It was funny that when I first started trading, I used to run around hunting for the best forex scalping strategy that worked. Ignoring the fact that a strategy is merely a set of rules based around few indicators that should resonate with my trading style, time frame and trade context. Obviously nothing worked for me at first, because the ones that I was testing were not made by me and absolutely not tailor-made for me. As do most amateurs, I kept on saying to myself that there is a holy grail out there and that I should find it or create it myself in order to be fail-proof in trading. This is exactly why I started saying ‘it was funny.’
I am a bit of a perfectionist myself. More and more I practiced and studied forex scalping strategies, the more I came to believe that perfectionism does not exist in forexsphere. Perfect trading, perfect entry and perfect exit is only defined by our trading rules and it means no more than discipline.
My Theory of Scalping Indicators
All indicators are lagging. The way I see it, there are no special sets of lagging and leading indicators. Every indicator has to react after few or more price ticks have been received. If price can do whatever it wants and indicators merely translate the recent history of price, why bother with indicators in the first place? I will tell you why. I use indicators to determine where traders are likely to place there orders and stops and absolutely not as to provide me with buy or sell signals. What is the difference here, if I use indicators just like everyone else?, one might wonder. The pure difference is the purpose of indicators. There are plenty of traders that wish and wait for a moving average crossover, an RSI level or certain MACD/Stochastic event to happen. I’m definitely not that guy.
My Forex Scalping Strategy
I have attached myself with the absolute basics. When I say basics I don’t mean indicators. I meant the very basic principles why any market has to behave the way it does. Why does price has to fluctuate? In any free market price is determined by supply and demand. So I only have to analyze strength and weakness of bulls and bears at certain levels or zones where mass volumes of orders are likely to be placed. I would have to watch how price behaves at these high probability levels by watching bar by bar price action. If I see (not think) that price behaves according to my expectations, only then I would enter a trade. There is no room for guessing games when stakes are real. That is exactly why I used the term ‘expectations.’ Because expecting some price behavior has to have logic behind it.
Of course its a boring strategy. All I care is about making money. I’ve found out the hard way that fancy charts, colorful indicators and expensive multi-monitor trade stations or systems don’t make me money. They probably won’t make you any money either. Here I have outlined the basic principles of my trading strategy. But there is much more to it. Perhaps I would start a series of posts to fully explain my best forex scalping strategy that works for me.