Many traders want to be scalpers, but only a few know what scalping is or where to begin. There is nothing as excited as scalping in trading, but this does not mean scalping is easy; in fact, scalping is much harder than other trading strategies.
Scalping is a way of trading where we take small, consistent profits, cutting our losses quickly when necessary. The scope of scalping is to make expected profits from small price fluctuations and exiting the trades often shortly after becoming profitable. Scalping can be misunderstood, mainly because there are many ways to achieve it and not much information on actual methods.
In this article, we will see a 15min scalping strategy that works.
In this strategy, we will be using three simple moving average all with different period time. A simple moving average (SMA) is an arithmetic moving average calculated by adding recent prices and then dividing that by the number of time periods in the calculation average.
Adding the first SMA to the chart
We will take an example of GBP/CAD currency pair. We will first keep our chart at 15min time frame as this is a 15min scalping strategy. Now we will change the period of the simple moving average from the default value to 6. We also have to keep in mind to change the color of this SMA to blue.
Adding the second SMA to the chart
As we can see in the above chart, we have our first blue simple moving average already added. Moving forward, we will add the second moving average that will be in the color red. Now we will change the setting from the default value to 26.
Adding the third SMA to the chart
As we can see in the above chart, we have our first blue and the second simple moving average already added. Now we will add the last SMA to our chart that will be yellow. Here, we will change the period setting from the default value to 14.
Using a 15min scalping strategy to find a trading signal
In this strategy, we will be using all the three SMA together to get our confirmation on buy/sell. Here, our main SMA will be the blue moving average; to get signal, we will wait for the blue line to cross the yellow line, but we also have a trick here. If the blue line crosses the yellow line from down moving upwards, it will be the signal for a buy.
For a sell signal, we will have to wait for the blue line to cross the yellow line from upwards, moving down.
Here we just have to keep in mind a crucial thing, i.e., we will only take a trade either buy or sell when the red line supports the signal.
Now we will look into the role of the red moving average. Now, if the blue line crosses the yellow line from down moving upwards and the red line is above both the yellow line and blue line, then we will enter for a buy.
For a sell, if the blue line crosses the yellow line from upwards moving down and the red is below Both the yellow line and blue, then we can take the trade.
Note: if the red line is below the two lines or very messy, then we will not enter a buy the trade and vice verse. The signal has to very clear, and the red line has to be clearly above or below both the lines maintaining some distance.
The above chart is GBP/CAD 15min time frame, and we can see that the blue line crosses the yellow line, and the red line is above both the lines. We have a clear buy signal.
The below chart is GBP/CAD 15min time frame, we can see that the blue line crosses the yellow line and the red line is below both the lines. We have a clear sell signal.
Trading with 15min SMA scalping strategy
In trading, with the 15min SMA scalping strategy, we will see when to enter and exit the trade. As we already know in scalping, we take the trade and close it once we see a profit. With the strategy, we will try keeping tight Stop loss to minimize our risk.
In the below chart, we see that the blue line is crossing yellow, and the red line is above both the lines. Our stop loss will be 1 or 2 pips below the candle that appears after the lines intersect each other. Take profit can be some 10-15 pips or when you are happy with the profit.