Best Scalping Indicators for Forex and CFD Stock Trading


Hello guys, in the following minutes we’ll
discuss about scalping trading, we’ll see what are the main requirements of this trading
style and we’ll also talk about the best indicators to use when adopting this technique. So, scalping is a popular trading method used
by experienced traders and especially by market beginners. The main aim is to obtain small incremental
gains that add up to a large profit, rather than big gains from a small number of trades,
as in the case of swing trading or position trading. This method involves holding trades for just
a few seconds or minutes, at the most. Scalpers generally choose to trade on highly
liquid markets, because this allows them to get in and out of positions very quickly. If you want to engage in the fast-paced world
of scalping, you need the right tools to maximize your success. First you need, a good computer and a fast
internet connection. As a scalper trader, you need your trading
platform to execute a trade as fast as possible. You don’t want to work on a slow computer,
with little ram, just to see your pc frozen when you want to enter a trade. Also, a slow internet connection speed could
make the difference between a successful scalping trade and a bad one. Remember, you want to get in and exit the
market promptly and 1-2 seconds could be crucial to your results. Second, you need a professional and reliable
broker. When you are scalping in real time for several
hours, it can be an intense experience. If you practice scalping with a poor broker,
it is very likely that they will not allow you to make short-term profits. Most brokers use dirty practices to stop scalpers
such as stop-loss hunting, spread widening or slippage. In order to be successful while scalping,
a high-quality broker must offer instant execution. Your broker must provide a live data feed
for charts and must have very competitive spreads for the instruments you will be trading
on. Also, the trading software must be easy to
use and fast to execute trades with. I’ve tested a lot of brokers in the last
years and all of them have their pros and cons. In the recent year I’ve settled with one
broker and so far this is the best one for my needs. I’ve put a link in the description if you
want to research more about the ECN broker I’m trading with. The third requirement is instruments with
low spreads. Because of the nature of scalping you need
to open and exit a number of positions in a day. The cost of the trades will become an important
factor. As a scalper, by default you’ll use tighter
stop-losses, aiming for small profits. The higher the spread, the lower your stop-loss
will become. For example, if you scalp with a 10 points
stop-loss order, a spread of over 3 points will leave room only for 7 more points in
order to exit the trade. That’s a small margin. In scalping, every point counts so you need
to trade with low-spread instruments. I personally never scalp an instrument that
has a spread higher than 2 points. The risk/reward ratio is not worth it. My favorite low-spread instruments on which
i apply scalping techniques are Dow jones index, Dax 30 index, eur/usd, gbp/usd eur/jpy
and usd/jpy. Now that we saw the requirements and tools
of scalping, let’s see what are the best indicators I use when I’m scalping the market. One of the best indicators for scalping the
market is the parabolic sar. The parabolic sar is an indicator mainly used
to identify the market direction and the beginning of reversals. Parabolic sar allows scalpers to evaluate
the trend direction, to pinpoint entry and exit points and also placing trailing stops. The indicator is displayed as a series of
dots. Unlike other trend-following indicators, parabolic
sar formula can spot short-term price changes, which is ideal if you want to scalp a few
points from the market. So, parabolic sar indicator provides great
signals that the market trend on lower timeframes is about to change. A dot appears below the price when the trend
is upward (this indicates a buy signal), and above the price when the trend is downward
(and this indicates a sell signal). The PSAR trails the price until the trend
has finished and begins to reverse (which is why is also known as stop and reverse indicator). The parabolic sar provides excellent exit
points, as it provides a stop loss level that moves closer to the price, regardless of the
market direction. The rule is that you should close buy positions
when the price moves below the sar and close sell positions when the price moves above
the sar. The parabolic sar works best in trending markets,
helping the trader to ride trend waves for a good period of time and capture substantial
profits. However, in ranging markets the parabolic
sar will generate a lot of false trading signals, as will whipsaw back and forth. Another indicator suitable for scalping the
market is the stochastic. The stochastic oscillator compares where the
price closed in relation to the price range over a given time period. Here is why the stochastic is an excellent
indicator for scalping. ↑ first, because it works both in trending
or range market condition ↑ also, this oscillator identifies cycle
turns ↑ stoch is also good at identifying overbought
and oversold areas on the chart ↑ plus is useful at identifying strong momentum,
in conjunction with support and resistance levels on lower timeframes
When scalping, traders use two types of stochastic: fast stochastic and slow stochastic. The fast stochastic oscillator is very volatile,
its reaction to market price will generate many signals. In a strong trending market, the fast stochastic
isn’t able to filter noise and will offer a lot of false signals, which will lead to
bad trades. Which is why the slow stochastic is more suitable
for scalping because it reduces the volatility by a notch. I will release a video soon with a scalping
strategy involving the stochastic oscillator, but for now let me quickly explain how i take
signals when I’m scalping. I prefer to use the stochastic oscillator
with 8.3.5 settings for spotting divergences on the 1-min chart and i also look for the
crossover between the 2 lines of the indicator. But more on this in following videos. Another indicator excellent during scalping
conditions is the ADX. Basically, the ADX tells traders whether the
bulls or the bears are in control on the market. A common scalping technique to take entries
with the ADX indicator is by spotting the DMI crossovers:
The positive DMI line crossing above the negative DMI line, indicates a buy scalping opportunity. The positive DMI line crossing below the negative
DMI line, indicates a sell scalping signal. Because the market is in a continuous movement
and trading opportunities on lower time-frames develop quickly, the ADX must be used in combination
with other tools or price action. Scalping with these indicators may seem easy
in theory, but the reality is that it’s an advanced trading style. It requires very quick decision making, quick
reflexes to react when setups are spotted, and the scalper trader must be skilled at
quickly executing a trade. And more important, if you want to make money
from scalping, it’s imperative to have a disciplined approach to trading and to keep
things simple and don’t over-complicate your scalping setups with lots of indicators. If you got any value from this, please consider
subscribing to our channel, share and like this video, as it would help us a lot in the
future. Until next time.

Leave a Reply

Your email address will not be published. Required fields are marked *