The goal of scalping is to enter and exit a trade with profits as fast as possible. In today’s video, I’ll talk about some of the indicators I love to use for scalping the Forex market.
My name is Tyson Clayton, Senior Currency Strategist for Market Traders Institute. I’m a master Forex instructor with over 20 years of experience teaching student traders how to take ultimate control over not just their finances, but their lives.
1) Moving Average
A moving average is simply the average price for a particular investment over a set period of time. For example, if I use a 20-period moving average, I’m averaging the closing price over a period of 20 days or 20 hours.
One of the ways that scalpers like to use a moving average indicator is they will plot two moving averages together and look for crossovers. Let’s say I plotted a 21-day moving average alongside a 5-day moving average. When the 21-day moving average crosses over, that’s an indication that short-term price action is starting to take over long-term price action, so we want to look to buy. Scalp traders will often jump into this type of opportunity.
On the other hand, you would look to sell or “short” a trade when long-term price action begins to dominate short-term pricing. You can combine many different kinds of time settings to plot moving averages, including 5 and 13, 7 and 24, etc.
2) Parabolic SAR
Moving averages are great to use for entry techniques, but they can also lag behind the most recent average prices. This is why it’s best to combine moving averages with another indicator like the parabolic SAR (stop and reverse) in order to increase our probability for success.
A parabolic SAR uses a series of peaks and valleys called pivot points to track along with a price much closer than moving averages do. When a price is able to break through those pivot points, the parabolic stop will cut through price aggressively to the top side and vice versa.
Moving averages can help scalpers find a suitable entry point, while parabolic stops enable them to identify an exit point.
For more tips and strategies on successful Forex trading, visit MTI’s YouTube channel at www.youtube.com/c/Markettradersinstitute/videos.