Scalping strategies for Forex trading
Category : Robots
Every trader selects their trading system on the basis of their preferences, their understanding of the algorithm, and the ease of making transactions. Any modern FIX API trader has in their portfolio several systems that are suitable for a particular asset or market. Also in the information technology age, the available set of these tools only grows with workflow automation, new methods of analysis and deal making.
One of the strategies, which in my opinion should be at least tried by all traders, is the scalping system. Scalping system is the process of making trading operations, which are carried out in a few minutes with the aim of fixing a minimum price movement (a few points). This strategy will add to the positional or speculative positions day-trading, in order to diversify risks.
Scalping usually takes place on smaller timeframes (M1-M5). Also this type of trading, as I mentioned above, is characterized by short position hold. A trader opens a transaction and keeps it open for about a minute. Thus, a scalping trading algorithm has no complex entrance principles.
Key benefits of scalping strategies:
- A simple algorithm for performing trade operations;
- Combination with various technical indicators;
- The low rate of drawdown;
- Increase in the volume of trading operations (which for someFIX API Forex brokers is an important indicator);
- The ability to combine it with investment positions.
Disadvantages of scalping trading:
- Limited work (it is best to trade currency pairs with high liquidity, where there will be no large spreads);
- Low mathematical expectation of the strategy.
Scalping algorithm can be based on almost every popular method of analysis of a financial instrument. For example, it is possible to trade on this principle using the intersections of simple moving averages, signals from oscillators, recapture of resistance or support zones on the lower timeframes.
Thus, all scalping strategies can be divided into several categories:
- Scalping on the basis of the depth of market: this type is based on the analysis of the positions opened by traders, banks or shopping robots, leaving their claims in a market book. An important parameter for scalping is increased market volatility. On the FIX API Forex it is enough. But when there is information that a large buy or sell order is posted, we should expect impulse movement that will help to extract bigger profits.
- Graphic scalping: this type allows to make deals on the basis of technical figures and hold results thanks to the classical methods of price action analysis.
- Scalping based on technical indicators. As I wrote above, scalping strategy can work with almost any indicators. Important is the fact that the transaction is committed after two or three profitable bars on a small timeframe.
- Arbitration scalping. This type is difficult for a trader to perform. Here trading robots come to help, written specifically for trading via the system of FIX API Latency and 2-Leg Arbitrage. This type is about opening speculative positions on the basis of exchange rate differences at different stock exchanges.
These are the key categories and varieties of scalping strategies on FIX API Forex market. Each of them has its own rules and methods of entering and exiting positions. I’d like to note though, that there is no “best method”. It depends on the frequency of use of the strategy.
Using scalping strategies in trading, you must taken into account the fact that this process has to be automated in the future. There are already many expert advisors and robots on the market that are written specifically for this type of trading. Selection of algorithmic trading will automate this process and facilitate the constant market monitoring.
Scalping is a modern tool for the current “stock speculator”, which helps to improve trading performance.