5 Min Forex Scalping Strategy with Parabolic SAR and MACD
We created The 5 Min Forex Scalping Strategy using the standard MT4 Indicator, Parabolic SAR and the popular momentum indicator, MACD, for fast entry and exit. The 5-minute chart can be an interesting time frame to trade for scalpers and intra-day traders. At the very least, the 5-minute chart can offer traders the ability to scalp 10 – 15 pips a day and is suited for part time traders as well as full time traders. Due to the time frame, any 5-minute chart is ideal for trading on just the major currency pairs and ones which have tight spread.
In this 5-minute forex scalping strategy with Parabolic sar and MACD, traders are introduced to a simple yet efficient way to trade the markets. The trick is in of course, staying disciplined in this approach.
5 Min Forex Scalping Strategy with Parabolic sar and MACD
For the chart set up, you simply need the Parabolic SAR with the default settings (Step: 0.02, Maximum 0.2) and the MACD indicator (attached to this article, and not to be confused with the default MT4 MACD indicator). The MACD can be used as the default settings of 12, 26 and 9.
Once the indicators are added your chart set up looks like this.
The 5 Min Forex Scalping Strategy with Parabolic SAR and MACD Scalping Rules
- Identify a strong downtrend. A strong downtrend is determined by at least 10 5-minute bars or more where the Parabolic SAR is printing on the top (indicating a downtrend)
- Wait for a retracement to the downtrend. This is where the Parabolic SAR will now start printing below price
- Wait for this retracement to be completed, which is identified by the PSAR on top of par
- Identify the low before retracement and market it with a horizontal line
- When this low is broken, the PSAR should be on top of price and MACD confirms the sell signal (MACD line and Signal line makes a bearish crossover) and histogram is below the 0-line
- Set stops to 10 pips above the high of the retracement and set first target to 10 pips and the second target to 20 pips. Move stops to break even when first target is reached.
- Identify a strong uptrend. A strong uptrend is determined by at least 10 5-minute bars or more where the Parabolic SAR is printing below price
- Wait for a retracement to the uptrend. This is where the Parabolic SAR will now start printing above price
- Wait for this retracement to be completed, which is identified by the PSAR switching to printing below price
- Identify the highest high before the retracement and mark it with a horizontal line
- When this high is broken, the PSAR should be below price and MACD confirms the buy signal (MACD line and Signal line makes a bullish crossover) and histogram is above the 0-line
- Set stop loss to 10 pips below the low of the retracement and set first target to 10 pips and the second target to 20 pips. Move stops to breakeven when first target is reached.
Parabolic SAR and MACD Scalping – Trading Examples
- Strong downtrend is noted with PSAR above price
- Price makes a low at 1.12146 before retracing (and confirmed with PSAR switching below price)
- Sell at the low, confirmed by MACD making a bearish crossover. Targets at 10 pips and 20 pips from entry with stops at the high of the retracement
- Price is in an uptrend with PSAR below price
- Price makes a high at 1.11827 and then makes a small retracement
- Buy on the breakout of this high with targets set to 10 pips and 20 pips (only first target is reached here)
5 min Forex Scalping Strategy with Parabolic SAR and MACD Scalping – Final Thoughts
- If anytime after the trade is triggered and the PSAR switches, then exit at market and wait for a better set up
- Move stops to break even when the first target is triggered
- Always account for spreads. For example, if EURUSD spread is 1 pip and your target is 1.11837, then adjust the target to 1.11827 to ensure that you miss out on taking profit
- Best times to trade this strategy is during European and US trading sessions
A final example of this scalping strategy with notes on chart.
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