HOW TO USE FOREX SCALPING STRATEGIES & INDICATORS
In today's article, we are going to focus on how best to use forex scalping strategies and the tips on how to use them effectively. We will be discussing the forex scalping of multiple charts and the relative strength and weakness exit strategy.
Always remember when using any sort of indicator or tool in your trading, that you should focus first on your supply and demand levels to provide you with the main entries and exits. The indicators are to be used to confirm entries.
If you have experience within forex day trading, you will know about forex scalping, this is a technique where forex market traders will profit from very small changes in prices over multiple currency pairs. The positions are open for a small amount of time, sometimes seconds. It is a very time-consuming method of trading and one in which full-time traders who have the time will favour more over the occasional speculator.
Scalping can be a very risky style of trading since some trades last only moments, there's little opportunity to place a stop loss. If some trade news surprisingly comes out of Europe and America while you're on the EUR/USD then your quick scalping trade could quickly turn against you.
Scalping indicators in Forex
Looking for a good indicator is very tricky as there are so many out there with most being useless, please see a couple we will introduce you to.
- The Relative Strength and Weakness Exit Strategy
- Forex Scalping of Multiple Charts Strategy
- Ribbon Entry Forex Trading Strategy
These forex strategies are similar to those used on longer time frames but modified for trading on a very small-time frame such as a 2 minute or 5-minute chart. Any scalping strategy is always best to use in a range bound market with minimal interference from fundamental factors. Scalping will perform poorly in times of volatility and trend movement.
Ribbon Entry Forex Strategy
The main task of this scalping method is to place the simple moving average (SMA) 5-8-13 combination on a 2-minute chart. This will help determine trades to be purchased or sold on counter swings in small trends. This strategy is fairly easy to master as all it requires is to line up the 5-8-13 ribbon. It will then point to either higher or lower during solid trends. A penetration in the 13 bar SMA determines a diminished momentum, therefore favours a reversal.
The ribbon will flatten out during range-bound periods and swings, the price may even cross the ribbon a number of times. The scalper will then observe the changeover as the ribbon turns both ways – higher or lower.
The Relative Strength and Weakness Exit Strategy
This simple scalping strategy is about determining the best time to take profits and cut losses in short term scalping trades. This, of course, is of vital importance. Usage of the 5-3-3 Stochastics indicator with an SD Bollinger band and ribbon signals serve well on markets like the indices.
The best type of ribbon trades combine with stochastics turn to become higher than the oversold level, or lower than the overbought level. Make sure to time your exit accurately, watch the interaction with the band at a certain price. Take profit in concrete band penetration as they forecast the trend. Forex scalping strategies can’t afford to go through retracements in the market.
Also, take time to exit if the price fails to penetrate the band as the Stochastics indicator rolls over providing you with the signal to get out of the trade.
Forex Scalping of Multiple Charts
This strategy is definitely our favourite here with the traders and one of the best to use in forex scalping. In order to set this up, pull up a 15-minute time frame of your desired chart. Please ensure the chart has no indicators on it at all, then set up 3 horizontal lines for a 45-90 minute trading session. The first line for the opening print, the other two for the high and low of the trading range.
Observer price action at these three levels, you will then also set up this on a 2-minute time frame too. You will find the biggest profits come when the scalp support and resistance line up on both timeframes.
Always approach scalping with caution as it requires an experienced trader to execute the strategies, you will also be required to be in front of your charts for large amounts of time. Using the strategies above will certainly help as they are some of the best scalping indicators, learn to trade the correct way firstly too.
If you require assistance on trading price action, here at Platinum Trading Academy we provide 1 on 1 personalised mentoring on how to do so.
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Hopefully, you have enjoyed today’s article. Thanks for reading!
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