This is a scalping trading system based on stochastic oscillator, which has two advantages: it is easy to understand and implement. Like all good trading strategies the trading signals are very easy to visualize. This system employs five technical indicators that are wellknown to any experienced trader in the market.
In general terms this is a very simple scalping strategy which is recommended for traders interested in short-term trading. Although it use several technical indicators, its rules are very easy to follow.
This trading system was designed to trade in the Forex market. However as a scalping strategy, it can be tested with other instruments, making any necessary changes depending on the market.
To successfully implement this technique we use the following indicators with the configuration indicated:
- RSI (14).
- MACD ( 24, 52, 18).
- Stochastic Oscillator (10, 6, 6).
- Simple Moving Average of 20 periods.
- Weighted Moving Average of 10 periods.
Trading system rules
The 10-period moving average crosses the 20 period moving average from below upwards.
The stochastic is in an upward trend.
MACD is above 0.
The RSI has a value above 50.
Once we open the long position we take profits and close the trade when the MACD reverse its trend
The 10-period moving average crosses the 20 period moving average from above downwards.
The stochastic is in an downward trend.
MACD is below 0.
The RSI has a value below 50.
Once we open the short position we take profits and close the operation when the MACD reverse its trend.
- It is important to look carefully the behavior of the stochastic oscillator because when it reaches the extreme levels 20 or 80, this could be signal of a probable change in market trend. However, we should consider the other indicators before making a decision.
- This is a scalping trading system so it is no recommended for larger time frames.
- As a scalping technique, in very important to avoid a big loss in a single trade. Remember that this is not a strategy designed to obtain huge profits in each transaction.