Introduction to scalping in the forex market

By:  Tinaye Muzanya

Scalping is the quick opening and closure of positions and the aim is to make small profits which when summed make a large profit. Scalpers of the forex market usually hold positions for three to five minutes but some may hold their positions for as long as a minute. These traders type of traders are required to be able to concentrate for long hours, be composed, persistent and patient.


Due to the  quick opening and closing of positions scalpers require low spreads that is the difference between the bid and the ask as this is a key determinant of profits. For example, let’s assume 50 positions were opened and closed. There is a spread of 3pips and the sizes of the positions taken are constant and 30 trades were profitable with an average profit of 5pips per trade. Lastly let’s suppose we have an average loss of 3pips per trade.

To calculate the net profit\ (loss) we use the formula:
(Total profitable positions) - (total positions lost + spread paid) =Net profit\ (loss)
(30*5) – (10*3+50*3) = -30pips
Using the same formula for net profit and with a spread of 1pip we have
(30*5) – (10*3 + 50*1) = 70pips

The best currencies to scalp are the majors e.g. EURUSD, USDGBP, USDCAD. These are highly liquid and have lower spreads. The EURUSD has the lowest spread and is the most liquid. These currencies are traded all over the world by banks and important institutions.
Scalping uses a lot of technical analysis and very little fundamentals because it is hard to determine what a new release of data can do in a minute. The best times to scalp are during the busiest times of the day this is usually during the London session and when the London session overlaps with the New York session. During these times there is high volatility and the spreads are low.