The 1-minute scalping strategy in a nutshell
Stanislav Bernukhov
Exness senior trading specialist
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Uncover the potential of the 1-minute scalping strategy, as trading expert Stanislav Bernukhov explains how this lightning-fast approach can help traders capitalize on short-term price movements while effectively managing risk. Dive into one of the most popular scalping strategies and learn how you can apply this approach for swift market gains.
Scalping has always attracted traders. This trading style has many advantages and, if done correctly, can be the fastest way to build capital while keeping risk under control. The specific strategies of scalpers have been a mystery for some time, as it seems very difficult to analyze the market in such short time frames.
In this article, we unravel the mystery and break down the fundamentals of the 1-minute scalping strategy. We explore the mechanics, the role of scalpers, and the type of trader best suited for this fast-paced method. We also dive into specific 1-minute scalping strategies, risk management techniques, and the pros and cons of this trading style, helping you determine if it's a profitable fit for your trading approach.
What is 1-minute scalping trading?
A 1-minute scalping strategy involves pursuing very short-term price moves, usually one to several pips, within a short time frame, generally between several seconds and one minute. The modern interpretation of scalping might extend beyond the 1-minute chart and time frame, as scalpers hold a position for several hours. However, the classic scalping approach is usually the quickest trading style compared to others.
The role of a scalper
Historically, the role of a scalper was to provide and maintain liquidity in the markets, with the practice evolving from the trading floors of Chicago and New York. Traders on the floor were basically scalpers, seeking to fulfill orders for the “floor brokers”: large institutional traders who operated from offices upstairs.
The general role of a scalper is no different from any other trader. They provide liquidity and ensure a smooth order flow without spikes, wicks, and other unnecessary disruptions in the price action.
In today’s markets, it’s difficult to believe that any individual trader can influence the market, but combined in their thousands, orders from scalpers can positively affect the market’s landscape.
What type of trader is made for 1-minute scalping?
When it comes to trading, there are no right or wrong approaches. Each trader needs to find a niche that works best for them. Scalping is one such niche.
Scalping is a pretty demanding trading style, as scalpers operate under intense pressure, both physically and emotionally. People who are not familiar with scalping may say, "What's so difficult about that? All you are doing is pushing buttons from the comfort of your chair."
But every time a scalper pushes a button, a trading decision is made within a very short time period.
Are you eligible to become a successful scalper?
The answer requires an adequate assessment of your personal strengths. Scalpers are often young people capable of concentrating and working hard, glued to their screens for extended periods. After several years of scalping, traders usually transition to less demanding trading styles, such as day or swing trading. These require less execution and processing speed but a better understanding of the market and quality of forecasts.
Preparation and homework of scalpers
Scalpers are probably the only traders who don’t need to do their homework and arrive with a “blank page.” They work with the present price action, which might not be related to the previous day or week.
However, scalpers need to know two things: basic market conditions and upcoming news releases.
The latter might be particularly important, as volatility might provoke large drawdowns for a scalper.
It makes sense to know if the market is moving with a strong trend or not, as positioning against a strong trend may cause quick losses.
For the rest, scalpers need to observe the price action, try to figure out short-term shifts in supply and demand, pull the trigger when necessary, hold a trade for several seconds or minutes, and then get out.
Such an operation might be repeated several times within a day.
1-minute scalping strategies
There are two types of approaches that scalpers work with: momentum and mean-reversion scalping.
Usually, a one-minute scalper operates on the 1-minute chart, that’s why it doesn’t make sense to recognize candlesticks patterns. This time frame produces a lot of noise and the accuracy of such a pattern might be questionable, however, scalpers usually monitor chart patterns.
Momentum strategies for 1-minute scalpers
Momentum scalping involves several basic models:
- False breakout and reverse.
- Failed test and reverse.
- Breakout and continuation.
False breakout and reverse
For a long position: The price moves to a new low before attempting to break into another low. It then reverses, violating the previous correctional high. In this case, short sellers begin to close their positions, creating an opportunity for scalpers to take advantage of a small move on the upside.
For a short position: The price moves to another peak before establishing a new peak, after which it fails and violates the previous correctional low. It then shifts downwards, opening an opportunity to sell.
Failed test and reverse
For a long position: This is almost the same as the "false breakout and reverse." The difference is that the price can't establish another low, creating the "failed test." After this occurs, it violates the previous correctional high, opening a path for short-term continuation to the upside.
For a short position: The price establishes the new peak, then fails to set a new peak and violates the previous correctional low. After this occurs, a price action can develop in the opposite direction for some time.
The shape of this pattern resembles a "cup-and-handle pattern," a classical reversal pattern from technical analysis.
Breakout and continuation
This is a simple breakout pattern visualized with a triangle or any other chart formation. In this scenario, the price moves in a specific direction before locking into a trading range. It will then break the boundary of this pattern in the direction of the previous trend. At this point, a scalper can take advantage of the quick momentum move.
Mean reversion strategy for 1-minute scalping
False breakout of a consolidation
Another classic example of a quick scalping opportunity is false breakout consolidation with a further reversal. This is a dominating pattern for most liquid markets, including currency pairs, stock indices, and gold.
The price establishes a trading range and then tests its border. After this, it slides back to the range and develops a price move in the opposite direction. The moment when the price exits a trading range and fails to break through is an opportunity to enter a trade. However, be careful not to move against a strong trend.
1-minute scalping strategy risk management
Do scalpers need to place the stop loss or take profit order for their 1-minute scalping strategy? Yes, they do; every trader operating with leverage needs a stop loss. However, setting a very tight stop loss is not recommended because it can be easily captured by the noise of the price action.
It’s incredibly difficult to find the exact entry point that would immediately shift the price movements in a trader's favor. Sometimes, the price makes a minor pullback before moving in the projected direction.
Having a stop loss is essential, and it makes sense to place it relative to the volatility of a 1-minute time frame, using ATR or a similar indicator.
The variation of a decent stop loss is at the opposite side of the pattern that the trader is working with. For example, in the case of reversal patterns, it’s relatively easy - the stop is placed below the lowest low in the sequence, for the long position. For a short position, the stop is placed above the highest high.
For a simple continuation pattern (triangle) or a false breakout pattern, it is better to place the stop loss with respect to the volatility, as there are no references for stop placement on the chart.
Avoiding overtrading
Scalpers make many trades within a day, making them the group most at risk of excessive overtrading. By making one losing trade after the next, traders can find themselves stuck in a spiral of losses, leading to a severe drawdown within a day.
Thus, a scalper should have a strict loss limit, reducing the number of consecutive losing trades. It’s recommended to take a break or to stop trading for the day in cases where you reach three losing trades in a row.
Dynamic risk management
The alternative to reducing the number of losing trades is applying dynamic risk management.
Here’s how it works. A trader defines their loss limit for a particular day in cash. For example, it might be 200 USD per day.
If they lose 50 USD, they need to reduce their volume to 75% of the initial volume. If they lose another 50 USD, their volume should be dropped twice compared to the initial volume. Thus, a trader can still continue to trade but cut their losses when necessary. This approach should prevent a trader from ending up in a deep drawdown, helping them to preserve capital.
Both approaches require tremendous discipline and self-control.
Pros and cons of 1-minute scalping strategy
1-minute scalping pros
1. Scalping looks like a day job: You enter the market without any open positions and leave your workplace with no positions. This gives a trader peace of mind and helps to reduce focus on the markets outside of working hours.
2. Lots of trades made by scalpers create a quick feedback loop: If you do anything wrong, you will know about it very quickly. This helps a trader adjust their strategy accordingly.
3. If executed properly, scalping allows you to grow capital quickly and stably.
1-minute scalping cons
1. Scalping is a demanding trading style, both physically and mentally. People who like challenges appreciate that, but it’s relatively difficult to perform consistently at your peak.
2. Scalpers don’t benefit from volatility and time. Sometimes, holding a position might bring greater than average performance for a trader without extra effort. That’s not for scalpers; volatility is usually a threat to a scalper.
3. Scalpers give away a big chunk of their profits. They generate big turnover, but spreads and commissions aggregate into substantial amounts of money over long periods of time.
Is a 1-minute scalping strategy profitable?
A 1-minute scalping strategy can be profitable, but it requires discipline, skill, and a deep understanding of market conditions. Due to the high frequency of trades, scalpers rely on small, incremental gains that accumulate over time. However, profitability depends on precise execution, effective risk management, and controlling trading costs such as spreads and commissions. Traders need to have the ability to react quickly and accurately to short-term price movements, making it possible to generate steady profits if done correctly. That said, it also carries higher risks due to the rapid pace and market noise over short time frames.
Which indicator is *best for 1-minute scalping?
The best indicators for 1-minute scalping tend to focus on momentum and volatility, with the Moving Average Convergence Divergence (MACD), Relative Strength Index (RSI), Bollinger Bands, the stochastic oscillator, and moving averages such as the exponential moving average (EMA) and simple moving average (SMA) being popular choices. MACD is one of the most effective tools for identifying changes in momentum, while the Relative Strength Index highlights overbought or oversold conditions, indicating potential reversals. Bollinger Bands are useful for gauging volatility and recognizing breakouts or retracements. The stochastic oscillator is one of the key indicators for pinpointing shifts in momentum, especially in short time frames. The EMA and SMA help traders smooth out price action and identify trends more clearly. Combining these indicators can help scalpers make quick decisions for the entry and exit points of their trades, while navigating the rapid fluctuations typical of 1-minute charts.
What is the *best forex pair for 1-minute forex scalping?
The *best forex pairs for a 1-minute forex scalping strategy are those with high liquidity and low spreads, such as EURUSD, GBPUSD, and USDJPY. These major currency pairs are heavily traded in the market, which ensures minimal slippage and quick order execution, critical factors for successful scalping. Their tight spreads reduce trading costs, allowing scalpers to capitalize on small price movements without losing much of their profit to fees. Additionally, in order to maximize opportunities, these pairs tend to have frequent price action during key trading sessions, offering ample chances for scalpers to take advantage of rapid market fluctuations.
*It is important to note that in all types of trading, there is no “best pair” or “best indicator.” The markets' unpredictable nature requires traders to adapt their strategies continuously based on changing conditions and personal trading styles.
Which markets are good for a 1-minute scalping strategy?
Markets with high liquidity and volatility are ideal for 1-minute scalping strategies. These include the forex market, stock indices like the S&P 500 or NASDAQ, and commodities like gold or crude oil. Forex is particularly well-suited because of its 24-hour accessibility and high liquidity. Stock indices also provide opportunities due to their active price movements during market hours, while commodities can offer short-term volatility for quick trades. Scalpers should focus on markets where they can easily find an entry and exit for their trades with minimal delays, as timing is crucial in the fast-paced environment of 1-minute scalping.
Key takeaways
A 1-minute scalping strategy is a fast-paced trading approach designed to capitalize on small price movements within short time frames. If you want to succeed with this strategy in forex trading specifically, it’s important to choose highly liquid forex pairs with low spreads. Use a combination of technical indicators like the Moving Average Convergence Divergence (MACD), the stochastic oscillator, and the exponential moving average (EMA) to help you understand the dynamics of the market.
Scalping strategies, by nature, require discipline and strong risk management. Ensuring a favorable risk-to-reward ratio is essential to maintain profitability over time. Additionally, knowing how to react quickly to short-term price changes and managing emotions under pressure are key aspects for this strategy to succeed. Overall, mastering this trading strategy requires experience, constant practice, and a deep understanding of the market’s volatility.
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