A 5 min Quick scalping strategy to follow current trend
Following the current trend with a quick scalping method Time frame 5 minutes
Always follow the trend for better outcomes with this Scalping Trading Strategy. Traders adopt a variety of strategies in order to constantly beat the markets and profit, but scalping is one of the most profitable methods of trading. Scalping is a type of trading that entails executing a series of little winning deals in order to increase earnings by focusing on number rather than quality. Rather than undertaking a lot of detailed technical analysis, the primary aim of such methods is to use trading volumes. There are a variety of such trading tactics, one of which was detailed in this article. Continue reading to learn more.
Indicators used in Trade setup
There are 3 main indicators used in this trading setup, and each of these indicators has been explained below in detail.
EMA
The exponential moving average of a stock’s closing price over a certain number of trading sessions is known as the EMA.
It functions similarly to the SMA (Simple Moving Average), with the exception that it prioritises more recent data because it is regarded more important than older data.
The time period is the parameter that must be entered for the EMA.
Traders often go long when prices are above the EMA and short when prices are below the EMA.
MACD
Convergence of Moving Averages
Divergence, sometimes known as the MACD, is a momentum-based indicator that depicts the connection between two separate exponential moving averages (EMAs).
It is derived by subtracting the longer period’s EMA from the shorter period’s EMA.
This line can then be used as a buy or sell signal by superimposing it over another EMA line (called the signal line).
When the MACD is above the EMA, traders usually go long, and when the MACD is below the EMA, they usually go short.
RSI
The RSI is a momentum indicator that may be used to determine if a company is overbought or oversold at any given time.
It achieves so by keeping track of the size of recent price movements.
The RSI is expressed as a number between 0 and 100, with a value below 20 indicating an oversold stock (ripe for a long position) and a value above 80 indicating an overbought stock (ripe for a short position) (ripe for a short).
Trade Setup
For this particular trading setup, the following settings were used on the indicators:
EMA
Three different EMAs were used in this setup, each with different time periods. They were all marked with different-coloured lines:
EMA 1: Period = 9
EMA 2: Period = 55
EMA 3: Period = 200
MACD
The signal line and the MACD line are disabled here as we only use the histogram. While the original chart is in 5-minute intervals, the MACD histogram is set to a 1-minute interval.
RSI
The middle line of 50 is used as opposed to the overbought (>80) and the oversold (<20) bands.
Trade Entry and Exit
- A long position was initiated whenever EMA 1 was above EMA 2 and EMA 3. Here another condition is that the RSI would have to be above 51 and MACD should have at is lower Red that is Lower than the average (indicated through the MACD histogram).
- A short position was initiated whenever EMA 1 was below EMa 2, which was in turn below EMA 3. The RSI chart would have to be below 49, and in addition to this, the MACD histogram would have to show higher green band.
These indicators were set to indicate pullbacks in trends. Bollinger band expansion of volatility can easily be identified on Bollinger bands to the MACD and a candle touching upper or lower bar exists whenever a candle touches the Bollinger bands.
The risk-reward ratio was set as 1:2.
Trade Results
Profitability of around 60%+ pop
Some Adjustments for better results
Some additional indicators and settings that could be added in order to increase the win rate and reduce the risk employed are:
Conclusion
Again this article is for educational purposes only and one should back test the trade setup before applying. this will also give confidence to one…
