Top Indicators for a Scalping Trading Strategy

forex trading strategy

Forex scalp traders also use technical analysis indicators to better understand the supply and demand of currency pairs and the overall market sentiment. These forex scalping indicators are statistical tools designed to help traders analyze price behavior and offer indications to enter and exit trades. Some of the most popular and commonly used scalp trading indicators include the Relative Strength Index, Bollinger Bands, Moving Averages, MACD, and Stochastic Oscillator. The forex market can be volatile and instead of showing small price fluctuations, it can occasionally collapse or change direction entirely.

Margin trading involves a high level of risk and is not suitable for all investors. Forex and CFDs are highly leveraged products, which means both gains and losses are magnified. You should only trade in these products if you fully understand the risks involved and can afford to incur losses that will not adversely affect your lifestyle. Currency pairs trending near the lowest price in the range signal an upward market trend reversal, suggesting traders to buy more of the currency pair to maximise returns. Dots above the currency pair price indicates a bearish market phase that shows a continued downtrend, signalling traders to place sell orders for minimum potential losses. When the RSI moves beyond 70, it indicates a downward trend and sends a signal to traders to exit the market and sell more of the currency pair to minimise losses.

bollinger bands

You can capture that by looking for instances at the London open, New York open and Tokyo open. This is a powerful scalping system that is very easy to learn and can be consistently profitable in both trending and consolidating price movement if used correctly. The Simple Moving Average tracks the average closing price of the last number of periods. For example, a 50-day SMA will display the average closing price of 50 trading days, where all of them are given equal weight in the indicator.

This is meant to help a trader with trend identification. takes no responsibility for loss incurred as a result of the content provided inside our Trading Room. By signing up as a member you acknowledge that we are not providing financial advice and that you are making the decision on the trades you place in the markets. We have no knowledge of the level of money you are trading with or the level of risk you are taking with each trade. Scalping trading is all about opening many trades in every trading session and earning small profits from each transaction.

You might be a forex scalper if:

Although there is no “correct answer” to the analytical question, technical analysis is often implemented in forex scalping strategies. Trading with high frequencies on a short-term time frame requires the trader to act with precision. Thus, the scalper needs to have a robust trading platform at their disposal. The primary facets of any scalping system are high trading frequency, positive risk vs reward, and short trade durations. Given the proper inputs, many professional traders certainly think so. A reversion to the mean, or simply “reversion,” is a strategy designed for rotational markets.

Plenty of new strategies are being developed in the global network every day. However, if you want to know more about efficient Forex strategies read our review of the most profitable recent trading strategies at Forex. There are strategies inappropriate to an asset or market conditions.

Top Indicators for a Scalping Trading Strategy

In the following AUD/JPY example, the arrows indicate points where a scalper would open a position, going long or short depending on the trend reversal. In the second example, the long-term MA is declining, so we look for short positions when the price crosses below the five-period MA, which has already crossed below the 20-period MA. The best forex platforms are intuitive, user-friendly and low latency. Latency is a term used to describe the period of time it takes data to flow to and from the market. A low-latency platform does not contribute to data lag or bottlenecks. It is glitch-free and promotes precision as data is transferred seamlessly to and from the market.

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The top three forex scalping strategies are the breakout, reversal and reversion methodologies. If implemented consistently, each can produce positive returns over the long-run. Ultimately, it’s up to the individual to decide if scalping is a suitable way to trade the forex. In most cases, a market break is preceded by a period of rotational or compressed price action. When the compression reaches critical mass or “breaking out,” price moves considerably to the bull or bear.

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They differ from each other in visualization and additional options. It shows a current and previous spread values in the form of a small histogram. Once you close a trade, open another one in the opposite direction. Don’t close a trade if the price only passed the middle of the channel. In point 8, the price touched the middle of the channel and went down.

Successful Forex scalping strategy will use specialized trading tools and often employ algorithms to identify and automate trades. As such, it is not recommended for beginners, as the fast-paced nature of scalping can lead to significant losses for those who lack the necessary knowledge and emotional control. Additionally, scalping demands constant attention to the market and may not suit traders with limited time or those who prefer a more passive approach. Finally, since scalping involves many intraday trades, it can rack up trading fees and taxable events. ​ is available on our online trading platform​, Next Generation. Bollinger bands are one of the best trading indicators for scalping as they enable scalpers to trade in volatile markets since all the positions are so rapid.

Second,high-frequency trading now dominates intraday transactions, generating wildly fluctuating data that undermines market depth interpretation. Finally, the majority of trades now take place away from the exchanges in dark pools that don’t report in real-time. Scalpers often have a specific temperament or personality that reflects the risky method of trading.

It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. Consequently, any person acting on it does so entirely at their own risk. This report is intended for general circulation only. It should not be construed as a recommendation, or an offer to buy or sell any financial products.

What is the Best Time Frame to Scalp Forex?

While scalpers aim for very small profits on each trade, the large number of trades they open during a day can easily return significant profits by the end of the day. Falling and Rising WedgesWhen you are trading currency pairs in the Forex market, it is essential to know when the market can possibly reverse. The Falling and Rising Wedges pattern help identify market reversal signals and accurate market entry and exit points. You enter your first position at 4, and a few minutes later, the price increases to 4.3; you sell your first position to profit from the small change. The price continues increasing to 4.5, and at this point, you place another long position with an expectation of the prices rising further. The currency pair reaches a rate of 5 in the next one hour, and you sell the entire trade to profit from the price change.

Determine your entry and exit points depending on whether you think the price will rise or fall. Most of our traders analyse the market on a regular basis for upcoming events that may have an effect on their spread. Typically, the first thing you have to do is to define the Asia range.

  • The Stochastic Oscillator captures the trending market direction and also provides potential market turning/reversal points to let the trader know when to enter and when to exit the market.
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  • You enter several short-term trades for directly correlated pairs in the first minutes of the news publication in the general trend direction.

The currency pair falls temporarily to a level of 4, where you place another long order as you expect the market to rise again. Since scalping involves entering and exiting the market quickly to make small trades with considerably less capital, it is perfect for forex trading beginners. Although, forex scalping does require a competitive nature, high discipline, and decisiveness from forex traders.

Some things to consider if you decide to scalp:

Let us look at some of the best 1-minute scalping strategy when scalping. Using longer charts in scalping will tend to lead to substantial losses because each candlestick represents a longer period. For example, each candlestick in a hourly chart represents one hour. There are those who initiate trades in the morning and then close them when they are ending the day.

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Trend following is a fairly simple strategy to use when you are scalping in a 1-minute chart. Your goal is to find an asset that is in a bullish trend and then just buy, especially when it makes a pullback. In this case, you will make some cash when the price rises and then move on to the next one.

Don’t open multiple positions if the gap between the two conditions is two or more candlesticks or if MAs converge and then diverge instead of crossing each other. Open a tradeprofitably in the price movement direction. A trader can open dozens of trades in various assets simultaneously, trying to exploit every small price fluctuation. Profits can go up to several points, but the total result can compare to other trading systems’ efficiency because of the large amount of trades. I won’t describe the subdivision by the indicator type as it is rather logical. The classification can be extended, and I will appreciate it if you, my dear readers, help me by offering your variants of Forex scalping strategies in the comments following the overview.

Live prices

Scalpers aim to enter and exit positions as quickly as possible to minimise their exposure to broader systemic risk. Within the realm of active currency trading, there are numerous strategies. Each has a collection of necessary inputs, defined rules and objectives.

Instead of waiting for days for a trade setup, short-term traders jump into and out of the market in seconds and trade only during the busiest and most liquid market hours. This means no overnight risk, and all profits and losses can easily be summarised by the end of the trading day. A 1-minute scalping strategy refers to a situation where a trader uses the 1-minute chart to conduct analysis and execute trades.

IfEURUSD andUSDJPY are rising, thenEURJPY will also rise. Next, it’s time to move over to a shorter-term chart. Which chart you use is up to you, but most scalpers tend to look at markets in 1-minute timeframes, or even less. With this simple strategy, a trader can decide to exit their position as soon as price hits the middle simple moving average line or when it reaches the lower Bollinger band. Our next chart shows the Bollinger bands indicator using the 20-period, 2-standard deviation settings on the day the European session commenced. The upper and lower blue lines are the Bollinger bands, and the orange line that runs in the middle is a simple moving average that, by default, forms part of the indicator.


It corresponds to 10 USD for a 0.1 lot trade with a spread of 1 point. Then open a trade in an opposite direction or take a pause. Cryptocurrencies are good for scalping only during important fundamental releases as 1-2% daily volatility won’t be enough to cover competitive spreads. Holding time is up to 30 minutes, the time frame is M15. Alternatively, you can practise scalping with a free City Index demo.

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