Today we are discussing the best Forex indicators for scalping. We will break down three strategies: Moving Average Ribbon Entry, Relative Strength and Weakness Exit and the Multiple Charts Scalping and go over some useful tips on using any scalper Forex indicator.
Scalping Indicators for Forex
Scalping can be stressful. It is one of the most fast-paced trading methods and it requires steel nerves from anyone who attempts it.
The way Forex scalping works is very straightforward. Scalpers aim to benefit from small fluctuations of the chart, and eventually gather several small victories into visible income.
For anyone familiar with the nature of price movement it is pretty clear that carefully selecting promising opportunities in a short time frame can be challenging. Price values are never linear: traders always tug them in the opposite direction. As a result, we get a pretty chaotic looking chart.
Longer term traders don’t normally experience dealing with too much of the price movement noise. Their view is a bit more zoomed out. And in strategies like swinging, for example, the insignificant movements don’t matter.
For scalpers, however, those small shifts are basically essential. It takes years of practice to get an eye for seeing which fluctuations can be beneficial and which ones not so much. Only starting using scalping methods for your trades?
Well, then you will definitely need to become familiar with a few indicators Forex scalping. Most technical indicators on the foreign exchange market serve the same purpose: to make trader’s life easier.
This is done through adding elements to the chart, extracting specific pieces of data, highlighting important parts and more. By having a strong understanding of how to use trading indicators, any trader can become a pro in a matter of weeks.
The question here is: what indicators to choose? There are just so many. That’s why we take time to explore all available options and select the best tools for every particular strategy. Today, for instance we are looking for the best scalping indicator Forex.
But before we get into discussing the three best Forex indicators for scalping, let’s first discuss the technical side of scalping in general. Specifically — the particulars of scalping with Metatrader 4.
Forex Scalping with MetaTrader 4
Metatrader 4 or MT4 is the most popular trading platform across the globe. No surprise there: it is well-organized, functional and relatively easy to master. What’s more, MT4 is ideally suitable for all trading styles and approaches.
There are enough built-in tools to implement practically any strategy and an option to add custom indicators and add-ons if needed. This gives traders an ocean of possibilities: from miniature time frame scalping to several years long investments.
Since today we are focusing on one of the most challenging trading approaches, scalping, it makes sense to look at how it works from the technical side. Exactly how do you scalp on Forex?
The very first thing you will need to get comfortable with is the visualization of the price movement, known as the chart. When you look at it for the very first time you might probably be extremely confused. Yes, it might be a lot to take in.
However, the longer you spend analyzing each element and learning what it means, the better you grasp the mechanics. After some time, it will become effortless and as simple as looking at the weather app.
Perhaps the most important thing to do is to learn about every available function of your Metatrader 4. Try to do it at the very beginning of your trading journey, this way you’ll save yourself some precious time looking for the needed tool or function in the future.
There are two ways to familiarize yourself with the platform: either manually go through every menu and button and figure out what it does hands-on or get yourself a copy of an instructional manual and study every available function on paper first.
Scalpers above all other traders have to be quick. Sometimes the success of a trade is a matter of mere seconds. So it makes perfect sense to fully understand how the terminal works and memorize all potentially useful hotkeys and keyboard combinations.
Another important aspect in Forex scalping is the timeframe. There is a set of default frames in MT4 starting from one minute and gradually expanding to up to one month.
For the most part, scalpers tend to operate on the smallest frames, such as one minute or five minutes. However, in some scalping approaches 15 minute and one hour charts are also considered.
Additionally, it is always a good idea for any trader to cross-check their decision-making process with larger timeframes. Zooming out can help notice potentially beneficial trends and build slightly more forward-looking strategies.
Last but not least, each trader has to figure out which indicators work best for them. Most pre-established strategies will give you the exact indicator specifications for your trades. This can be very helpful, however do not disregard the option to experiment a little with other indicators.
Professional scalpers will confirm that it is very easy to lose track during small timeframe trading. There are many high potential opportunities, but careful selection is required. Due to accumulation of spread charges, scalpers need to be picky in terms of what positions are worth opening.
A good scalper Forex indicator can significantly help. By focusing trader's attention on a specific aspect, indicators designed for scalping overshadow the unnecessary pieces of data and make the analysis process simpler and faster.
Now that we have a solid understanding of how to use MT4 for Forex scalping, it is time we get into discussing the best Forex indicators for scalping.
3 Forex Scalping Indicators Most Accurate, Strong and Tested
We already mentioned that there are many indicators out there to choose from. In order to make sure to go with the best of the best, each trader comes up with their own way of evaluating the efficiency of a tool.
But there are also some universal criteria which we can safely use to see if the indicator is as effective as we expected. We need them to be accurate, strong and tested.
Accuracy is the foundation of any good indicator. The precise calculation and well-written algorithm will most likely guarantee the most trustworthy results. And solid results lead to making a correct decision while trading.
Strength of an indicator can be measured through its ability to steadily perform in different conditions and successfully cooperate with other indicators. Although it is generally not advised to use several indicator tools at once, there are cases when it is necessary. And in order for the combination to be beneficial, we should choose indicators that can power through difficulties.
Lastly, testing is the proof of both accuracy and strength. The more traders will use the same indicator and share their experience, the better we will understand whether it's worthwhile or not. If you come across an indicator you haven’t heard about before, consider consulting other traders or testing it yourself in demo mode before putting it to work in the real market conditions.
Below we’ve gathered three most common indicator-based scalping strategies. Each one of them matches the accuracy, strengths and tested criteria, so you can go ahead and use them in your trading.
Ribbon Entry Forex Strategy
The Moving Average Ribbon Entry strategy also known as Ribbon Entry is very popular among scalpers. Main goal here is to surround the price movement with a Simple Moving Average set at 5, 8 and 13 on a two-minute chart.
The two-minute timeframe isn’t available at default settings, however there are ways to add custom frames to MT4. One of solutions to customize a timeframe is by adjusting the period of the current frame though the Period Converter that can be found under the Navigator menu.
After everything is set, you will see three Moving Averages wrapping around the price movement like a ribbon. This ribbon tends to twist and flatten along the chart. The twists are strong action signals when found within an ongoing trend.
Considering the 5 period MA is top and 13 is bottom, we recognize the ribbon as turned up or down. From this logic, when the 5 and 8 Averages are at the top during a twist, traders will make a decision to buy.
And once the price breaks below the 13 period MA, it’s considered a weakening in the momentum. The first couple of twists after that are sell signals.
The most important part of this strategy is to closely watch the ribbon in the moments of flattening. While practicing the method, take several minutes to simply watch the ribbon form without making any decisions. Notice how it twists and flattens and keep record of which elements are on the top at each particular moment.
The Relative Strength & Weakness Exit Strategy
The next strategy is focused less on entering the trade, and more on the exit. It is very easy for scalpers to get caught in the moment and keep riding the trend. That’s why it is important to always be in control over emotions like greed. As well as to use specifically designed strategies and indicators to help you distinguish the most optimal exit solutions.
This next strategy is using the MA Ribbon from the previous method and adds two more elements on top of it. There is a Stochastic Oscillator set at 5, 3, 3 and 13 bar Bollinger Bands with standard deviation set at 3.
The chart might start looking a bit like a holiday decoration, but all the parts are essential to this strategy.
Now combine the twist concept from the Ribbon strategy with Stochastic being either above oversold or below oversold levels and you’ve got yourself perfect setups for opening long and short positions.
As for the exit, you will need to closely watch the price’s interactions with BB and exit whenever it breaks through them. The Bollinger Band penetration indicates the slowing down inside the trade, therefore it is the best solution for exiting while scalping.
Professional scalpers might also suggest playing around with the standard deviation setting in accordance with currency volatility. Alternatively, you can add extra Bands on the chart to get a wider assortment of exit signals.
Forex Scalping of Multiple Charts
We like to save the best for dessert here. That is why this third strategy is one of the easiest to implement and proves to be highly effective for all highly volatile pairs.
Open a 15-minute chart and keep it clean at first. Then draw three lines: the opening print one, one for the highs and one for the lows set in the first 45 to 90 minutes at the beginning of the session. This chart will serve as a great background with many string signals for your 2-minute time frame scalping process.
A lot of expert scalpers confirm that their biggest profits usually came from aligning the scalps with the support and resistance levels on higher frame charts.
This method combines price action principles with scalping. It is probably the best for anyone who is just starting to consider scalping strategies and needs to have several options for cross-checking the signals.
Just before we call it a day, let’s briefly discuss some tips on trading with the best Forex indicators for scalping.
Tips on Trading with the Best Forex Indicators for Scalping
Scalping can be very profitable as long as a trader considers all potential outcomes. Whenever you start considering looking for best Forex indicators for scalping, make sure that you are comfortable with recognizing the strong trends as well as the chart patterns.
Take the opportunity to test an indicator in the simulation mode before going live. This way you’ll both see it in action without risking any money, and have a chance to adjust the settings to find the best setup for your style.
Last but not least, make sure to closely follow the rules of your chosen trading method. It is extremely easy to get carried away chasing a trend. Practice self-discipline and patience all along the way of your trading career.
And if you find scalping too overwhelming for your taste, consider trying out slightly slower approaches. Luckily, there is more than enough to choose from.
At this point you have a strong understanding of tools that can come in handy during scalping. Just keep in mind that every single trading approach requires a good amount of time to be perfected.
Don’t get discouraged by setbacks and keep searching for new ways to analyze the market, prevent risks and gather the most profits.