Scalping means taking many small trades that last from a few seconds to a few minutes, each aiming for a few pips. Every gain is small, so trading costs take a bigger share of it than in any other style. Before you scalp, work out what each trade costs and what win rate you need once those costs are paid.
What you will learn
- How a scalp is set up and closed
- How to measure costs against your target and your stop
- The win rate a scalp needs once costs are included
- How many scalps the Classic and Direct daily loss limits allow
How a scalp works
A scalper trades the small moves inside a session, usually on a 1-minute chart, with a 5-minute or 15-minute chart to mark the levels. The stop and the target are both placed when the trade opens, so the exit needs no decision.
Take a setup on EUR/USD during the London morning. Price has been rising, pulls back to the high it broke 20 minutes earlier, and holds there. You buy, with the stop 4 pips below the bid at the moment you buy and the target 6 pips above it. The trade ends at one of those two orders or at a time limit you set, such as 15 minutes. The order types lesson explains the limit and stop orders that do this work.
Scalpers stick to liquid markets, such as the major forex pairs and the main index CFDs, in the hours when spreads are narrowest.
Measure costs against the target and the stop
Simulated trades carry trading costs, as they would on a live account: a commission when a trade opens and when it closes, a price markup on some symbols, and holding costs on positions kept overnight. A scalp closes within minutes, so it pays no holding cost, but it pays the spread and the commission on every round trip.
This example uses 1.8 pips per round trip on EUR/USD: an illustrative 1.2-pip spread plus commission of about $3 per lot each way, or 0.6 pips for the round trip. Commission on CMC Funded is $25 for every $1 million of position value each way, about $2.93 a lot on EUR/USD at 1.1700. Spreads move, so check your symbol's live figures.
A buy fills at the ask, one spread above the bid, and a stop or target on a buy is reached when the bid gets there. Measured from the bid at entry, the spread therefore comes on top of both distances: a loser loses 4 pips plus the spread, and a winner keeps 6 pips less the spread.
Take 0.50 lots, worth $5 a pip, with the 4-pip stop and the 6-pip target:
- Costs are 1.8 × $5 = $9 per round trip.
- A winner moves 6 pips your way: 6 × $5 = $30, less $9, leaves $21.
- A loser moves 4 pips against you: 4 × $5 = $20, plus $9, costs $29.
After costs the trade risks $29 to make $21, where before costs it risked $20 to make $30.
The win rate a scalp needs
The break-even win rate is the share of trades you must win to finish level. Divide the cost of a losing trade by the sum of that cost and the gain on a winning trade.
- Before costs: 20 ÷ (20 + 30) = 40%.
- After costs: 29 ÷ (29 + 21) = 58%.
Costs added 18 percentage points to the win rate this scalp needs. A swing trade paying the same 1.8 pips, with a 60-pip stop and a 120-pip target, moves only from 33.3% to 34.3%. If the spread on the scalp widens from 1.2 to 2.5 pips, costs become 3.1 pips ($15.50 on 0.50 lots) and the break-even rate rises to 71%.
A wider target helps the sums, but then the trade starts to look like a day trade. The risk-reward and expectancy lesson shows how to judge a strategy on its results after costs.
How many scalps fit under the daily loss limit?
On the first day of a $10,000 account the daily loss limit is $500 on Classic and $400 on Direct: 5% and 4% of your equity at the start of the day. It is measured on equity, so it counts losses on open trades as well as closed ones, and reaching it ends the account.
At $29 per full loss, the 14th straight loss takes you past the Direct limit, at $406, and the 18th takes you past Classic's, at $522.
Costs build up even on a quiet day. Twenty scalps that all close with the bid where it was when they opened still cost 20 × $9 = $180, which is 36% of the Classic limit and 45% of the Direct one.
So set a stopping rule well inside the limit, such as 30% of it: $150 on Classic, which is five full losses ($145), and $120 on Direct, which is four ($116). Count costs as part of each loss, since the account does.
A scalper meets the minimum of 3 trading days per phase quickly, and neither route has a time limit, so you can stop on a dead day with no deadline pushing you.
Tight stops make big positions
A tight stop gives a large position. With $50 at risk and a 2-pip stop, the formula in the position sizing lesson gives 2.50 lots, about $275,000 of EUR/USD at 1.1000. At 1:25 leverage that needs about $11,000 of margin, more than a $10,000 account holds, and at 1:100 about $2,750. Higher leverage magnifies both gains and losses. Take the size from the formula and never from the margin you have free. On a 2-pip stop, 1.8 pips of costs also nearly doubles each loss.
When to scalp and when to stand aside
Scalp when the market is liquid and moving, and stop when either changes.
- The London open from 08:00 UK time and the London and New York overlap from 13:00 to 17:00 usually have the narrowest spreads on the major pairs.
- Around the daily rollover, about 22:00 UK time for most of the year, spreads often widen, as in the 2.5-pip example above.
- News trading is allowed on CMC Funded, but in the seconds after a release spreads widen and stops can fill several pips past their level. On a 4-pip stop, 4 pips of slippage doubles the loss.
- A market stuck in a range a few pips wide leaves no room for a 6-pip target.
Scalping suits you if you can concentrate for an hour or two, act on a signal without second-guessing it, and stop when your rule says so.
Check your understanding
Costs are 1.8 pips per round trip, your stop is 5 pips and your target is 5 pips. What win rate do you need to break even?
Work in pips. A loss costs 5 + 1.8 = 6.8 pips and a win keeps 5 − 1.8 = 3.2. The break-even rate is 6.8 ÷ (6.8 + 3.2) = 68%.
On a $10,000 Direct account you scalp 0.50 lots with a 4-pip stop and $9 of costs. How many full losses fit inside a daily stop at 30% of the limit?
30% of $400 is $120. Each full loss costs $20 + $9 = $29, so four losses ($116) fit and a fifth ($145) would go past it.
Why might you stop scalping EUR/USD at 22:30 UK time?
Spreads tend to widen around the daily rollover, which raises the cost of every round trip and with it the win rate you need.
Key points
- A scalp aims for a few pips over seconds to minutes, with the stop and target set at entry.
- Costs come out of every round trip, so measure them against the target and the stop.
- With a 4-pip stop, a 6-pip target and 1.8 pips of costs, the break-even win rate rises from 40% to 58%.
- On a $10,000 account each $29 loss counts towards a $500 Classic or $400 Direct daily limit, so set a stopping rule well inside it.
- Scalp in liquid hours, and stand aside when spreads widen or the market goes quiet.
Next lesson: Run a day-trading routine with a daily stop
All trading is simulated. Rewards are based on performance and are not guaranteed.