Scalping is a Forex trading style with high efficiency and risks of a neurosurgeon.
What is the main charm of scalping? The answer is dynamics. Most traders are attracted by bright, exciting trading and quick profits. If you are among them, then scalping is your method of trading. Scalping is intraday trading. Transactions, as a rule, are opened for a short period, since the purpose of scalping is not to catch large movements but to search for quick transactions that can be quickly earned. However, the biggest problem is to be able to correctly scalp, correctly accompany transactions and exit them on time. If you want to learn this in just a few steps and masterfully scalp, this simple guide is for you!
What is a scalping strategy?
Scalping is one of the trading styles, the essence of which is to profit from small price fluctuations over a short period. Typically, scalpers (the so-called traders who practice this method) close the deal quickly enough after it has become profitable. This trading style involves a large number of transactions in a short time, for example, more than 100 intraday transactions.
It is only natural that scalpers have strict entry and exit rules since even one significant setback can block all previous small earnings that the trader worked hard so long. Therefore, scalpers always have a specific set of tools and a sufficient deposit size for work.
The task of the scalper is to close as many transactions as possible with a small profit. This approach is opposite to the profit growth method used by positional traders. The scalper’s profitability directly depends on how much he can increase the number of profitable trades since the ratio of risks and profitability in a transaction is not the same as for traders practicing other, calmer styles.
The main advantages of scalping:
- Reduced risk due to short entries. If a trader enters the market as the price moves, he has good chances of making a profit at a very short distance.
- To “catch” small price changes is much easier. For any security, a movement of 10 cents happens much more often than a movement of 1 dollar.
- Small movements occur in the market much more often. Even in periods of relative market calm, scalpers always have work to do.
Scalping strategy requires constant attention and quick response. Success in this type of trading depends entirely on the mood of the trader. A trading session cannot be successful if it is difficult for you to maintain a maximum concentration mode.
Beginners often choose quick strategies to make up for their lack of experience with a sense of constant employment. However, you need the right and effective indicators. With their help, you can increase the efficiency of scalping.
Best 5 Scalping Indicators and How to Use Them
Now let’s look at the best indicators for scalping and how it can be applied in your daily trading. We will consider the five best indicators that give a good result and help you deal with short-term market analysis.
The accuracy of the indicator is 9.0/10. It is used to boost your deposit.
It’s the latest accurate indicator, working at time intervals M1-M15. Not three lines of indicators are used here, but their correlating values. It is much more convenient and gives greater accuracy of entry. The system is well suited for searching for divergences and convergence, and also makes it quite easy to find price reversal points.
How to trade?
You need to trade only at short time intervals to earn more money. Entrance signals are not very frequent, but up to 10-30 transactions on one pair can go out per day. With a strong decrease in the indicator lines, relative to its past values, you need to look for points to buy, and with a significant increase – sales.
The essence of the work is to find the intersection point of the indicator at a local minimum or maximum, and profitability will depend on this.
A return signal closes the deal, but you can set other rules for yourself. Try to disperse the score using the standard settings. Today, the indicator works best on the GBPUSD pair. It is easy to understand, very technical, and the indicator confirms this. With trading in the risk of 5% of the deposit (for aggressors), profit can reach 250% per month, and this is not the limit.
Indicator accuracy – 8.75/10
It’s an old idea but a new way of understanding.
It’s an excellent indicator of finding price reversal levels. Well suited for work, both scalpers and medium-term traders. The indicator is straightforward to use. After setting the currency pair on the chart, you will see that below the price, there will be levels for purchases, and above the price, there will be sales.
Following these tips, working on a trend, you can make good money with scalping. It is best to use the system on the euro/dollar, where the least noise. Although working on a trend, and you can trade on the pound/dollar, the profit, in any case, will be more than a loss.
How to trade?
Buy pending orders from Op_buy levels, sell from Op_sell. Stop-loss & stop orders should be placed at the next level of purchase or sale because there is another strong level.
Profit is taken at will, but it should not be less than 10-15pt. It is best to set a fixed profit of around 50 pts in case of strong movement, but most often, traders close the deal based on the readings of other indicators. If you bought from a level, Experts recommend taking profits from the first level for sales to squeeze everything out of the market.
Extrapolator _-_ sincMA
The accuracy of the indicator is -/10. It’s a leading algorithm.
A very complex algorithm based on several standard indicators of technical analysis. It’s able to forecast the price ahead of schedule. Advance or delay is set in the input parameters. It’s better not to change the settings; then, it shows best. The probability of a correct forecast is up to 75%. It is not very much, but if you are working in a trend, then the endpoint of the rollback is significant; you can earn faster.
If you set this indicator, you will see that the blue area is the history of the trading instrument, and the red area is the forecast. Experts use this indicator as an analyzer if there is no free time for conducting the fundamental analysis.
Switch to the 5-minute chart of the euro/dollar currency pair, changing the turn parameter from 3 to 5. As you can see, the line forecasting the price change has become smoother. Smoothing allows you to get rid of the noise, but at the same time, there is a risk that the trader will miss the beginning of a strong movement, so if there is a lot of smoothing, trading should always go with safety orders. After the market moves to the profitable zone, it is necessary to transfer the transaction to breakeven, which will allow not to lose the already earned.
The accuracy of the indicator is 10.0/10. It’s an analytical signal indicator.
It is an exciting indicator that draws price action patterns. The system draws bullish and bearish takeovers, as well as some other candlestick formations, about which you can read the link here. If you install the indicator, you can see that its signals are very accurate. Transactions concluded on these signals give high performance.
How to trade?
If you want to work with this indicator, it is advisable to know the most popular candlestick pattern so that you can filter not the most profitable deals. After that, you need to configure the indicator. Experts recommend using the standard options; they work best. Be careful with cross rates; they can cause problems due to the high price activity.
A bullish absorption signal appeared 1 bar back. Naturally, the indicator will show the signal with an up arrow. The question is where to place a safety order and where to take profits. When working with acquisitions, the safety stop loss is set at the level of the nearest local extremum, and take profit is an important level or a signal in the opposite direction.
Since the accuracy of the signals is high, you can make transactions using the soft martingale system. To earn an average on each transaction, in the event of a loss, you need to increase your position 1.1-1.25 times to earn on the next and beat off the previous transaction.
The accuracy of the indicator is 8.0/10. It calculates the correlation between currency pairs.
You can often find traders claiming to trade correlation. Now, this is a popular topic, as inefficiencies began to occur a little more often. The question is how long it is. The algorithm takes two currency pairs, they can be set in the settings, compares their average movement for a certain number of bars. This value is substituted into the correlation calculation formula to display the data on the graph.
By default, experts have set the correlation calculation for two pairs, EURUSD and GBPUSD, with an estimated period of 288 bars. Correlation can be considered not for such a large period. When trading on the M15 chart, it is enough to use a period of 16 bars.
How to trade?
There is always a guide. In the market, this is a more “stuffed” currency – the euro. The pound is slightly weaker in terms of liquidity, so it will almost always go for the euro. It is known that the average correlation between these currency pairs is up to 90%. Wait until the correlation index (in other words, the dependence of the movement of one currency on another) falls. Once it drops to 60-70%, open the euro chart. If the price rises, look at the pound/dollar. With a low correlation, inefficiency will appear.
Roughly speaking the euro is growing, the pound is in place. We are buying, as if removing the inaccuracy of the market.
Quick profits will always be a trader’s dream, especially for beginners with small deposits. It is psychologically difficult to wait for the completion of the transaction for several hours or days, open in small lots and increase the deposit in small portions. An obsession arises to put the maximum leverage, switch to lower timeframes, and start using scalping techniques. Use these indicators so that your scalping strategy is based on relatively accurate indicators. Then you can increase profitability. Learn the nuances of working with each indicator to choose the most suitable settings for you.