But above all, scalping requires a sharp eye for detail, knowledge of technical analysis principles and determination.Īs entry and exit points appear and vanish in seconds, sometimes, traders are tied to their computers. Scalpers are disciplined soldiers who always follow the trend and stick to their trading system. Uses either systematic or discretionary trading strategies and tactics Less frequent and longer-term trades (30 minutes to a whole day) In comparison, when the RSI reaches 70 and then starts declining steadily within a downtrend, there’s a chance to “sell the rally”, as seen below. Specifically, when the RSI declines to 30 and then moves above this point, it means it is the right time to enter. When the price rises (as seen in the first chart), with the three MAs pointing higher, dips in the trend are to be bought. Lastly, you can use the RSI with scalping to identify your entry points along with the current trend. As with every other trading strategy, risk management is vital with scalping, preventing substantial losses. Most importantly, when scalping, you should remember that every trade you place follows the trend, and you shouldn’t seek to capture each and every price swing. We now look for an opportunity to go short, which will present itself when the price crosses below the 5-day MA. In the contrarian scenario (illustrated below with a chart), the 200-day MA moves lower. The arrows on the chart indicate the entry points. Therefore, we look for the 5-period MA to cross above the 20-period MA to open positions in the trend’s direction. We observe that the 200-day MA is moving upwards. This is when traders speak about “selling the rally”, in which case the presence of a bearish crossover in the direction of the trend signals that it’s time to enter a short trade.Īnother popular indicator among scalpers is represented by Moving Averages (MAs), usually in the form of a short-term one and a longer-period one showing the trend.įor the purpose of this article, we will analyse a 3-minute EURUSD chart, with the short-term 20 and 5-day MAs and the 200-day MA for the longer term. Short positions are ideal in a downward trend, as shown below. In contrast, when the stochastic peaks above 80 or when the crossover appears (when %K crosses below %D), it means that the trade should be exited. In the above example showing the 3-minute timeframe of WTI oil, we observe that the price is moving upwards, and the lows in the Stochastic (marked by arrows) provide entry points for long trades (the black %K line crosses above the dotted red %D line). Prices tend to close near the extreme points of the recent range before a pullback or a reversal occurs, as seen in the example below: Scalpers use this indicator to spot trends in a trending market, mainly where the up- or downtrend is consistent. By comparing a security’s current price to its recent range, the Stochastic aims to provide potential turning points. The term “Stochastic” describes the current price level in relation to its most recent range.
You can use the Stochastic Oscillator to shore up some quick profits. Scalpers often use advanced charts and indicators to assess an asset’s historical price movement, spot trading events and determine their entry and exit points.ģ Popular Indicators You Can Use With Scalping Traders adopting this trading style prefer technical analysis rather than fundamental principles. Additionally, scalping is based on the premise that smaller market moves are easier to capture than larger ones and that smaller moves occur more frequently. Every scalping strategy relies on lower risk exposure, given that the time of active trading is reduced, thus lowering the risk of a contrarian market movement. The purpose of scalping is to place as many short-term winning trades as possible rather than make sizeable profits with one or two long-term trades. Precisely because the price difference between the opening price and the take-profit price is so small, scalpers must remain faithful to their trading system, thus avoiding significant losses. As a rule, all trading strategies require rigour and discipline, but these qualities double their importance with scalping. Profits on scalping trades are usually made quickly, as soon as the trade has turned profitable, even if the movement is as little as 1 pip. Scalping is a trading strategy used by traders seeking short-term gains from small price differences.
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