Scalping: An Introduction

Short-term and retail and institutional traders choose Scalping as it makes the most out of the win-to-loss ratio in their trades. It is productive for deriving big gains from a singular trade. Scalping books small profits and possible losses immediately as revealed by the market.

Well-Known and Effective Scalping Strategies

There are a lot of Scalping strategies out there that an active trader can choose from to scalp for profits. However, it would be wise for a trader to look into the processes within the Scalping strategy as one cannot simply incorporate a strategy without being properly informed. What works with one trade might not necessarily work for another.

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Steps Pertinent to Performing Scalping Strategies:

But before we dive into the strategies, or for that matter choose from any of them, certain steps must first be done so that the performance of the chosen strategy might not be done in vain.

  1. Define – as with any trading strategy and process, it must first be made certain what technical indicators you would need to use and the necessary settings must be put in place. 
  2. Backtest – going through historical data is not only wise, but a must to determine how certain tools and strategies have been used in the past and what results each had rendered.
  3. Paper Trade – paper trade is simply a fancy way of referring to simulated trade. IN this regard, one must paper trade the strategies through your broker and level II quotes.
  4. Optimize – for the sake of improving adjusted returns, strategies must be met with improvements itself.
  5. Trade – learn by doing! Trade through the strategy.
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Well-Known Scalping Strategies 

Now that these steps are out of the way, let’s get into the meat of our 5 chosen strategies. 

Moving Average Ribbons

The simplest amongst the strategies, Moving Average Ribbons make use of multiple moving averages. This generates buy and sell signals once the long-term moving averages are either exceeded or the values fall short of it. A series of moving averages creates these “ribbons” if they are equally-spaced.

Long positions are entered should averages exceed the 60-day whilst a short position when the 8-day plummets underneath the 14-day moving average.

Stochastics with Bollinger Bands

A well-known momentum indicator, the Stochastic Oscillator pin points the location of the closing price within a given period of time regarding its high and low positions. Bollinger Bands are primarily used to illustrate volatility in a specific timeframe.

Emini Scalping Strategy

The Emini Scalping Strategy makes use of 5 Min bars and 20 Tick bars. This will turn out 2 kinds of signals, specifically:

  1. The touching/testing/re-testing Dynamic volumes-based day levels and 
  2. Market-Limit orders executions.

Heikin Ashi Candles

Of Japanese origins and its main contribution to the field of technical analysis, the Heikin Ashi candles is a good setup for both Swing Trading and Scalping. The Japanese words, Heikin means “average” while Ashi “pace”.