Scalping is a short term fast (almost instantaneous) strategy, designed for a small income from one deal, but a high profit at the expense of a large number of transactions during a trading session. The purpose of scalping is to determine the point of entry and no less quickly from the market to leave. Below there is a trading strategy for scalping called “Scalping volume”.
Trading strategy for scalping
The basis of this trading strategy for scalping is the monitoring of volumetric saturation and the search for the moment of inertia of the price movement. With the aim of obtaining the maximum income out of the market is carried out by parts using a Trailing Stop.
A trailing Stop is a floating warrant, which moves together with the condition for its growth. Set at a certain opening position distance, when prices rise (assuming a long position, i.e. with increasing income) order “creeps” for the price. If the profit decreases, the order remains in place. For each transaction there is only one trailing stop.
The indicator that is used – LaguerreVolume (the volume indicator smoothed by the Laguerre filter) with the following parameters:
- gamma – 0.618 (you may also leave the one that is set by defaul);
- CountBars – 5000 (the number of bars to draw the indicator);
- levels: 0, 0.25, 0,5, 0.75, 1 (main levels for trading – 0 and 1).
Download archive with template of the strategy and indicators used
Recommended trading platform – MetaTrader4. As example we consider trade in a time interval in 15-minute USD/CAD trade is conducted on a night flat.
Price movement may be trendy of flat. The price movement may be trending or flat. A trend is a deliberate upward or cascading motion graphics with some fluctuations in different directions. Flat is price fluctuation, it is averaged along the horizontal line, and observed at the moment of market uncertainty or weakness.
Conditions for opening a buying position:
- Indicator LaguerreVolume should take a value of zero, and then to monitor its growth. As soon as its value reaches “1” (see figure), we analyze the candle above this level. The candle is bullish, the difference between the opening and closing – 23 points (difference between Open and Close window glass). To enter the market, the candle should be growing and to have the body at least of 3 points, therefore, all the conditions are met.
At the next candle open buy position with a fixed stop loss of 7-10 points. Once our profit reaches 5 points, close 50% of the position, the remaining position being insured by the trailing stop of 5 points.
Conditions for opening sell positions are the same: waiting for the indicator value to “0” then we catch the moment when it reaches the value “1”, we see a candle with a black body with size at least of 3 points.
Important point: as long as the indicator took the value “1”, the position is not open. Also trade is not conducted, if the indicator has almost reached the value “1” and then again returned to him (see Fig.). This means that the market tested the level and then came back to him, indicating the uncertainty. Such market are not worth to trade in.
Favorable situation for open positions may occur during the Asian session (European more characteristic of a directional trend, not horizontal flat) several times during the night. Because this trading strategy for scalping the auxiliary rather than primary.
Next time we will discuss one more scalping strategy, which can be taken as the main one.