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Forex Scalping Strategies

The Best Strategies for Forex Scalping

We will now look at some scalping approaches that when used in the right market conditions could be rewarding. It is imperative to know when the conditions are right for each approach to benefit.

Scalping can be both damaging and rewarding. Traded correctly, equity can be dramatically increased within a day, although Traded incorrectly and accounts can be wiped out. Scalping is a fast-paced trading strategy and allows for many trades throughout a trading period, if your trades are successful, you can quickly grow your equity.

Scalping is not an easy task, it can be challenging, but not unachievable. Potentially you could grow your accounts two-fold or more in just a few months, this is what all traders desire.

Forex Trading Strategy: Free Scalp

It has been said that all markets, Forex included have fractal features. This suggests that the patterns traders see at higher timeframes, would match the patterns seen at lower timeframes. This has some merit, but does not always apply. Sometimes there are instances that can cause patterns on one timeframe to be irrelevant on another. Instances such as, news releases, volatile markets, significant space between the bid and ask price etc. These influences can have a superior effect on the lower time frames than the higher timeframes.

On the other hand, there are theories that can be applied to higher and lower timeframes. These can consist of momentum, trend reversals, trading patterns etc. These theories can apply to most trading strategies, traders looking to scalp should have these factors considered.

In order to see if the strategy works on a certain timeframe, you need to test it. Some theories work well on the 5 minute chart, but not at all on the 30 minute chart. The same can be said for a strategy that works for higher timeframes, but will cause destruction when used on the lower timeframes.

Free Scalp works remarkably well on lower timeframes. Based on trend and momentum, scalping trade signals are detected using a union of highly consistent scalping indicators.

50 SMA and 200 EMA

In all trading strategies, whether it be scalping, day trading or swing trading etc, trends are an essential factor.

Traders favour moving averages as one of the main indicators to identify trend direction and bias. A bullish trend would be seen as a price being above a moving average or an upward slope, whereas the opposite is true for a price below a moving average or a downward slope.

Looking at how 2 or more moving averages are arranged is another method to see a trend. Bullish momentum would be considered when shorter period moving averages are above longer period moving averages, the opposite can be considered bearish.

Long term trends are normally identified by traders using the 200-period exponential moving average, whereas the 50 period simple moving average is used to detect a general mid-term trend.

Free Scalping System

The free scalping system was designed exclusively to recognise trends relating to the lower timeframes. The system is a customised indicator to detect trend direction.

Trend direction is indicated as an oscillating indicator. Histograms are displayed and could fluctuate from positive to negative or negative to positive. Lime coloured bars are positive and show bullish trend, whereas red bars are negative and show a bearish trend.

ASC Trend

The ASC Trend is another custom indicator and is based upon trend and momentum reversals, which indicate specific entry points.

This is a very easy indicator to use, entry points are clearly displayed with arrows on the candles.  Where the arrow points upwards, bullish momentum is detected, whereas downward pointing arrows suggest a bearish entry signal.

Trading Strategy

Designed predominantly for the lower timeframes, this strategy creates highly probable trade signals, based on the union of the long-term, mid-term and momentum based trends.

Trading this strategy requires us to find the convergence of the 200 EMA, the 50 SMA, the Free Scalping system indicator and the ASC Trend indicator.

To be sure that the long and mid-term trend direction are in union, the moving averages are required to be arranged correctly in the trend direction, as well as the closing of the price being on the correct side of the moving average, based on the trend direction.

The moving averages and the free scalping system should be in agreement of the trend direction. Although, trading should only be considered when the midline is just crossed by the free scalping system. This would suggest the long term trend is still valid and that there was a brief reversal on the free scalping indicator due to a brief retrace.

In conclusion, all indicators above and the ASC trend signal should be in agreement of the trade direction. This would suggest that we are back to the original direction of the main trend.

Setup for a Buy Trade:
  • A bullish long term trend should be detected with the 50 SMA above the 200 SMA.
  • The Price needs to cross and close above the 50 SMA.
  • The histogram bars of The Free Scalping System should alter from red (negative) to lime (positive) to show a bullish trend reversal.
  • There should be an upwards (bullish) arrow displayed by The ASC Trend indicator.
  • If all of the conditions above are met, enter a buy order.
Stop Loss:
  • Place a stop loss on the fractal that is beneath the entry candle.
Exit:
  • Once a downward, bearish arrow is produced by the ASC Trend indicator you should close the trade.
  • Once the bar changes from lime (positive) to red (negative) on the Free Scalping System, close the trade.
Free Scalp Forex Trading Strategy A
Free Scalp Forex Trading Strategy B

Set up for sell trade:

  • A bearish long term trend should be detected with the 50 SMA below the 200 EMA.
  • The price needs to cross and close below the 50 SMA.
  • The histogram bars of the Free Scalping System should alter from lime (positive) to red (negative) suggesting a bearish trend reversal.
  • A downward pointing arrow should be displayed by The ASC Trend indicator suggesting a bearish entry signal.
  • If all of the above conditions are met, enter a sell order.
Stop Loss
  • Place a stop loss on the fractal that is above the entry candle.
Exit
  • When an upward pointing arrow is produced by the ASC Trend indicator, close the trade.
  • When the Free Scalping System histogram alters from red (negative) to lime (positive), close the trade.
Free Scalp Forex Trading Strategy C

Conclusion

For best results this theory is best suited to the 1 and 5 minute charts, theoretically, it could also produce good results up to the 15-minute chart as a day trading strategy.

It is recommended that a trader set up the lower and higher timeframes in order to allow for a higher prospect trade setup. Although this could reduce the number of trading chances, it could also increase the successful trade ratios. 

 

Forex Scalping Strategy: DeMarker Smooth

Scalping is not just for experienced or elite traders. Although it can be difficult to master, it is a strategy that can work for everyone.

The main asset required to be successful at scalping is quick thinking. Price movement happens very quickly and what would seem like a fairly insignificant move on a higher time frame can be the difference between a profit and loss on a lower timeframe. Decisions need to be made on the spot as one candle closes, and another opens or as the rules align.

Due to the fact that decisions have to be made on the spot, it eliminates the second guessing, if the rules are followed, this is where they come in to play; allowing traders to make much quicker decisions.

Providing precise entry signals with a decent win rate and a static reward-risk ratio, The DeMarker Smooth Forex Scalping Strategy follows a rules-based strategy.

200-Period Exponential Moving Average

Not unusually, traders who scalp line up their trades in the same direction as the long-term trend, this is normally assessed by reviewing the higher timeframes. There is however an easier way to identify the long-term trend without checking all the timeframes.

A widely accepted way to identify the trend direction is to use the 200 period EMA. Basing the trend direction on the slope of the 200 EMA compared to the location of price is how traders commonly identify the direction.

HeikenAshi Smoothed

In the lower timeframes, trend is central. Generally, a price would travel toward the path of the trend instead of travelling against it.

When detecting the overall trend direction, The HeikenAshi Smoothed indicator is a very under-utilised tool. During volatile markets, where false signals are familiar, this indicator is very reliable. As the lower timeframes are considered more volatile, using an indicator with high reliability would surely be favourable for improved win rates.

Bars are placed on the price chart to indicate the trend direction. The bars are coloured in relation to the trend direction. A bullish trend would be indicated with blue, whereas a bearish trend is red. When the trend is strengthening the bars tend to get longer and when it is weakening the bars shrink.

Cronex T DeMarker

This indicator indicates trend direction and momentum and is known as an oscillating indicator. Using histogram bars to show trend, a bullish trend would be seen with positive bars, whereas negative bars show a bearish trend. The colour of the bars will also change due to the momentum. If the current bar has a higher price than the previous bar, the bar will be green. Should the current bar have a lower price than the previous bar, the bar will be red. (Red – Bearish signal) (Green – Bullish signal).

The indicator also has 2 lines. One line is blue and represents that progress of price action. The other line is orange and is a signal line. When the blue line is below the orange line, we can assume a bearish signal; a bullish signal would be represented by the blue line above the orange.

Trading Strategy

Combining the union of signals offered by the 200 EMA, HeikenAshi Smoothed indicator and the Cronex T DeMarker is how this theory trades.

Long term trend will be dictated based on the location of the price in comparison to the 200 EMA.

Once both The HeikenAshi Smoothed indicator and Cronex T DeMarker indicate the trend is the same as the 200 EMA trades should commence.

The bar colour will determine the trend for the HeikenAshi Smoothed indicator.

The histogram bars being positive or negative, the colour of the bars and the placement of the coloured lines will determine the trend for the Cronex T DeMarker indicator.

Set up for Buy trade
  • Representing a long-term bullish trend, the price should be above the 200 SMA.
  • Signifying a bullish reversal, the HeikenAshi Smoothed indicator should turn to blue.
  • Histogram bars on the Cronex Y DeMarker should turn from red (negative) to green (positive).
  • A bullish trend reversal should be indicated by the blue line crossing above the orange line on the Cronex T DeMarker.
  • The signals indicating the bullish trend should be closely united.
  • Should all of the conditions above be met, you can assume a safe entry point.

 

Stop Loss
  • The stop loss should be placed slightly lower that the HeikenAshi Smoothed indicator.
Take Profit
  • The Take profit should be placed around twice the risk on the stop loss.
Setup for sell trade
  • Representing a long-term bearish trend, the price should be below the 200 SMA.
  • Signifying a bearish reversal, the HeikenAshi Smoothed indicator should turn to red.
  • The Histogram bars on the Cronex Y DeMarker should turn from green (positive) to red (negative).
  • A bullish trend reversal should be indicated by the blue line crossing below the orange line on the Cronex T DeMarker.
  • The signals indicating the bearish trend should be closely united.
  • Should all of the conditions above be met, you can assume a safe entry point.
Stop Loss
  • The stop loss should be placed slightly higher than the HeikenAshi Smoothed indicator.
Take Profit
  • The Take profit should be placed around twice the risk on the stop loss.

Conclusion

Traders can expect positivity with this Forex strategy over the long-term, with a reward to risk ratio of 2:1, ensuring wins provide more in comparison to losses.

Following the rules is paramount. In the meantime, identify where the price movements and trend direction are. 

 

Bykov Signal Forex Scalping Strategy

There is only way to make money in the Forex market is to buy low and sell high. This is also true of the opposite sell high and buy low. Providing you can achieve these 2, you can make money out of the market.

Here is the catch, how do you know when the price is high enough to sell or low enough to buy? Spoiler alert! You don’t. However, there are ways to assess where the market is going and make sure you never buy at the top or sell at the bottom of a market. You wait for mean retracements.

When a price revisits its average, a mean retracement occurs. It could be argued that prices close to the average are neither too low nor too high due to the proximity to the average, providing reasonable areas to trade. Should you notice that the price is favouring one direction from the average, it could be a signal to trade more toward the direction of the momentum.

After a momentum shift comes a rapid price movement, Bykov Signal allows traders to trade before this at a better price, due to Forex signals of momentum attaining from the mean.

50-Period Exponential Moving Average (EMA)

Indicators and oscillators can help to detect if the price has reversed or retraced back to its mean.

Mean retracement can be detected through the basic but effective indicator of moving averages. Frequently, price would shy away from the mean during expansion phases, however it would always retract back to the mean at some point based on moving averages. Following this, price would usually bounce off it. Usually moving averages act as support or resistance when a price touches it.

For the lower timeframes a favoured moving average for price to bounce off is the 50 period EMA. The 50 EMA links with shorter time period moving averages on higher timeframes, for example the 20 EMA. Through trending markets, these moving averages can be invaluable.

Buyers vs. Sellers v3

Here we have a custom indicator that can help ascertain who is dominating that market, bulls (buyers) or bears (sellers). As before, bullish bars are lime in colour and bearish bars are red in colour. These bars are printed on a separate window. Buyers vs Sellers permits traders to only trade in the direction of the market’s directional preference.

Bykov Trend Signal

Helping to identify trade direction, alongside specific entry points, Bykov Trend Signal is a momentum indicator. Placing an arrow on a candle when a momentum shift is detected, the indicator offers potential entry point signals.

Trading Strategy

This is a strategy based on momentum signals following a mean retracement or when the price is located close to the average price.

Using the 50 EMA line, we can detect the mean using this strategy. To be considered a worthwhile trade, price should be positioned near the 50 EMA or it should retrace. This guarantees that we are trading the bounces of it, instead of trading against the support/resistance.

The Buyers vs. Sellers indicator can determine trend direction and market sentiment.

Confirmation of the previous 2 conditions, and an entry signal in the same direction from the Bykov Trend signal indicator suggests a trade should be made.

Set up for Buy Trade
  • Price should be in the vicinity of the 50 EMA or it should retrace.
  • Price should finish higher than the 50 EMA.
  • A bullish trend should be indicated with lime bars by the Buyers vs Sellers indicator.
  • An upward pointing arrow should be printed by the Bykov Trend signal indictor to show a bullish entry signal.
  • The Buyers vs. Sellers and the Bykov Trend Signal indicators’ bullish signals need to be united.
  • If all of the above conditions are met, make a buy trade
Stop Loss
  • The stop loss should be placed on the fractal below the entry candle.
Exit
  • The trade should be closed as soon as a red bar is shown by the Buyers vs. Sellers indicator.
  • The trade should be closed as soon as a downward arrow is printed by the Bykov Trend signal indicator.
Bykov Signal Forex Scalping Strategy A
Setup for sell trade
  • Price should be in the vicinity of the 50 EMA or it should retrace.
  • Price should finish lower than the 50 EMA.
  • A bearish trend should be indicated with red bars by the Buyers vs Sellers indicator.
  • A downward pointing arrow should be printed by the Bykov Trend signal indictor to show a bearish entry signal
  • The Buyers vs. Sellers and the Bykov Trend Signal indicators’ bearish signals should be united.
  • If all of the above conditions are met, make a buy trade.
Stop Loss
  • The stop loss should be placed on the fractal above the entry candle.

 

Exit
  • The trade should be closed as soon as a lime-coloured bar is shown by the Buyers vs. Sellers indicator.

The trade should be closed as soon as an upward arrow is printed by the Bykov Trend signal indicator.

Bykov Signal Forex Scalping Strategy D

Conclusion

Typical to this type of theory, it allows for mammoth gains. Working well as a retracement theory or a type of theory that bounces from dynamic support or resistance, in this instance the 50 EMA.

Be aware that not all bounces from support/resistance give a high probability theory. Including a price action theory such as candlestick patterns or breakouts from support/resistance would improve the success rate. Alternatively, you can align this theory with a higher timeframe trend direction. 

Gann HiLo Fast Trend Forex Scalping Strategy

Out of the four types of trading, Forex scalping is the quickest, it is a high-speed type of trading. Within minutes, traders open and close trades.

High volatility and fast-moving markets are best suited to this type of trading, this is because the fast price movement allows traders to open and close a trade during a move very quickly. Due to the spread, minute price movements are no good and this is an obstacle scalpers need to get over.

A market with a strong trend is one of the best markets to find rapid price movement and high volatility. The issue with these markets on the lower timeframes is that prices can whipsaw and catch traders out. Traders can end up trading at the end point of a trend.

To avoid trading a whipsaw, one of the best ways to trade is on a retracement. One theory on trading retracements is called Gann HiLo Fast Trend and it can help traders to make money in these markets.

Moving Average Dynamic Support and Resistance

One market where moving averages come into their own is a trending market. Moving averages are a great tool to detect trend direction, strength and significant support/resistance.

The direction of the trend is easily identifiable with the use of moving averages. The position of the price compared to the moving average, the direction of the slope and the position of the shorter period moving average in comparison to the longer moving average.

The trend strength, however, can be evaluated based on the gradient of the moving average slope and the distance between moving averages.

A pair of moving averages can be used to find areas of support/resistance. There are usually short phases of retracement during a trending market, although it is most likely to respect the longer period moving average. The zone of support/resistance where the price tends to retrace to would be between the 2 moving averages. The trend direction then normally recovers and continues following the retracement.

Gann HiLo Activator Bars

This is another momentum-based Forex indicator. This indicator is used to ascertain the short-term trend direction. Bars are laid over Forex candlesticks.

Bullish trend is represented by blue activator bars and bearish trend is represented by orange activator bars.

Trading Strategy

Trade signals are given after a retracement to support/resistance levels, the theory uses strong trends with steep slopes. The theory used the 5 and the 30 period EMA. Centred around the 2 moving averages, trades will be made in the trend direction.

The most difficult part of trading retracements is to pinpoint where the retracement will end. Using the short-term signals from Gann HiLo Activator Bars, we can predict the end of the retracement. As soon as the colour of the activator bars change in the direction of the moving average trend, trades should be taken.

Setup for buy trade
  • A bullish trend will be indicated when the 5 EMA is above the 30 EMA.
  • The slope should be upwards to show a bullish trend on both the 5 and 30 EMA.
  • The retracement should be in the direction between the 5 and 30 EMA initiating the change of colour of the Gann HiLo bars to orange.
  • The end of the retracement is shown as the price should close above the 5 EMA.
  • Once the Gann HiLo bars change to blue, a buy trade should be made.
Stop Loss
  • The stop loss should be placed on the fractal below the entry candle.

 

Exit
  • Once the Gann HiLo Activator bars change to orange the trade should be closed.
Gann HiLo Fast Trend Forex Scalping Strategy A
Setup for sell trade

 

Entry
  • A bearish trend will be indicated when the 5 EMA is below the 30 EMA.
  • The slope should be downward to show a bearish trend on both the 5 and 30 EMA.
  • The retracement should be in the direction between the 5 and 30 EMA initiating the change of colour of the Gann HiLo bars to blue.
  • The end of the retracement is shown as the price should close below the 5 EMA.
  • Once the Gann HiLo bars change to orange, a sell trade should be made.
Stop Loss
  • The stop loss should be placed on the fractal above the entry candle.
Exit
  • Once the Gann HiLo Activator bars change to blue the trade should be closed.
Gann HiLo Fast Trend Forex Scalping Strategy C
Gann HiLo Fast Trend Forex Scalping Strategy D

Conclusion

The decision making with this theory is made more objective, decisions can be made on the Gann HiLo Activator bars resuming the direction of the initial trend as oppose to watching how the candles react when entering support/resistance areas.

This theory is an adaptation of the customary support and resistance trading strategy. Trades are traditionally taken as soon as price closes outside the areas of support/resistance, although traders run in to complications as they subjectively decide if the retracement has ended.

 

Bollinger Keltner Squeeze Forex Scalping Strategy

Expansion and contraction are the 2 phases of the Forex market. When the market is moving sharply in a bias direction, we call this an expansion phase. Due to the pure size of the price movements, many traders are attracted to trade. On the other hand, the contraction phase is when the market moves very little, this would indicate an indecisive market and price would have a limited range. Retracements can also cause contraction, where the market moves sideways or back after a clear expansion phase.

When the market is moving slowly (contraction), there are few opportunities to profit and so traders show little interest. Expansion phases are much more interesting and profitable to traders. The most beneficial time to trade is at the end of a contraction phase, to make the most of the coming expansion, however traders often wait too long and end up trading at the end of the expansion phase.

Bollinger bands and keltner channels can be used to help trade contractions. When the Bollinger bands and squashed inside the Keltner channel, traders would consider the market to be in contraction. As the bands expand outside of the Keltner channel, traders will often make a trade.

This approach identifies 3 phases and presents it as an oscillator and so is a custom indicator. The basis of the approach is built on strong momentum coming from a contraction phase based on the use of Bollinger bands and Keltner channels.

Bollinger Squeeze v3

Based on the squeeze action among the Bollinger bands and the Keltner channel, the Bollinger squeeze in an oscillating indicator.

Phases of contraction and expansion are identified as well as trend direction. Displayed as histogram bars, bullish momentum is shown with positive bars and bearish momentum with negative bars.

Colours of the bars are dependent on the momentum of the trend. When the momentum is bullish and getting stronger, the bars are coloured lime green, whereas the bearish, weakening momentum is light pink. Red bars will be seen when a bearish trend is getting stronger.

Buy Sell Arrows Scalper

Another momentum indicator, detecting momentum reversal and offers trading signals accordingly.

On the price chart a plotted line is drawn and the colour of this line changes dependant on the trend direction. Bullish momentum is blue, where bearish momentum us red. An arrow is also helpfully plotted in the direction of the trend when a momentum shift is detected. Entry signals could be ascertained from these arrows.

Trading Strategy

This theory uses the 200 period EMA to detect trend direction and trades are only taken in the direction of this trend. Trades will be taken, only based on closing price in relation to the 200 EMA, in the direction of the trend.

A trade direction is indicated by the Bollinger Squeeze and the Buy Sell Arrows Scalper when they are united with the long-term trend direction. Signals are only produced when the momentum reversal is strong and trade signals should be aligned.

Setup for a buy trade

 

Entry
  • A bullish long-term trend will be indicated when the price is above the 200 EMA.
  • Bullish momentum will be indicated by The Buy Sell Arrows Scalper line changing to blue and an upward pointing arrow being plotted.
  • Indicating bullish momentum, The Bollinger Squeeze histograms colour should change to lime green and should cross above zero.
  • The signals should be closely aligned.
  • If all of the above conditions are met, a buy order can be made
Stop Loss
  • The stop loss should be placed on the fractal below the entry candle.
Exit
  • As soon as the colour of the Buy Sell Arrows Scalper line changes to red and a downward pointing arrow is plotted, close the trade.
  • As soon as the Bollinger Squeeze histograms crosses below zero, close the trade.
Bollinger Keltner Squeeze Forex Scalping Strategy B
Setup for sell trade

 

Entry
  • To indicate a long-term bearish trend, price should be below the 200 EMA.
  • Indicating bearish momentum, the Buy Sell Arrows Scalper line colour should change to red and a downward pointing arrow should be plotted.
  • To indicate strong bearish momentum, the Bollinger Squeeze histograms should cross below zero and the colour should change to red.
  • The signals should be closely aligned.
  • If all of the above conditions are met, a sell order can be made.
Stop Loss
  • The stop loss should be placed on the fractal above the entry candle.
Exit
  • As soon as the colour of the Buy Sell Arrows Scalper line changes to blue alongside a plotted upwards pointing arrow, the trade should be closed.
  • As soon as the Bollinger Squeeze histograms crosses above zero, the trade should be closed.
Bollinger Keltner Squeeze Forex Scalping Strategy D
Conclusion

If the timing is correct, this approach could produce positive results.

There are cases where price expands exponentially in the direction of the trade and huge profits can be gained, however the market can also reverse during a trade and take back the previously gained profit. Moving stop losses can be used in order to break even, trail the stop loss in order to protect profit. Not all trades will be successful.

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