulating gains throughout the session. Constant dedication is essential, allowing positions to be taken almost at any moment when markets are active.

▶ Fundamental requirements to start scalping

Contrary to what many believe, scalping is an activity that goes beyond mere technical knowledge. It requires a deep understanding of the chosen asset, quick decision-making skills, and cutting-edge technological tools.

Required technological infrastructure:

A trading platform that provides real-time quotes without significant delays in price information. It is recommended to work with charts of short periods, maximum 15 minutes, ideally 5 minutes or less. The execution system must connect directly to your broker’s servers, allowing orders to be placed in less than a second. Internet connection must be reliable and fast, avoiding disconnections that could ruin potentially profitable trades.

Key psychological factor:

This aspect outweighs any tool or indicator. You must master discipline, self-control, and emotional management. This involves setting what percentage of your capital you will use per trade, establishing stop loss (stop loss) and take profit (take profit) targets, and maintaining the strategy without deviations.

▶ Four critical pillars in scalping

1️⃣ Market liquidity

Your best ally, defining how easily prices can move. The global currency market has the most robust liquidity, with thousands of traders generating continuous movement in currency quotes. Greater liquidity means more opportunities in both bullish and bearish positions, optimizing profits in both directions.

2️⃣ Asset volatility

Although it may seem beneficial, excessive volatility poses significant risk. Sudden movements in short periods generate slippage and hinder execution at desired prices. Cryptocurrencies exemplify this: Bitcoin can fluctuate by 200 dollars in a minute, complicating scalping even for experienced traders.

3️⃣ Spread and cost structure

Every broker charges the difference between buy and sell prices. For example, in EURUSD you might see: Buy 1.05424 – Sell 1.05430, generating a spread of 0.6 pips. These costs vary depending on the intermediary and their transaction commission. Smaller spreads facilitate scalping profitability, especially considering the volume of daily trades.

4️⃣ Trading hours

London and New York sessions concentrate the highest volume of transactions and liquidity. During the Asian session, movements are so limited that scalping becomes unviable. This synchronization is crucial to identify real opportunities.

Ideal versus problematic assets:

Forex and stock indices offer high liquidity and controlled volatility, trading Monday through Friday with multiple viable pairs (EURUSD, GBPUSD, USDJPY). Individual stocks have short sessions (8 hours) and lower relative liquidity. Cryptocurrencies, although operating 24/7 and having considerable liquidity, suffer from extreme volatility that requires advanced experience to trade profitably.

▶ Technical tools: Main indicators for scalpers

Each trader develops their own style, but certain indicators are prevalent among professionals:

Exponential Moving Average (EMA)

Shows the current trend and the average price over a specific period. Popular strategies suggest opening positions when two EMAs of different periods cross, generating reliable entry signals.

Relative Strength Index (RSI)

Measures momentum in price changes, anticipating trend reversals. Readings above 70 indicate overbought (or sell opportunity), while values below 30 signal oversold (buy opportunity).

Stochastic Oscillator

Works similarly to RSI but with different thresholds: 80 for oversold and 20 for overbought. Projects the probable duration of the current trend, complementing RSI-based analysis.

MACD (Moving Average Convergence-Divergence)

Captures momentum changes through the divergence and convergence of two moving averages. Crosses of lines generate buy or sell signals, particularly useful in fast-paced scalping.

▶ Practical execution: Step-by-step in a real trade

Using the EURUSD example with real spreads:

• Buy: 1.05430
• Sell: 1.05424

Trade structure:

You buy 0.01 lots at 1.05430 (market sell price), risking 2% of your capital (2 USD from a 100 USD account). You place a stop loss at 1.05230 and a take profit at 1.05630. The price reaches your target, closing the position with a 20 pip profit, equivalent to 2 USD. Your balance increases to 102 USD.

Trade metrics:

• Lot size: 0.01 contracts
• Spread: 0.6 pips
• Entry: 1.05430
• Exit: 1.05630
• Pips gained: 20
• Dollars earned: 2 USD

Each successful close yields 2% return; each stop loss causes an equivalent loss. Operating with discipline, you could execute more than 10 trades daily, generating consistent returns.

▶ Advantages and limitations of scalping

Positive aspects:

Risk is minimized thanks to short exposure periods. Potential gains multiply by executing multiple trades daily. There is flexibility to diversify across different assets and currency pairs. You maintain full autonomy over your decisions. Results are immediate, allowing quick adjustments.

Challenges to consider:

Requires extreme concentration during low-liquidity sessions where opportunities are scarce. Accumulated commissions can represent a significant percentage of profits when trading frequently. Dedication is demanding: traders in the New York session must stay connected for 8 hours performing analysis and trades, generating stress especially after consecutive losing streaks.

▶ Do you have the profile of a successful scalper?

Honestly evaluate these questions:

◾ What are your realistic financial goals with this technique? ◾ What is your financial capacity to start without compromising your economic stability? ◾ Do you have time availability to analyze charts during London and New York sessions? ◾ How do you react under pressure and in quick decision-making situations? ◾ Do you have the discipline to follow rules without exceptions?

If you plan to start with small accounts (100 USD), you must be emotionally prepared to lose that capital completely. It will require at least 6 hours daily of analysis. You must have emotional control during positive streaks (avoiding trading more than 2% per transaction) and negative streaks (maintaining confidence). If you meet these requirements and use money that does not affect your subsistence, you have the potential to become a scalper.

▶ Recommended academic and practical preparation

Initial step: Theoretical education

Access courses, seminars, and conferences by specialists. Master fundamental concepts: pip, lot size, leverage, spread, liquidity, volatility, commissions, limit and stop orders, take profit, stop loss.

Intermediate step: Risk-free practice

Create a demo account with virtual money. Experiment, make mistakes, adjust strategies without economic consequences. Study technical analysis tools: Fibonacci levels, supports, resistances, trend identification.

Final step: Broker selection

Analyze multiple intermediaries, comparing conditions, spreads, platform speed, and reliability. Keep updating even after achieving profitability, as markets continually evolve.

Essential warning: Not everyone makes profits with trading. It is not easy money nor guaranteed. There are real risks of total capital loss, and even greater losses if you ignore proper stop loss protections. Some brokers implement protections that close positions before going into negative balance. With patience, discipline, and strict adherence to these recommendations, you can achieve consistency in scalping.