Thursday, June 29, 2017

Effective Forex Scalping Strategy and Indicators

March 8, 2011 by  
Filed under Forex FAQ & Latest Post


In today forex faq, I will be addressing a question about scalping the forex market. In fact, forex scalping strategy is one of the most commonly used trading strategies by traders as it provides fast profit.

Below is the question by one of our fellow traders:

Kelvin, your site is amazing!

I have learned so much from you over the past few months and really grateful for that. I have also read your trend line trading strategy and plan to read the technical analysis book that you recommended to further expand my knowledge.

Anyway, I feel like I am a scalper type of trader and actually get a kick out of trading the 5 minute charts for 5 – 20 pips at a time. Unfortunately I live in Eastern Standard Time and can only trade during the Asia Session, which is a pretty bad time I always hear. Sometimes there are rather big moves going on during that time.

I was hoping if you could recommend any scalping strategies or provide any ideas how to successfully trade during the Asia session. Thanks for your help. Look forward to reading your posts and trade recommendations.

Below I go into details about how to scalp the forex market, let me list down the pros and cons of being a scalper.

Pros

– Quick entry and exit of market leading to fast profit and can avoid news release
– Suitable for those with not much time to look at the chart

Cons

Low risk reward ratio as every trade aims to grab small profits
– Quick analytical skill is needed as you need to make quick decision

Now let us get into the details of how to scalp the market. The best way to perform scalping is through the use of support and resistance. As you know, the price is usually influence by the major support and resistance in the chart and as a scalper, you must be aware of these levels.

Types of Important S & R

Pivots
Fibonacci
Trend Line (Especially Medium and Long Term Trend Line)
– Major Swings

Once you have all these levels identified, you will need to wait for the price to approach these levels.

In order to increase your chance of winning, you can make use of some indicators like the Relative Strength Index (RSI) or the Forex Stochastic Indicator.

Once you see the price approaching one of these major support and resistance levels, you should check your indicators to see if they show sign of overbought or oversold.

If it is approaching a resistance level, you should check to see if your indicators are registering overbought and vice verse.

Another indicator you can add is the MACD indicator, the histogram of this indicator can be used as a tool to check the strength of buyers and sellers. Let says that the price is approaching a resistance and you see that the MACD histogram is shortening above the zero line, it is a sign that the seller are gaining strength and this gives you a good signal to go SHORT.

Forex Scalping

 

Please do not trade live immediately with this strategy as you need at least two to three months of practicing on a demo account before you can trade successfully with it. During your practicing, you will then be able to fine tune the strategy by adjusting your indicator setting or adding new indicator to improve your winning percentage.

If you guys have anything to share regarding forex scalping strategy, please feel free to give your comment below.

Comments

2 Responses to “Effective Forex Scalping Strategy and Indicators”
  1. Leonardos says:

    Hello Kelvin,
    Thank you for your advice and all these strategies.I find them very reliable.
    I want to ask you in this chart,the bottom indicators are the stochastic and the other one is the RSI?

Speak Your Mind

Tell us what you're thinking...
and oh, if you want a pic to show with your comment, go get a gravatar!