The Secret MindsetDiscussing scalping trading, requirements include a good computer and broker, and trading with low-spread instruments. best indicators for scalping include parabolic sar, stochastic, and ADX.
Introduction to Scalping Trading
Scalping trading is a popular method used by experienced traders and market beginners. The goal is to obtain small incremental gains that add up to a large profit. Scalping involves holding trades for just a few seconds or minutes, at most. Scalpers generally trade on highly liquid markets, as this allows them to get in and out of positions quickly. In this article, we will discuss the main requirements of scalping trading and the best indicators to use when adopting this technique.
The Importance of the Right Tools
To engage in the fast-paced world of scalping trading, you need the right tools to maximize your success. The first requirement is a good computer and a fast internet connection. Your trading platform should execute trades as quickly as possible, without freezing up or crashing. Additionally, your broker must be professional and reliable. Most brokers will use dirty practices to stop scalpers, like stop-loss hunting, spread widening, or slippage. For success in scalping, a high-quality broker should offer instant execution, a live data feed for charts, and competitive spreads for the instruments you will be trading on.
Instruments with Low Spreads
The cost of trades will become an important factor because of the number of times you need to open and exit positions when scalping. The higher the spread, the lower your stop loss will become. For example, if your scalping 10 points using a stop-loss order, a spread higher than 3 points will leave only 7 points for exiting the trade. Therefore, you need to trade with low spreads instruments. Some favorite instruments that can be used for scalping include Dow Jones index, Dax 30 index, eur/usd, gbp/usd, eur/jpy, and usd/jpy.
Best Indicators for Scalping Trading
One of the best indicators for scalping the market is the parabolic SAR indicator. It is mainly used to identify the market direction and the beginning of reversals. The parabolic SAR indicator aids scalpers to evaluate the trend direction, pinpoint entry and exit points, and place trailing stops. It is displayed as a series of dots and can spot short-term price changes, leading it to be ideal for scalping a few points from the market. The rule is that you should close buy positions when the price moves below the SAR and close sell positions when the price moves above the SAR.
Another indicator suitable for scalping trading is the stochastic oscillator. It works both in trending or range market condition, identifies cycle turns, and is useful at identifying strong momentum, in conjunction with support and resistance levels on lower time frames. Traders generally use two types of stochastics: fast and slow stochastic. The fast stochastic isn’t able to filter noise and will offer a lot of false signals, which will lead to bad trades, unlike the slow stochastic, which is more suitable for scalping.
The ADX indicator is an excellent tool to use during scalping conditions. It tells traders whether the bulls or the bears are in control of the market. A common scalping technique is to take entries with the ADX indicator by spotting the DMI crossovers. For instance, when the positive DMI line crosses above the negative DMI line, it indicates a buy scalping opportunity, while the positive DMI line crossing below the negative DMI line indicates a sell scalping signal.
Conclusion
Scalping trading is an advanced trading style that demands quick decision making, quick reflexes, and a disciplined approach. You should keep things simple and avoid over-complicating your scalping setups with many indicators. Scalping with the right tools and indicators will give you great signals that the market trend on lower time frames is about to change. If you practice scalping with a high-quality broker, you have the potential to make short-term profits.
