Scalping Trading UK Guide 2020

Scalping trading is a popular day trading strategy. With scalping trading in the UK, the goal is to win as many small trades as possible. Over the course of a day, many small winning trades can add up to a significant profit.

Want to jump into scalping trading? We’ll explain how UK scalping trading works and highlight top scalping trading systems. We’ll also take a look at top UK brokers you can use to start scalping today.

What is Scalping Trading?

Scalping trading is a style of trading in which the goal is to profit from many small trades rather than a few large ones. Scalping trading strategies are generally used by day traders. The majority of scalping trades in the UK are opened and closed over a timespan of just a few minutes.

The idea behind scalping is that once a price movement starts, it’s likely to continue for some amount of time. However, UK scalping traders don’t assume that a price movement will stick around for long.

Instead of trying to profit off of an entire price movement, the idea behind scalping trading systems is to trade only the strong initial movement. By limiting a trade to this small portion of a price movement, the chances that your trade will succeed go up significantly. The trade-off is that by exiting a trade early, you limit the potential profit that any single trade can bring in.Scalping Trading UK

To make money, most day trading strategies built around scalping call for placing a lot of trades. If you place 50 trades in a day that each earn 0.1% returns, that adds up to a 5% return by the end of the day.

Managing risk when scalping trading in the UK is extremely important, though. A single bad trade must not be allowed to wipe away a whole day’s worth of profits. Scalping trading systems almost always entail placing stop losses on every trade so that the maximum loss if a trade goes against you is limited.

What Assets are Best Suited to Scalping?

Scalping trading systems can be used for just about any tradable asset. Stock trading and forex trading are particularly suited for scalping strategies since these assets tend to be very volatile. The higher the price volatility, the more opportunities for scalping trading.

On top of that, stocks and forex are highly liquid. This means that scalping traders won’t have any trouble entering and exiting positions seamlessly.

Other types of trading, like ETF trading, commodity trading, and cryptocurrency trading, can all use scalping trading systems as well. However, keep an eye on liquidity. Gold trading and oil trading are highly liquid markets, for example, but scalpers may not be able to exit positions quickly when trading less popular commodities like cocoa.

Note that options trading using a scalping strategy is possible. However, this is relatively risky since options trades are always leveraged and liquidity for options contracts can be very low.

Scalping Trading Strategies

Succeeding with scalping trading in the UK requires having a clear scalping trading strategy. Your strategy should offer clear entry and exit points for every trade. The more that you can remove emotional decision-making from scalping trading, the more likely you are to profit over the long-term.

Stock and forex trading scalping strategies can be as simple or as complex as you like. However, since scalping is fast-paced, simple is generally better. Let’s take a look at three easy to follow day trading strategies for scalping trading that are built on individual technical indicators.

Moving Average Trading

Moving averages of the price can be used to form a basic scalping trading strategy. First, look at a long moving average like a 200-minute average to gauge the direction of the long-term trend. Then compare two shorter moving averages, like the 5-minute and 20-minute moving averages.

If the 200-minute average is trending bullish, you can enter trades when the 5-minute moving average crosses above the 20-minute moving average. Often, this will be the start of a short but powerful upward price movement. Exit the trade at the first sign of weakness – don’t wait for the 5-minute moving average to cross back below the 20-minute moving average.Moving Averages scalping trading strategy

Parabolic SAR Trading

A particularly good forex trading scalping strategy revolves around the parabolic SAR (stop and reverse) indicator. This technical indicator looks at price momentum to predict whether a bullish or bearish trend is underway.

Parabolic SAR appears as dots on a price chart. When the dots are below the current price bars, the price action is bullish. When the dots are above the current price bars, the price action is bearish. You can enter a trade as soon as the parabolic SAR switches from above to below or vice versa. Exit your trade as soon as the price momentum begins to fade.Parabolic SAR scalping trading strategy

Stochastics Oscillator Trading

When the market is moving sideways rather than in a specific bullish or bearish direction, the stochastic oscillator can be used to build a scalping trading system. This oscillator consists of two lines – a fast-responding %K line and a slow-responding %D line.

When the %K line crosses above the %D line, it means that price action has turned bullish in the short term. This is an opportunity to buy the underlying asset and capture a short upward price movement. Exit the position either when the %K line crosses back below the %D line or when %K reaches a value of 80 or more (which is near the top of its range).Stochastic oscillator scalping trading strategy

Scalping Trading UK Benefits

Scalping trading isn’t always the easiest style of trading. It takes a significant amount of focus and dedication. To make a worthwhile profit from scalping trading in the UK, you need to be glued to the market day in and day out. Placing hundreds of trades per day is time consuming.

That said, day trading with a scalping strategy has some important benefits over other types of trading.

First, the risk of any individual trade is low. If a trade loses more than, say, 0.1%, you’ll automatically exit it with most scalping strategies. So even if you are wrong about a trade, the amount of money you will lose as a result is small.

Placing stop losses can help automate this risk management. We recommend that UK scalping traders place stop losses with every trade to help remove downside risk.

Another major benefit to scalping trading systems is that they provide plenty of trading opportunities. Scalping traders don’t need to be tied to any single pattern or technical indicator, like some other types of traders. They can also look for opportunities across assets, and many forex trading scalping strategies work just as well for stocks or cryptocurrencies.

On top of that, small moves are simply more frequent in the market than large moves. Scalpers are trading the price action that happens normally throughout the day, rather than waiting for once-a-day jumps in price. As a result, there are more opportunities to make small profits.

Risks of Scalping Trading

While the risk of any individual scalping trade is low, scalping trading as a whole still carries significant risks for UK traders. Just as profits can add up over dozens or hundreds of trades, so can losses. If you lose a large fraction of your scalping trades, you could end up losing money from scalping trading.

It’s also important to keep in mind that scalping trading successfully requires a great deal of attention. You must be constantly monitoring your trades as well as searching for the next trading opportunity. It’s possible to profit from scalping trading, but to place too few trades in a day to make very much money.

Best Scalping Trading Platforms

Choosing a reliable and cost-effect trading platform is one of the most important aspects of scalping trading. Commissions and fees can quickly eat away at the profits from your trades, so we highly recommend using a commission-free UK brokerage. You’ll also want to ensure that your brokerage offers a wide variety of assets to trade so that you can easily jump between the forex, stock, and other markets.

Another thing to consider is your broker’s trading platform. Scalping trading strategies require that you have access to advanced charting capabilities and technical indicators. Fast order entry can also make a big difference, since trades must be opened and closed quickly.

With all that in mind, let’s take a look at three of the best UK scalping trading platforms that you can start using today:

1. eToro – 0% Commission Trading with a Social Network

etoro logoeToro is one of our favourite stock and forex brokers in the UK. This trading platform offers access to more than 800 stocks and 450 ETFs from exchanges around the globe. Plus, you can trade CFDs for more than 40 forex pairs, dozens of commodities, and a selection of popular cryptocurrencies. All trades on eToro are completely commission-free and the spreads for CFD trades are among the lowest in the industry.

What really sets eToro apart is that it includes a social trading network. You can follow other scalping traders to generate ideas and swap day trading scalping strategies. Or take advantage of copy portfolios to automate some of your scalping trades. That way, you can place even more trades from your account in a single day.

eToro also offers an advanced charting platform that’s perfect for scalping trading systems. It comes with dozens of built-in technical indicators and drawing tools. Plus, there’s a mobile trading app to help you monitor the market on the go. The only thing we’d like to see is trade execution right from your charts, which would speed up the entry and exit process.

Pros:

  • Wide variety of assets to trade
  • 0% commission on all trades
  • Includes social trading network
  • Supports copy portfolios
  • Advanced charting platform

Cons:

  • Order entry process can be slow

75% of retail investor accounts lose money when trading CFDs with this provider.

2. Plus500 – Commission-free CFD Trading with Price Alerts

Plus500 LogoPlus500 is a low-cost CFD broker that offers fast-execution trading on a wide variety of assets. With Plus500, you can trade hundreds of stocks, currencies, commodities, cryptocurrencies, or even options. All trading with this broker is 100% commission-free, and Plus500 has some of the lowest CFD spreads we’ve found in the UK.Even better, Plus500 offers scalping traders a significant amount of leverage. For example, you can trade major currency pairs on margin up to 300:1 and stocks with leverage of up to 10:1. That leverage can supercharge a forex trading scalping strategy, but be careful that it also dramatically increases the risk of any single trade.

Plus500 offers a capable charting platform with nearly 100 technical indicators built in. It’s paired with a mobile investment app, which stands out because it allows price alerts set on your desktop to be pushed to your phone’s home screen. That’s a major advantage for UK scalping traders because it allows you to closely monitor trades even when you step away from your computer.

Pros:

  • 100% commission-free CFD trading
  • Trade stocks, forex, crypto, and more
  • High leverage, up to 300:1 for forex
  • Versatile charting platform
  • Mobile app supports price alerts

Cons:

  • Cannot trade directly from charts

80.5% of retail investor accounts lose money when trading CFDs with this provider.

3. Capital.com – CFD Trading with AI Insights

Capital.com logoCapital.com leverages technology to help you improve your scalping trading system. With this broker, you get an artificial intelligence-based assistant that offers insight into what’s working and what’s not. You might find that you trade better on certain days of the week, for example, or that a specific asset type or trading strategy is dragging down your overall profitability.

The AI assistant can also help you find trading opportunities. It automatically scans the market to find setups similar to those you’ve traded in the past. Of course, Capital.com supports price alerts so you can make it easier to spot scalping trading opportunities as they arise.

Capital.com offers CFD trading only for a wide variety of assets, including stocks, forex, and commodities. All trades are 100% commission-free and spreads are below the industry average. Leverage at Capital.com isn’t particularly high – it’s just 33:1 for major forex pairs – but this should be more than enough for most UK scalping trading.

Pros:

  • AI assistant provides insights into your trading
  • Automatically surface trading setups
  • Supports price alerts
  • 100% commission-free CFD trading
  • Excellent charting and analysis platform

Cons:

  • Limited leverage for most trades

There is no guarantee you will make money when trading CFDs with this provider.

Scalping Trading Broker Commission Deposit Fee Inactivity Fee Withdrawal Fee
eToro £0 (variable spread) £0 (0.5% currency conversion fee) £8 after 1 year £4
Plus500 £0 (variable spread) £0 £8 after 3 months £0
Capital.com £0 (variable spread) £0 £11.50 after 1 year £0

Scalping Trading UK Pros & Cons

Pros:

  • Works for any liquid asset class
  • Lots of trading opportunities
  • Use many different indicators and strategies
  • Risk from any individual trade is small
  • Quick reward from profitable trades

Cons:

  • Requires a lot of attention and focus
  • Easy to let a single bad trade wipe out profits
  • Miss out on potential profits from big price moves

How to Start Scalping Trading

Ready to jump into scalping trading in the UK? We’ll show you how to get started with eToro, which offers 0% commission trades, a social trading network, and an advanced charting and trading platform.

Step 1: Open a Scalping Trading Account

In order to start scalping trading in the UK, you’ll need to open a brokerage account. Head to eToro’s website and click ‘Join Now.’ Enter a new username and password for your account, then fill in personal details like your name, email, and birthdate.Click Join Now to open a new eToro account

eToro is regulated by the UK’s Financial Conduct Authority, which requires that the broker verify your identity. Upload a copy of your passport or driver’s license and a copy of a recent financial statement or utility bill to complete this step.

Step 2: Fund Your Account

You can deposit funds into your eToro account using a wide variety of methods. eToro supports debit and credit cards, e-wallets like Neteller and Skrill, and bank and wire transfers. Keep in mind that you must make a minimum deposit of £140 when you first open an eToro account.eToro deposit

Step 3: Place Your First Scalping Trade

Now you’re ready to start trading. Choose an asset to trade by searching for it in the eToro dashboard, then click ‘Trade’ to open a new order form.

In the order form, enter how much you want to trade. You can also set stop loss and take profit levels, which we recommend for scalping trading. Finally, select whether you want to add leverage to your trade (if trading CFDs).eToro scalping trading

When you’re ready, click ‘Open Trade’ to open your first UK scalping trade.

Conclusion

Scalping trading in the UK is a high-frequency trading strategy that entails placing a lot of small trades. The advantage to scalping trading systems is that the risk of any single trade is relatively limited. However, you must pay close attention to the markets throughout the day in order to succeed with scalping trading. This type of trading can be rewarding, but it takes a significant amount of work.

eToro – Best UK Scalping Trading Platform with 0% Commissions

75% of retail investor accounts lose money when trading CFDs with this provider.

FAQs

How does liquidity impact scalping trading?

Liquidity is very important to scalping trading in the UK. When an asset is highly liquid, orders are fulfilled quickly and it’s easy to enter or exit a position. If you trade assets with low liquidity, you could get stuck holding onto a trade for longer than you intended because there is no one to buy the asset from you.

Does scalping trading work on multi-day timescales?

Scalping trading is generally used as a day trading strategy. Trades should typically only be open for a few minutes at a time. If you’re interested in placing trades that span multiple days, consider using a swing trading strategy.

How much money do I need to start scalping trading in the UK?

It’s helpful to have at least several hundred pounds to commit to scalping trading in the UK. That way, a profit of several percent at the end of the day adds up to a significant amount of money. However, most brokers only require that you commit at least £50 or less per trade.

Are profits from scalping trading taxed in the UK?

Yes, any profits from scalping trading in the UK are subject to capital gains taxes.

How many trades does a scalping trader place in a day?

The number of trades that scalping traders place each day can be highly variable. However, expect to place at least 10 trades per day and up to 100 or more on days when the market is highly volatile.

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