What is Scalping Trading? A Detailed Guide for Beginners

Swing trading or scalping trading is a trading strategy focused on capturing small price movements in the market. Over a short period, usually a few minutes, traders open and close multiple orders in succession to accumulate profits from these price differences.

How Does Scalping Trading Work?

Basic Definition: Scalping trading or short-term trading is a method of making profits by executing many small trades within a day. Instead of waiting for large price swings, scalpers take profits when reaching a target of 3-10 pips and repeat this process dozens of times.

Real-life Example: Suppose you trade the EUR/USD pair, open a buy order with a profit target of 5 pips. During a trading session, you might perform 20-30 similar trades, each earning 5 pips. In total, you could earn 100-150 pips in a day, equivalent to $1,000-$1,500.

Time Frame: Scalpers typically operate on 1-minute, 5-minute, or 15-minute charts. This strategy suits those who want quick wins or losses and do not want to hold positions overnight.

Why Do Many Traders Choose Scalping Trading?

###Main Advantages

Risk Minimization: Each trade targets small profits, so the market fluctuation is not large. You can set a stop-loss at 1.5-2 pips to avoid deep losses if the market suddenly reverses.

Easier to Execute: Making 3-5 pips per trade is easier than aiming for 30-50 pips. In the forex market, currency pairs are constantly volatile, creating many opportunities to exploit small movements.

Low Starting Capital: You can start scalping trading with a very small amount, just from $50. With 1:200 leverage, you only need $5 to trade 0.01 lots of EUR/USD.

Many Trading Opportunities: The forex market operates 24/7, especially during the overlap between London and New York sessions (around 19h-23h Vietnam time) with high liquidity, ideal for scalping.

###Challenges

• High transaction costs: Each open/close incurs fees, so choosing a platform with low spreads is essential.
• Time-consuming: Requires continuous chart monitoring and high concentration.
• Psychological risks: Dozens of trades daily can lead to mistakes and impulsive decisions.

Essential Technical Tools for Scalping Trading

To succeed in scalping, you need to master technical indicators:

• Trend Indicators: EMA (Exponential Moving Average), MACD
• Momentum Indicators: RSI (Relative Strength Index), Stochastic Oscillator
• Volatility Indicators: Bollinger Bands, Parabolic SAR
• Candlestick Patterns: Pin bar, Inside bar, other Japanese candlestick patterns
• Price Analysis: Support/Resistance, trendlines

Three Effective Scalping Trading Strategies

Strategy 1: Trend Following Scalping with Pin Bar Candles

Setup: 5-15 minute timeframe, using RSI (6-period), EMA 21, SMA 50

Implementation:

• Identify the main trend on the chart
• Look for Pin bars (with short body and long wicks) – reversal signals
• Confirm with RSI: overbought (>70) or oversold (<30)
• Enter with a risk/reward ratio of 1:2 (risk 1 to gain 2)
• Place stop-loss a few pips below the lowest point of the Pin bar

Strategy 2: Bollinger Bands Squeeze

Setup: 5-minute chart, Bollinger Bands (20, 0, 2), Stochastic (5,3,3), EMA 200

Implementation:

• Wait for Bollinger Bands to narrow (squeeze) – indicating reduced volatility
• When a candle breaks out of the bands, check if Stochastic is overbought/oversold (>80 or <20)
• Confirm price position relative to EMA 200: buy when above EMA, sell when below EMA
• Avoid trading during major news releases

Strategy 3: 1-Minute Chart Trading

Setup: 1-minute timeframe, EMA 50, EMA 100, Stochastic (5,3,3)

Implementation:

• Wait for EMA 50 to cross EMA 100: from below = uptrend, from above = downtrend
• Wait for the first pullback (price correction) to avoid false signals
• Use Stochastic to pinpoint entry points accurately
• Best suited for EUR/USD due to low spread

Things to Know Before Starting

1. Initial Capital: Scalping trading only requires $50-100 to start, but beginners should avoid high leverage. Starting with 1:5 or 1:10 on major currency pairs is recommended.

2. Risk Management is Crucial: Never risk more than 1-2% of your account on a single trade. If your account has $1,000, only risk a maximum of $10-$20 per trade.

3. Trading Discipline: Stick to your strategy, do not change rules based on emotions. Dozens of trades daily can lead to mistakes.

4. Transaction Costs: With many trades daily, choose currency pairs with low spreads (EUR/USD, GBP/USD) and a platform with competitive fees.

5. Timing and Focus: Scalping is not suitable for those working regular hours. You need to monitor the market continuously during trading sessions.

Is Scalping Trading Legal?

Yes, scalping trading is fully legal and widely used in forex, stock, and cryptocurrency markets. Many major brokers support scalping without restrictions.

How Much Can You Earn from Scalping?

Profits depend on:

• Number of trades: 50-100 orders daily is typical
• Win rate: Maintaining a 55:45 win ratio ensures steady profits
• Capital management: Risk 1-2% per trade to protect your account

For example: If you make 50 trades daily, each earning 5 pips, with a 55% win rate, you can earn 137 pips per day (net profit).

Tips for New Scalpers

1. Practice on a demo account first: Most brokers offer free demo accounts to test strategies without risking real money.

2. Start small: Even with 1-2 lots, begin live trading after mastering your skills.

3. Keep a trading journal: Track each trade, reasons for entry and exit to learn from experience.

4. Choose optimal trading times: The overlap between New York and London markets (19h-23h Vietnam time) has the highest liquidity.

5. Don’t trade when tired: Scalping requires high concentration. If tired or in a bad mood, take a break.

Conclusion

Scalping trading is an attractive strategy for those who enjoy daily trading, want to learn technical analysis, and have limited capital. However, success requires discipline, strict risk management, and dedicated practice. Start with a demo account, develop your own strategy, and always remember: small profits from many healthy trades are better than risking on a single large trade.