3 Indicators That Will Improve Your Scalping

Published by FrankNez Team.

Scalping is a trading style that involves taking positions and existing within a few minutes.

It’s quite common with day traders as it affords them many opportunities to profit within a short period.

Most markets are volatile, with crypto being the king.

It is not unusual to see double-digit movements within the market in a day, and this volatility is a blessing in disguise.

The trader that is able to capitalize on the volatility gets rewarded handsomely.

One way to exploit this volatility is by scalping.

All you need to do is study the market, take a position, and exit once your take profit target is hit.

Since trading profitability lies in being able to predict which direction the market will take, price action is king.

However, combined with indicators, your chances of success are improved tremendously.

Below let us explore 3 trading indicators that can boost your scalping when combined with price action.

Moving Average (MA)

Statisticians use moving averages to analyze data points by creating a series of averages of different subsets of the full data set.

In trading, MA is used to smooth out the price data of an asset by creating a constantly updated average price.

Thanks to MA, the impacts of random, short-term fluctuations on the price of an asset over a specified time frame are mitigated.

When scalping, you can use MA to identify an asset’s trend direction or determine its support and resistance levels.

However, note that MA is a lagging indicator as it uses past data, and the larger the timeframe, the greater the lag.

Also, it’s customizable for 9, 15, 20, 30, 50, 100, and 200 days.

And the shorter the time span you use to create the average, the more sensitive it is to price changes.

When scalping, you can use the 9 and 20 MA to enter and exit the market for quick profits.

In an uptrend, wait for the price to pull back to the 9 MA.

If the next candle is green, you can enter and set your stop loss below the 20 MA.

If you do not intend to exit immediately, use a trailing stop loss to lock your profits as the price increases.

Related: How to Trade Options in The Market with a 9-5

Moving Average Convergence Divergence (MACD)

If you are new to trading, you might wonder what is MACD?

It stands for moving average convergence divergence.

This indicator is used to measure both trend momentum and direction.

It consists of two lines, one blue (signal line) and the other orange (MACD line).

Crossovers of these lines present the most opportunities for scalpers since if the signal line crosses the MACD line to the upside, it means upside price action can be expected.

On the other hand, if the MACD crosses over the signal line, then downward price action can be expected.

Relative Strength Index (RSI)

The RSI or relative strength index is an algorithmic trading tool that measures a currency’s price action momentum change.

The indicator will take price action data and convey the information through a simple line graph.

This indicator displays the relationship between current price action and buying/selling conditions.

It ranges from 0-100, with most traders using parameters 30 – 70.

The logic of the indicator is simple: if the asset price is trending between 0-30, it is said to be oversold, thus considered cheap, while if the price is trending above 70, it is said to be overbought, thus expensive.

If you are scalping an uptrend, you want to buy “cheap” on the RSI and sell at the overbought level.

The opposite applies in a downtrend.

Additionally, watching out for divergences between price and RSI can indicate an imminent change in trend.

Another thing you need to remember is scalping requires use of platforms with high liquidity.

Therefore consider using the likes of PrimeXBT for fast trade execution.

Also, as mentioned earlier, remember, price action is king.

First of all, determine the direction the asset is headed, then use the above indicators to strengthen your bias.

This increases your confidence in taking a given position and tremendously improves your trading success.

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