(+) Scalping Strategies

THE STOCHASTIC SCALPER TRADING STRATEGY

An easy-to-use scalping strategy that combines an SMA for trend identification and the Stochastic oscillator as a trigger. It can be applied to trading any financial asset.

 TRADING STRATEGY

■ Style: Scalping Strategy

■ Name: The Stochastic Scalper Trading Strategy

💱 FINANCIAL ASSETS

■ Forex Majors | ■ Metals and Energy | ■ Stocks | ■ Indices

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 TIMEFRAME

M5 timeframe (5-Minutes)

■ 10-15 daily trades

 

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 INDICATORS & SETUP

This strategy combines the Stochastic Indicator with a 200-period Simple Moving Average.

■ Stochastic Oscillator

At a Glance: The Stochastic Oscillator

The Stochastic Oscillator measures a currency pair's closing price relative to its price range over a specified period—typically 14 days. It generates two lines, %K and %D, which oscillate between 0 and 100. This indicator helps identify overbought conditions (above 80) and oversold conditions (below 20), signals momentum shifts through line crossovers, and highlights potential reversals by spotting divergences between price action and the oscillator.

Settings:

• Set to 10,3,3 instead of the standard 14,3,3.

■ Simple Moving Average (SMA)

Settings:

• Set to 200 periods.

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 TRADING SIGNALS

This is how you can implement the Stochastic Scalper Strategy.

The 200 SMA is used as a straightforward tool to identify the prevailing trend. If the price chart is above the 200 SMA, the market is in an uptrend; if the price chart is below the 200 SMA, the market is in a downtrend.

■ (↑) Long Trades

• Each time the asset’s price is above the 200 SMA and the Stochastic is recovering from the 20 level, you receive a long trading signal (buy the market).

■ (↓) Short Trades

• Each time the asset’s price is below the 200 SMA and the Stochastic is falling from the 80 level, you receive a short trading signal (sell the market).

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 TRADING ORDERS

■ Take Profit: 20-30 pips

■ Stop-Loss: 20-30 pips

■ Profit/Loss Ratio: 1

In the following chart, the 'Stochastic Scalper' strategy is applied to EURCAD, but it is preferable to use currencies that are traded with narrower spreads.

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CHART: The Stochastic Scalper

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■ The Stochastic Scalper Trading Strategy

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BOLLINGER-RSI SCALPING STRATEGY

Trading the Forex majors—preferably EURUSD and GBPUSD—using Bollinger Bands and RSI.

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 TRADING STRATEGY

■ Style: Scalping Strategy

■ Name: Bollinger-RSI Scalping Strategy

Note: 

(1) The strategy produces low reward-to-risk trades, which can be unfavorable for most intraday traders.

💱 FINANCIAL ASSETS

■ GBPUSD best (or EURUSD)

Note: You may also apply this strategy to other Forex assets, provided they offer tight spreads that won’t negatively affect your P/L ratio.

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 TIMEFRAME

M1 timeframe (1-Minute)

■ 8-10 daily trades

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 INDICATORS & SETUP

This strategy is implemented using Bollinger Bands and the RSI.

Setting the Bollinger Bands and RSI:

■ Bollinger Bands

At a Glance: Bollinger Bands

'Bollinger Bands' is a volatility-based technical indicator composed of a middle simple moving average (SMA) and two outer bands set at standard deviations above and below the SMA. These bands expand during periods of high market volatility and contract when the market is calm. Traders use Bollinger Bands to identify overbought or oversold conditions, assess trend strength, and anticipate potential breakouts—especially when a “squeeze” occurs, signaling a likely sharp price movement.

You can use the following settings:

(i) 12 Periods instead of the standard 20 periods

(ii) Deviations 2

(iii) Shift 0

■ RSI

RSI Explained

The RSI or Relative Strength Index is a momentum oscillator that ranges from 0 to 100. The indicator measures the magnitude of recent price changes and help traders to identify overbought conditions (above 70-75) and oversold conditions (below 25-30). The RSI also highlights potential trend reversals through divergences and signals momentum shifts when crossing its centerline.

Settings:

-The standard settings (14,9)

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 TRADING SIGNALS

This is a simple scalping strategy combining two popular indicators:

■ (↑) Long Trades

• When GBPUSD reaches the lower Bollinger Band, you prepare to trigger a long (bullish) trade.
• An RSI reading of 30 serves as the trigger for the long trade.

■ (↓) Short Trades

• Conversely, when GBPUSD reaches the upper Bollinger Band, you prepare to trigger a short (bearish) trade.
• An RSI reading of 70 serves as the trigger for the short trade.

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 TRADING ORDERS

Here is how we set the Bollinger Scalping Strategy:

■ Take Profit: 5-7 pips

■ Stop-Loss: 10 pips

■ Profit/Loss Ratio: 0.5-0.7 (low)

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CHART: Bollinger-RSI Scalping

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■ Bollinger-RSI Scalping Strategy

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