Profitable trading in the forex market hinges upon the application of working strategies. Strategies differ and they are numerous. In fact, more strategies are still being developed as time rolls by.
In this write-up, we would expatiate one of the tested and trusted strategies for trading forex. It is the Simple scalping strategy also known a ‘ Triple S’. It is one of the strategies for trading the forex market by scalping the market.
The simple scalping strategy is a working strategy that affords forex traders the opportunity to place as many trades as possible in a trading period. Scalping may not be for everyone, it is best for day traders and people who have the ability and psychology to make vital decisions within a short space of time without allowing emotions and or sentiments get at them.
While scalping, there wouldn’t be time to carry out technical and or fundamental analysis, but there are forex indicators to guide you. It is also important you practice well before using your real money to scalp the markets. Without mincing words, scalping requires a level of expertise, this is why the simple scalping strategy stands out, as it is easy to use.
The major characteristics of this trading strategy are:
- High levels of leverage
- Short positions
- Small profit margins
In essence, this forex trading strategy simply involves placing small trades, taking profits, and moving out of the market before another trend commences. Forex traders that make use of this strategy are called scalpers.
The aim of scalpers is to target loopholes in short term trade, and price gaps which allow them to turn around a large position into profit.
To effectively use this strategy, you would need to install and set up certain indicators. It is these indicators that would help you to identify when a short term price gap would occur. These opportunities for scalping are not always there and they are short term, but with the indicators, you would enjoy prompt notification to place profitable trades with ease.
The simple scalping strategy is a unique strategy specially made for scalpers. You can make use of it on the 1-hour time frame or 4 hours time frame of your forex chart. However, our opinion is that this strategy works best on the 1 minute (M1) and 15 minutes (M15) time frame.
The strategy works best with the use of accurate and fail-safe indicators as stated earlier. It makes use of price action analysis and the volume indicator which helps you to make prompt/accurate trading decisions without a need for in-depth analysis.
Essentially the volume indicator is the propeller of the forex trading machine. Many arguments have ensued as regards its use. Some people ask that since there is no central exchange, how can the reading be done with effectiveness.
It is also clear that only the tick volume is seen on the forex trading chart and not the entire volume. And so some people ask how accurate is it to rely on just the thick volume.
Trading volume has a strong relationship with price. When trading volume changes, the price movement is the next thing to occur. This brings to mind the fact that trading volume is a vital key a scalper should always leverage on. Because a change in trading volume often precedes price movement.
Candlestick chart is also another powerful tool a smaller can use to have a quick and broad view of the market. It shows the trend of the market as either going up in a buy or down in a sell.
Simple scalping strategy rules by mt4 indicators
- Apply the simple scalping strategy indicator; trading volume
- Enter the M1 or M15 time frame on your forex chart: where you take cognizance of trends, any river, or stagnant price. You take a good look at the volume indicator since any change in the trade volume indicates a corresponding change in price action
- Do a careful analysis of the volume indicator: take note of any uptrend or downtrend to help inform your trade decision. Aside from the easy to detect up and downtrend, the trend could also be:
Dying and heading for several or Take a break before trend continuation
- Make a smart trade decision based on current price action: at this point, the decision is left to you, you simply choose to buy or sell based on the price action, after taking a thorough look at the trend.
Scalping deals with technical analysis and so you must make use of technical indicators. Some of the forex indicators include:
- Bollinger bands: the bands give the detail of when trend reversal and break out would occur.
- Exponential moving average: they are specially designed to be sensitive enough to detect recent price movements.
- Relative strength index: an indicator that detects momentum and so gives an accurate measurement of the level of strength and resistance on a scale of 1-100.RSI helps to minimize the risk involved in scalping.
- Moving average convergence divergence (MACD): this can be used on any timeframe and they help give balance to the 26 periods and 12 period moving averages.
Regardless of the currency pairs that you are trading or assets outside forex, the simple scalping strategy demands that you pay close attention to details. This is simply because the scalping takes place within the space of 5-20 minutes for each increase. If it is the 1 minute time frame you choose to use, then you need to take note of the trading volume, M5/M15 charts, and price action trend. The idea is that you should get to know the small changes in trend on a smaller time frame before the other parts of the market are able to respond to it.
You should also place your stop loss and take profit points after placing a trade, this would help you manage small losses when wrong and make huge profits when right. As a scalper, especially using the 1-minute strategy you should always set the right stop loss and take profit to help maximize your win.
Scalping, specifically the simple scalping strategy is a powerful strategy, with which you can grow your account beyond imaginable limits. It all boils down to your ability to follow the instructions and rules laid down for its use.