This rapid fire scalping forex strategy with frequent entry, uses stochastic for position timing. We identify major trend in lower timeframes by using combination of moving averages. Once we identify the trend, we can concentrate on position entry. Stochastic does a good job of pointing out to good enough price for us to enter. We will be also looking at the chart to distinguish between bullish and bearish candles for stop loss placement.
This forex strategy takes frequent scalping trades in the direction of trend. Avoid trading in high volatility and during the news release (as with other scalping forex strategies). Use only currency pairs with minimal spread and choose your broker wisely. Scalping is demanding on time and concentration and therefore more suitable for experienced forex traders.
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Indicators used in forex strategy
EMA (exponential moving averages) 31 (red) and 14 (green). Those two indicators will help us to separate downtrend from uptrend. Simple and conservative moving average crossing will be used for the task.
Stochastic forex indicator. Stochastic will be used with default MT4 settings (5,3,3) do determine the entry. Additionally candle close is used to improve the winning ratio.
Apply both indicators in 5 min chart.
Forex strategy rules:
EMA 14 (green) trending above EMA 31 (red). This will signalize uptrend. We will enter only long positions.
Buy signal: Stochastic falling below 30 line. Red stochastic line doesn't have to cross the 30 line. Simple bounce is sufficient.
We wait for first clearly bullish candle close to enter our trade.
Stop loss is placed one pip below the low of our signal formation (bearish candles while stochastic falls below 30 line and bullish signal candle).
Take profit: Both stochastic lines rising above 70 line.
EMA 14 (green) trending below EMA 31 (red). This will signalize downtrend. We will enter only short positions.
Sell signal: Stochastic rising above 70 line. Red stochastic line doesn't have to cross the 70 line. Simple bounce is sufficient.
We wait for first clearly bearish candle close to enter our trade.
Stop loss is placed one pip above the high of our signal formation (bullish candles while stochastic falls below 30 line and bearish signal candle).
Take profit: Both stochastic lines falling below 30 line.