Scalping Trading Strategy
A scalping trading strategy is a short-term strategy that aims to profit from small price movements within the market. Scalp trader executes trades fast and holds the position only for a period of a few seconds or minutes and will not hold positions overnight. Scalping Forex relies on a large number of trades and small profits from each trade. Therefore most scalping strategies are based on lower time frames 1-minute to the 15-minute.
The aim for a successful scalping trading strategy is through a large number of winners, rather than a few successful trades with large winning sizes. Therefore, a forex broker with the lowest spreads is a must. High spreads can easily eliminate significant portions of trader-winning trades. Choosing the lowest spreads currency pairs is also an important factor as well as volatility. EUR/USD would be the best choice, currency pair with the lowest spreads. USD/JPY, GBP/USD, EUR/GBP, EUR/JPY, and AUD/USD currency pairs are also suitable for scalping trading strategies. In terms of volatility AUD/JPY, GBP/AUD, GBP/NZD usually experience a greater degree of variation during trading days.
Scalping requires a very strict exit strategy. One large loss could eliminate many small gains traders could obtain. Therefore, forex scalpers are required to keep a constant eye on the market for any changes and to have an iron discipline. Possible entry points can appear and disappear very quickly so a trader must remain tied to his platform. Scalping is not necessarily an ideal strategy for individuals with day jobs and other activities as it is very demanding in terms of time. Scalping forex apart from trader full attention also requires great knowledge and experience. Expertise in Naked Chart Candlestick Patterns and Price Patterns would be highly beneficial.
Best scalping trading strategies based on standard indicators:
Technical indicators help traders to forecast market trends and patterns before they open a trade. Most of the time more than one indicator is needed. Generally, the best scalping indicators are combined together to work for a successful scalping strategy. The most common standard indicators scalpers use include simple moving average (SMA), Bollinger Bands as well as an exponential moving average (EMA), and stochastic indicators.
Stochastic oscillator strategy:
Stochastic oscillator scalping trading strategy combines three standard indicators: Stochastic Oscillator and two Simple Moving Averages (SMA), 50 & 200. A stochastic oscillator technical indicator measures the current value of a currency pair to its range over a recent period of time. By comparing the price to its recent range, the indicator attempts to reveal possible turning points and trend strength. Whereas SMA is the most common MA indicator, helps to identify the direction of a trend, without the interference of shorter-term price spikes. Find out more about standard indicators on Top 10 standard indicators for MetaTrader 4.
Scalping with the use of such an oscillator aims to capture moves in the trending market the reason for Simple Moving Average is crucial to identify the direction of a trend. In case SMA 50 remains above SMA 200 indicator indicates that the trend is bullish (uptrend), in contrast, SMA 50 remains below SMA 200 indicator indicates that the trend is bearish (downtrend). Traders always enter the market with the direction of the main trend.
Stochastic oscillator indicator with 14,5,3 setting signal entry points for a trade. When mainline K rises s above the 20 level signal an entry for a long (buy) position. In opposition when mainline K falls below the 80 level signal an entry for a short (sell) position.
Stochastic oscillator scalping strategy buy signals example :
(M5 chart, SMA 50 and 200, Stochastic oscillator 14,5,3)