Scalping can be one of the most exciting but challenging ways to move through the day trading world. What happens under normal circumstances is that a particular trader has to find a strategy that fits his or her style on a consistent basis, just to ensure profitability. Tricky—making it worth the name “scalping”—decisions have to be made fast and with great acumen, or else the risk is high.
With the advent of trading platforms, such as TradingView, which hosts many tools and indicators for traders to assist in strategy execution, the majority of traders are clueless about what combination of indicators can actually help them achieve their scalping potential.
This article discloses the best scalping trading strategy combined using a mix of three powerful indicators. This strategy is configured to help you to capture little but guaranteed profits with a very high probability of winning. This way, you should be able to trade a one-minute or a five-minute time frame and be able to place trades with clear entry and exit signals that will improve your overall performance in trading.
the Best Scalping Trading Strategy
Scalping, in its plain meaning, is a high-speed trade implementation system, through which traders catch small price changes within the shortest possible timeframe.
For a strategy to be prominent at all, it must really give very exact signals and allow quick making of decisions. Really, the following strategy is very effective for those traders who would like to maximize their profits through scalping.
The Three Key Indicators
For this scalping strategy, we use three important indicators:
- SMA: Smoothed Moving Average.
- Relative Strength Index (RSI)
- Williams Fractals
Smoothing Moving Averages (SMAs)
SMAs are the most essential in spotting a certain trend and potential reversal point. Thus, for this strategy, we will apply three averages: smoothed, set for 21, 50, and 200 periods.
- 21-SMA (White): This is the short-term trend indicator.
- 50-period SMA (Green): This is a medium-term trend indicator.
- 200-period SMA (Red): Long-term trend indicator.
The moving averages are the indicators that determination of trend and relation of price to trend are based on.
Relative Strength Index (RSI)
The RSI is a momentum oscillator that expresses the speed and change of price movements. We’ll tinker with the RSI settings by using a level of 50 instead of the traditional 70 and 30 levels. We do this to get a better view of the strength of the trend:
- Length: 14 RSI
- RSI Periods: 50 and 50
- Description: Sunny or
Setting the RSI to 50, it should be either above or below the neutral zone so there is more clarity in a trending market.
Williams Fractals
Williams Fractals help to see potential points of reversal. These indicators are used to identify significant highs and lows in the price chart, giving us precise entry points:
- Fractal Period: 2
On the chart, the fractals will be small arrows that represent a recent reverse direction of the price. These are our signals to enter trades.
Implementing the Scalping Strategy
To execute this, go to the following steps:
- Set Up Your Chart:
- Now add the three SMAs to your chart with the periods and colors.
- Add the RSI and change around its parameters.
- The Williams Fractals indicator.
- Trend Identification:
- For a purchase position, verify that all three SMAs are pointing up: the 21, the 50, and the 200—price should trade above these SMAs.
- The SMAs should be facing down for a sell position, and the price should likewise be below these SMAs.
- Entry Points:
- Search for the first Williams Fractal signal after the price has broken the 200-period SMA. Make sure the candle has closed to remove the fake-out entries.
- Execute the Trade:
- Create a buy position when the fractal signal is appearing above the moving averages.
- Enter the sell position when the fractal signal appears below the moving averages for sell positions.
- Setting the Stop Loss and Take Profit:
- Place stop-loss just below the lowest low price of the candle in which the fractal appeared for buy trades and just above the highest high price in the candle for sell trades. The aim here is to make a 10-pip profit on every trade. If you want, you can scale your positions to get more profit from the same move.
- Manage Long-Term Trades:
- If you want to hold onto trades a little longer, then close out 75-80% of your profit once you’ve reached your initial target of 10 pips. Move your stop loss toward a break-even point in order to protect your gains, and allow the remaining position to possibly profit further.
Real-World Examples
Example 1: Buy Position
See that in this chart of the GBP/JPY, the price rises and breaks the 200-period SMA, then retests the support. The 21 and 50 period SMAs are both above the 200 period SMA. The Williams fractals are alert for a buy; at the same time, the RSI is above 50. Enter a buy position with your target set at 10 pips, having your stop loss set as well.
Example 2: Sell Position
On the EUR/USD chart below, the 21-period and 50-period SMAs sit below the 200-period SMA, and the price moves. The Williams Fractals point to a sell position, but at the same time, the RSI is below 50. Open a sell position, taking profit for 10 pips with a good-risk stop loss.
Conclusion
The best strategy for scalping trading is based on the right combination of smoothed moving averages, RSI, and Williams Fractals. Including these indicators offers easy identification of perfect strong trends, the most proper entry points, and effective trade management. Remember that you can profit consistently using this strategy, but don’t feel out of place using a demo account to exercise and enhance skills before committing real capital.
