What is Forex Scalping

Read our Advertiser Disclosure.
Contributor, Benzinga
Updated: July 29, 2021
verified by Jay and Julie Hawk

Want to jump straight to the answer? The best forex broker for most people is definitely FOREX.com or CedarFX.

As of April 2019, there was an average of $6.6 trillion of currency traded on the forex market daily, so there’s little question why the forex market attracts traders looking for quick profits. If you’re interested in short-term trading, forex scalping can be a viable strategy. But what exactly is forex scalping, and is it the right strategy for your needs? Let’s take a closer look at some of the pros and cons of this common trading strategy. 

Forex scalping involves quickly and repeatedly buying and selling currency pairs in order to turn a small profit. Forex scalpers usually don’t hold their positions for more than a couple of minutes, and many forex scalpers take their profits as soon as their trades become profitable. The aim of forex scalping is to see these tiny gains add up throughout the day to make it a worthwhile activity.   

Unlike currency traders using longer-term strategies, most forex scalpers don’t rely heavily on fundamental analysis or GDP reports when they choose which currency pairs to buy or sell. Instead, they often use technical analysis to determine which currency pairs are likely to see an exchange rate change on a minute-to-minute basis. Many retail forex scalpers also rely on automated software known as “expert advisors” or EAs running on popular trading platforms like MetaTrader 4 or 5 to identify and/or execute their trades.

Keep in mind that in order to turn a large enough profit to make their time investment worthwhile, most forex scalpers need to use leverage. Leverage lets you amplify your gains and losses by controlling a larger position than you can otherwise afford. You do this with money deposited into your margin account to be held as collateral by your broker against potential losses. 

Leverage can be a crucial tool to compound profits, but it can compound losses as well. When scalping forex, you should be very careful not to put more money at risk than you can afford to lose if you decide to use substantial leverage. 

Pros and Cons of Forex Scalping

The forex scalping strategy has both benefits and drawbacks. Let’s take a look at some of the factors you’ll want to consider before you begin. 

Faster trades. If you hate the tedium of holding a trade for a long period of time, forex scalping might be right for you. Trades open and close quickly, which means you take your profits (or losses) sooner.

Easier for newcomers.
If you have ever scalped stocks, then you will find many of the same strategies and technical analysis methods can be used by forex scalpers. This can make scalping a relatively comfortable entry into the forex market for some stock market migrants. 
Can be riskier. Unlike longer-term trading strategies, any profits you’ll see when forex scalping will be small. This means you need to cut losses quickly to avoid letting a single bad trade wipe out the profits from a series of successful trades.

Requires more leverage. To amplify your profits (and losses) enough to make scalping worthwhile, you’ll need to use more leverage. Using high levels of leverage can quickly wipe out your margin account if you aren’t careful.

How Can I Scalp Forex?

Do you think that forex scalping might be the right strategy for you? Let’s take a closer look at how you can get started.  

Choose a Trading Strategy

The basis of successful forex scalping is having a solid trading plan and the discipline to stick to it. Sit down with a few of our best articles on forex trading and create a plan. Your plan should include information on:

  • The currency pair or pairs you want to trade
  • Whether your broker’s dealing spreads will support you turning a profit
  • The technical indicators you’ll watch to know when it’s time to buy or sell
  • The amount of leverage you’ll need 
  • How you’ll avoid major losses using leverage

Once you understand how you’re going to trade, it’s time to open a margin account with an online forex broker.

Choose a Broker

You’ll need a suitable forex broker to begin forex scalping. Not every online broker offers access to the forex market or allows you to use scalping strategies. Before you commit to a broker, take a look at these key characteristics:

  • Trading costs: Margins for forex scalpers can be razor-thin, so ideally choose a broker with tight dealing spreads and no per-trade commissions. Otherwise, your broker’s earnings will begin to seriously cut into your profits, and you might even end up losing money despite making mostly accurate trading decisions.
  • Available leverage: High leverage is often crucial for forex scalpers, especially if you begin with a lower dollar balance in your account. Inquire about the maximum leverage ratio your broker will allow you to use before you open an account.
  • Scalping status: Some forex brokers have banned scalping behavior among their clients. Before you deposit money into a trading account, check to see if your chosen broker has put a limit on the number of trades you can execute in an hour, day or month to discourage or prevent scalping.

Not sure where to begin? Check out our list of the best forex brokers available to U.S. traders.

Claim Exclusive Offers

  • CedarFX
    More Details
    Account Minimum
    $50 USD
    Pairs Offered
    securely through CedarFX's website
    More Details

    CedarFX is not regulated by any major financial agency. The brokerage is owned by Cedar LLC and based in St. Vincent and the Grenadines.

  • IG Markets
    More Details
    Account Minimum
    Pairs Offered
    securely through IG Markets's website
    More Details
  • Forex.com
    More Details
    Account Minimum
    Pairs Offered
    securely through Forex.com's website
    More Details
  • AvaTrade
    More Details
    Account Minimum
    100 EURO
    Pairs Offered
    securely through AvaTrade's website
    More Details

Fund Your Account and Make a Trade 

If you are new to forex trading or scalping, it might make sense to practice first by trading in a demo account with virtual money that most online brokers will provide free of charge. Once you are ready to start live trading, you will need to open a margin account at an online broker and deposit some funds before you can make your first trade. 

Your money may take a few days to transfer from your bank account into your trading account, depending on the deposit method you select. Use your broker’s maximum leverage ratio and your chosen trading strategy to determine how much money you’ll need to deposit to get started.  

Once your account is funded, you can finally make your first trade. It usually makes sense to begin live trading with a smaller margin balance and modest sized trades until you feel confident in your trading strategy and in using your broker’s unique platform. 

You’ll usually want to set your charting software to display a short time frame for each candlestick and the technical indicators you have selected to provide scalping trade signals. Watch the market closely, and when a trading signal arises, you can enter an order to make your first trade. 

Get Started in Forex

No matter which forex trading strategy you decide to use, successful trading begins with a solid basis of market understanding. You can start the process of finding a suitable broker by reading about our favorite forex brokers and you can boost your market knowledge by taking a deeper dive into forex charting. Knowledge is power when trading, and it usually leads to higher profits too!

Get a Forex Pro on Your Side

FOREX.com, registered with the Commodity Futures Trading Commission (CFTC), lets you trade a wide range of forex markets plus spot metals with low pricing and fast, quality execution on every trade. 

You can also tap into:

  • EUR/USD as low as 0.2 with fixed $5 commissions per 100,000
  • Powerful, purpose-built currency trading platforms
  • Monthly cash rebates of up to $9 per million dollars traded with FOREX.com’s Active Trader Program

Learn more about FOREX.com’s low pricing and how you can get started trading with FOREX.com.