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How to Apply Forex Signals for Scalping?

The forex signals industry has evolved since the early 2000s. This happened when retail forex started to get popular among individual traders. There are still quite a few forex signals providers now who provide many different types of signals. There are firms that offer long-term forex signals which are trade recommendations. These target hundreds and thousands of pips. There are medium-term signal providers whose forex signals target hundreds of pips. And then there are short-term day trading and scalping signal providers who target from a few pips to 100-200 pips.

What Do Forex Signals Have To Do With Scalping?

Scalping is a trading strategy based on small timeframes where you enter a position, hold it a few minutes, grab a few pips and get out. You can find this strategy explained at our trading strategies section. According to the signals we provide here, about 5% of the signals provided are based on this strategy. But major financial events can cause high volatility in the markets. In this article, we will explain the benefits of scalping forex signals.

Using forex signals for scalping - FX Leaders

Forex scalping signals are popular in the forex signals industry.

Which Opportunities Can Forex Signals Create in Scalping?

Using forex signals for scalping is especially effective when you, as a trader, are uncertain, and when you trade on large-range, quiet markets or volatile markets. Let’s review each of these opportunities:

1. Opportunities when a trader is uncertain

Scalping signals always offer trading opportunities. Sometimes the market can be tricky and we all know there are times when our trading, based on longer-term charts, suffers. The forex market has shown us time after time that it can be irrational and hard to predict to which direction it will move. Scalping forex signals offer you the opportunity to make a few pips here and there, even when you can’t figure out the market. With such signals, you can make pips even if you are on the wrong side of the market. You get in… take 5-15 pips on a small retrace and get out. Rinse and repeat. After that, the market can run several cents against your direction, and you’re still making your pips.

2. Opportunities in large-range markets

Often our long-term trades just take too long. You are sure you are on the right side of the market, but the price just doesn’t progress. This happens in periods of consolidation after a large move during a strong trend. USD/JPY is in a consolidation period right now. It’s been trading between 119.20 and 120.50 for weeks after it moved up for about 20 cents in the last 7-8 months. I opened a long-term trade at the bottom of this range, targeting 125.50 which is just below the high of this year. I know that I’m in the right direction because the fundamentals of both economies are clear. The US is growing fast and the FED will hike the interest rates soon. Meanwhile, Japan is in recession and the Bank of Japan (BOJ) is pumping money (YEN) into the market. So the price will get my take profit target but it might take longer than I first thought. But as a professional trader, I rely on trading and cannot wait forever for a trade to close. In this case, scalping signals are useful. You can increase your account balance bit by bit in such times, buying at the bottom of the range and selling at the top until the breakout happens.

3. Opportunities in quiet markets

We know how boring it is when the market is quiet. It feels like you are watching paint dry. During consolidation periods, the moves might not be that big but at least there is some action in the market. In a quiet market, it moves only 5-10 pips. Evenings are usually like this. But, most retail traders have day jobs and the only time they can trade is when they come home from work at 6-7 pm. Scalping signals offer you the opportunity to trade and make pips even in the quietest of times. As we said above, you don’t have to catch huge moves to make money; 5-6 pips here, 10-12 pips there adds up. You can increase the leverage as well when trading in a quiet market. I usually use 5 times leverage in a normal market, risking about 2% of the account in a single trade. When I scalp in a quiet market, I increase the leverage to 25 times, since the stop loss target is much smaller.

4. Opportunities in volatile markets

Many times toward the end of 2015 we saw high volatility in the markets. First, there was the Chinese stock market crash in late August 2015. This sent USD/JPY 800 pips down during the Asian and European sessions, and then there was the second mini-crash in early September. The FED meeting mid-September sparked movements of hundreds of pips in the currency pairs. It is difficult to trade in such volatile market. You don’t know what effect the fundamentals will have on the forex market or what direction they will send the pairs. It is quite dangerous as well to trade during volatile times and risk a huge part of your account with larger stop loss targets. You can place your stop loss 200 pips away instead of the usual 40 pips, but even that won’t save you if you are on the wrong side of the market. Scalping signals reduce the risk in such market conditions. Usually, these large movements happen in waves. The price moves for about 70-100 pips in 10 minutes, then it stalls and trades in a 20-25 pip range for a few minutes before resuming the trend and making the next 100 pips movement. A profitable forex scalping strategy offers some opportunities during the lag time between the two big moves. When I’m not in a long-term trade during these huge moves, I find it beneficial to scalp between them. Usually, I can scalp 4-5 times as the price moves (20-25 pips up and down) before it makes the next 100 pip move.

Scalping signals work best in a quiet market – FX Leaders
Scalping signals work best in a quiet market.

What Strategies Are Scalping Forex Signals Based On?

There are different strategies on which the scalping forex signals are based on, such as technical indicators. Some indicators used for scalping include moving averages, stochastic, support and resistance levels, trend lines etc. But scalping and short-term signals are also based on fundamentals such as data releases, economic news, speeches from central bankers or political events and comments. We use all these indicators, both technical and fundamental for our forex signals. You can find out more about the strategies we use in the forex trading strategy section. If you have been following our signals service you may have seen how profitable forex scalping and short-term forex signals can be. We issue signals in all types of markets so you have trading opportunities no matter what the market behavior is like. That is the biggest benefit of the scalping forex signals.

About the author

Skerdian Meta // Lead Analyst
Skerdian Meta Lead Analyst. Skerdian is a professional Forex trader and a market analyst. He has been actively engaged in market analysis for the past 11 years. Before becoming our head analyst, Skerdian served as a trader and market analyst in Saxo Bank's local branch, Aksioner. Skerdian specialized in experimenting with developing models and hands-on trading. Skerdian has a masters degree in finance and investment.