Simple Scalping Strategy For Consistent Daily Profit
Scalping the Forex markets comes with its own pros and cons. For one, traders who do not have the luxury to either watch the charts or having to deal with managing their positions over a period of time, scalping offers a great way to profit from the markets. On the downside, traders are required to be adept in entering and exiting the markets while at the same time paying attention to other factors such as leverage, position size and money management.
If you are one of the traders who prefers to scalp the Forex markets for a small profit without having to be invested over the long term, this simple forex scalping strategy can offer a great way to trade the markets.
By the end of this article, the trader should be able to easily apply the trading strategy outlined in this simple scalping strategy. Of course, it is always advisable to first test this scalping strategy on a demo account before applying to a real trading account.
Forex Scalping Strategy
To get started with this forex scalping strategy, we make use of a 15 minute chart and employ the 200 period Exponential Moving average applied to closing prices and a 5, 3, 3, Stochastics oscillator. The moving average allows us to identify and trade in the direction of the trend, while the Stochastics oscillator helps in timing the entries and exits.
Once the indicators are applied onto the chart, the first step is in identifying the 15 minute trend. Simply put, if prices are trading above the 200 EMA, we take long positions, and similarly, if prices are trading below the 200 EMA, we only look for short positions. The Stochastics oscillator allows us to buy or sell based on the 80 and 20, overbought and oversold levels.
For Short positions:
- Make sure that prices have crossed below or failed to break above the 200 period EMA
- Wait for Stochastics to crossover from 80 levels and go short
- The most ideal positions are where prices make a bottom and then retrace signaling a short position
- Take profit is set to the recent low before the retracement and/or can be trailed
- Stops are placed at the most recent fractal high prior to the short signal
The chart below illustrates a typical short set up using the simple forex scalping strategy.
Simple Scalping Strategy – Short Set up
In the above chart, the short set up was taken after prices briefly attempted to break above the 200 EMA. Failure to do so resulted in prices first declining to post a temporary low before retracing. Towards the retracement at 1.3016, we notice that the Stochastics crossed down from 80 level. For the stops, the nearest fractal high was formed at 1.30249 while for the target, we made use of the recent low at 1.2985.
For Long positions:
- Wait for prices to either break above 200 EMA or retrace to the 200 EMA
- Watch the Stochastics oscillator to rise from below 20 and go long
- Exit the long position at the nearest high or book profits for every 10/15 pips
- Stops are placed at the most recent fractal low prior to going long
Simple Scalping Strategy – Long Set up
In the above long set up example, we see that prices are trading above the 200 EMA, marked by the highlighted ellipse. Prices then rally to make new high and begin to retrace. Looking at the Stochastics, the long position is taken when the Stochastics, when the oscillator rises from above 20, a long position is taken with stops set to the nearest fractal low. For the target, we aimed for the recent high before the retracement, resulting in a good profit.
Simple Scalping Strategy – More Tips
The above explained forex scalping strategy is simple and doesn’t make use of any complex indicators. The probability of success for the trades can be improved by taking into consideration the following pointers as well.
- Always trade on the first signal which offers the highest probability
- Focus only on set ups that offer a minimum of 1:2 risk/reward
- Always look to the higher timeframe to determine the slope of the EMA. The more steep the EMA is, the stronger the trend is
- Profits can be maximized by booking profits at a fixed number of pips from entry or at the retracement high or low and the remainder can be trailed until you get stopped out
This simple scalping strategy is one of the most easiest to trade and with enough practices, traders can master this simple yet effective scalping strategy with ease.
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