These days, short-term trading is gaining more and more popularity. It is characterised by conducting trades in a short period of time with the purpose to receive profit of a couple of points (pips). Some people call the scheme “lottery”. However, one must mention that many investors gained considerable profit by using this concept of work. The most important thing is to pick effective and convenient scalping indicators and ignore your emotions.
In order to be successful in short-term trading, it is recommended to follow the rules listed below:
1. The technical indicator must show a precise specific parameter that the trader relies on when scalping.
2. It is advisable to only use instruments that give the most accurate signals, as the trader will not have time to verify them.
3. The mechanism of indicators’ work must be clear, so that the trader could recognize a false signal.
Drawing on the above-mentioned principles, many successful traders have picked only a couple of indicators that help them while day trading. Namely:
1. Oscillator Stochastic. The instrument is the most useful on timeframe m15 and above. The main advantage of this indicator is fast and precise identification of trading entry point, wherein the reference point is shifted to ”overbrought” and ”oversold” values. It is recommended to use divergence of the oscillator with the graph. This will allow you to get rid of excess “noise”.
2. Combination of two moving averages. This is a trading indicator that gives signals about possibilities to enter the market (crossover of short moving average indicator with long period).
3. CCI indicator. Initially, the instrument was created for traders that work with significant raw material markets. However, practice shows that the indicator can be used in day trading as well. This indicator is ideal for newbies, as the strategy of working with it is simple and straightforward: sell when value is over 100, buy when it’s -100 or lower.
4. RSI and Standard Deviation. This is a very effective symbiosis. You should trade when the RSI indicator is lower than 50, and the Standard Deviation is higher than 0.1. The main advantage of this combination is the ability to use signals on small timeframes, up to m1.
In scalping, one can and should use various instruments of technical analysis. When doing so, it is important to regard signals not as a direct incencitive to conduct a trade, but rather as a perspective range of conducting transactions.
On the other hand, the smallest price dynamic is important when working in small timeframes, and the indicators are quite often late, which in turn doesn’t allow one to day trade effectively. If you want to nonetheless use the „intraday“option, choose an interval of 5 to 10 minutes. Some trades will be missed, but that will be enough to hone your skills.
These ones will fit day traders the best:
1. Candlestick patterns. This is one of the universal assistants that are effective on any time intervals.
2. Order book. The assistant analyses spread and sizes of requests, which allows the trader to pick an optimal point to enter the trade or exit it.
Remember that quick profits attract many traders and produces excitement like gambling. Because of that, this approach to work requires exceptional self-possession and excellent knowledge of the market. The most important thing for a trader is to decide on an optimal number of trades per day and never cross that line. In this case you will be able to gain maximum profits from scalping, not be dependent on major fluctuations on the market and have a stable source of income.