S&P: magic of the cycles
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Easy scalping strategies
Information is not investment advice
Scalping may look like a scary word to a regular mind. Traders, in their turn, find a lot of hidden opportunities behind its meaning. In trading, you don’t have to do anything with a human scalp. Instead, you make “slices” of pips on the small changes in the price. In literature, scalping is defined as a short-term trading style, which helps to succeed in the market from small price changes as many times as possible within a day. Experts identify scalping as a quite risky trading approach, which requires keeping an eye on the charts for the whole day. Therefore, a scalper needs to have steel nerves and follow the market carefully. It's important to know the tips on risk management and place entry and stop loss levels in the right way. A self-confident newbie in scalping may turn into a loser if he does not have an algorithm for entering the market. Today, we will help you with this struggle and share with you some effective strategies for scalping.
But firstly, let’s find out if these scalping strategies are useful for you.
You are a scalper if you:
- Trade on small timeframes (M1, M5, M15);
- Like risks and are ready to devote all your time to trading;
- Trade during the volatile/busy market;
- Like to have large position sizes to get more return from short-term trades.
If you answered "yes" to more than two points, then you are a true scalper! As for those who answered "yes" just once – you are probably considering this approach for now. Nevertheless, the strategies we are going to explain below are easy and understandable. We believe anyone of you may try them out and see how effective they are.
1 strategy - 5-Minute Scalping Strategy
Key elements:
- Timeframes: H1, M5
- Currency pairs: liquid ones with tight spreads (EUR/USD, GBP/USD, USD/CHF, USD/JPY)
- Indicators: 8-, 21-, and 13- EMAs
Algorithm of a “buy” scenario
- At first, we need to confirm that the trend is going up. To do that, we open the H1 chart and insert 8- and 21- EMA. To do that, open Metatrader, click to “Insert” – “Indicators” – “Trend” – “Moving Average”.
- For a “buy” scenario, we need to see an uptrend. To confirm this trend, 8-period EMA should be above 21-period EMA. Moving averages should not cross with each other.
- Now we go to M5 and insert 13-period SMA. This moving average is needed to see the gap between 8-period EMA and 21-period EMA. The wider it is the stronger is the trend.
- We wait for the candlestick to touch the 8-period EMA by its bottom. This is our trigger.
- We need to find the highest candlestick amid those which appeared before the trigger bar.
- A buy order is placed at the high of this candlestick. Stop loss equals the low of the trigger bar.
- We place the first take profit at the same distance as the one between entry and stop loss. If the trend remains strong on H1 and we are confident enough, we can double our reward and close the position at the distance twice bigger than the one between entry and stop loss.
Let’s look at the example. We will be looking at the chart of EUR/USD on July 22. On H1 we can see that the price is moving within an uptrend. The 8-period exponential moving average was moving above the 21-period one.
We switched to M5 and waited for the candlestick to test the 8-period EMA by its lower shadow. The trigger candlestick occurred at 12:55 on July 22. We counted 5 candlesticks back from the trigger one and chose the one with the highest high. We opened a buy position at 1.1545. We placed a “buy stop” order at the high of the highest candlestick. The stop loss is placed at the low of the trigger bar at 1.1537, while take profit levels go to:
1.1545-1.1537=0.0008
TP1 = 1.1545+0.0008=1.1553
TP2 = 1.1553+0.0008=1.1561
Algorithm of a “Sell” scenario
On the other hand, let’s look at the steps for opening a short position.
- On H1, the 8-period EMA should be below the 21-period EMA. It confirms a downtrend. Remember, as with a “buy” scenario moving averages should not cross each other.
- We turn our attention to the M5 chart and place a 13-period SMA there. The wider it is the stronger is the trend.
- We wait for the candlestick to touch the 8-period EMA by its high. This is our trigger.
- We need to find the lowest candlestick amid those which appeared before the trigger bar.
- A sell order is placed at the low of this candlestick. Stop loss is placed at the high of the trigger bar.
- The first take profit equals the size of our stop loss. The second one is twice bigger than the distance between the entry and the stop loss.
On the H1 chart of EUR/USD, we noticed that the pair was moving within a downtrend. The 8-period EMA was moving below the 21-period EMA.
We opened the M5 chart and waited for the trigger bar. It appeared at 16:25 on August 15. We counted 5 candlesticks back from the trigger one and chose the one with the lowest low. This is our sell order which goes to 1.1134. Stop loss is placed at the high of the trigger bar at 1.1144. The take profit levels are calculated as follows:
1.1144-1.1134=0.0010
TP1 = 1.1134-0.0010=1.1124
TP2 = 1.1124-0.0010=1.1114
2-strategy - Gold-scalping
The second strategy is for those who love trading gold and want to learn how to scalp the precious metal. Keep in mind that it requires your full attention to the chart.
Key elements:
- Timeframes: M1
- Assets: gold, silver
- Indicators: Williams’ Percent Range: Fast (9) and Slow (54) With -30 and -70 periods
Algorithm of a “buy” scenario
You need to buy when both slow and fast oscillators break above -30. Close your position when the fast oscillator (9) leaves the zone. Stop loss goes several pips below the support level nearby.
Algorithm of a “sell” scenario
When you consider opening a short position, you need to sell when both slow and fast oscillators break below -70 and close when fast leaves the zone. Stop loss is placed several pips above the resistance level nearby.
Below you can see an example of long order. We opened a position when both slow and fast oscillators were above the -30 level at 1 946.12 and closed at 1 948.67 when the fast oscillator crossed the -30 level to the downside. The 1 945 level marks our stop loss.
Now you know what strategies you can use for scalping. We highly recommend you to try them out! At the same time, remember about risk management and don’t be greedy. This simple advice may save you from unsuccessful trades.
Ekaterina Gorbatenko
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