best indicators for scalping

Scalping is an extreme short-term trading strategy where a trader buys and sells assets like stocks and commodities within a short period. To identify a trading opportunity, place a trade, and then exit with a small profit, scalpers rely on several factors, including scalping indicators. Here are some of the best indicators for scalping:

1. Moving Average Ribbon Entry Strategy
2. Relative Strength/Weakness Exit Strategy
3. SMA indicator

How to use Moving Average Ribbon Entry Strategy for scalping?

The Moving Average Ribbon Entry Strategy is a popular scalping technique among Forex traders due to its straightforwardness and efficiency.

Here are the steps to use the Moving Average Ribbon Entry Strategy for scalping:

1. Place a 5-8-13 simple moving average (SMA) combination on the two-minute chart to identify strong trends that can be bought or sold short on counter swings, as well as to get a warning of impending trend changes that are inevitable in a typical market day.
    
2. The 5-8-13 ribbon will align, pointing higher or lower, during strong trends that keep prices glued to the 5- or 8-bar SMA.
    
3. The best ribbon trades are set up when stochastics turns higher from the oversold level or lower from the overbought level. Likewise, an immediate exit is required when the indicator crosses and rolls against your position after a profitable thrust.
    
4. An expanding moving average ribbon signals the potential end of a trend. When the moving averages start widening out and separating, also known as ribbon “expansion”, this signals that the recent price direction has reached an extreme and could be the end of a trend.
    

The Moving Average Ribbon Entry Strategy is easy to master and can identify robust trends and enable quick profits on counter swings. However, as with any trading strategy, traders should use appropriate risk management tools to safeguard their capital and avoid assuming excessive risk.

How does the Relative Strength/Weakness Exit Strategy work?

The Relative Strength/Weakness Exit Strategy is a technique used by scalpers to exit trades based on the relative strength or weakness of the market. The strategy works as follows:

1. Use the Relative Strength Index (RSI) to determine whether a stock is ripe for a rally or a selloff.
    
2. Look for a failure swing top or bottom on the RSI. A failure swing top occurs when the asset's price reaches a high point, but the RSI drops below the most recent fail point. This indicates a signal to sell the asset. A failure swing bottom occurs when the asset's price hits the low point, but the RSI jumps above the fail point or the most recent swing high. This indicates a signal to buy the asset.
    
3. Use the RSI to identify recent trends and spot signs of trend reversals.
    
4. Exit the trade when the RSI crosses back over the fail point or the most recent swing high or low.
    

The Relative Strength/Weakness Exit Strategy is a simple and effective way to exit trades based on the relative strength or weakness of the market. By using the RSI, traders can identify opportunities to enter or exit a position and take advantage of short-term market movements

What is the simple moving average?

The simple moving average is a lagging indicator because it is based on past price data. The longer the time period of the SMA, the greater the lag. While the SMA is a helpful technical analysis​ tool, it is best used along with other popular indicators such as trendlines and volume analysis.

In most trading scenarios, the SMA is plotted on a price chart along with the exponential moving average (EMA). They share similarities and differences but, like most technical indicators, they work best together to define price trends and momentum in trading.

How to use a simple moving average

There are two main ways to use the simple moving average. The first is trend analysis. At a very basic level, traders and investors use the SMA to assess market sentiment and get an idea of whether the price of a security is trending up or down.

The basic rule for trading with the SMA is that a security trading above its SMA is in an uptrend, while a security trading below its SMA is in a downtrend. For example, a security trading above its 20-day SMA is thought to be in a short-term uptrend. In contrast, a security trading below its 20-day SMA is thought to be in a long-term downtrend. By analysing the SMA, the investor or trader can quickly assess market trends and determine whether the security is trending upward or downward.

Simple moving averages can be useful in spotting trend changes. They can also be used to identify support and resistance​ levels. Often, during a trend, the SMA will provide a dynamic level of support or resistance. For example, a security in a long-term uptrend may continually pull back a little, but find support at the 200-day SMA. This can also be helpful in identifying trend changes. This method can be used across many markets, including foreign exchange, indices and stock markets.