Stochastic Scalping Strategy

This is a forex scalping strategy that relies only on the Stochastic indicator and the Parabolic SAR indicator, which can present several trading opportunities during the day.

For each trade, you set a target of 10 pips.

Test different settings and find out which ones suit you.

Setting up the scalping strategy

The indicators you need:

The Parabolic SAR indicator and the Stochastic indicator with their default settings.

Timeframe:

One minute.

Trading hours:

Preferably during the European and American sessions, because price moves during that time are more active than at any other time.

Currency pairs:

Low-spread pairs such as the majors EURUSD, GBPUSD, AUDUSD, USDCHF, NZDUSD, USDJPY, USDCAD, and so on.

You can also use some low-liquidity cross pairs such as the euro-yen EURJPY.

The chart below shows how this strategy works in the forex market. As you can see, there were 5 valid buy signals within just two hours during the American session; 3 trades were closed for a total of 30 pips in profit, and some trades stayed open until they reached the profit target or the stop loss.

The buy rules are very simple:

• The Parabolic SAR must be below the entry candle.
• The Stochastic reaches level 20, or is at or above it.
• Execute a buy order if the two conditions above are met.
• Place the stop loss below the nearest support, or 10 pips below the entry (whichever is closer).
• The profit target should be 10 pips.

The sell rules are exactly the reverse of the buy rules:

• The Parabolic SAR must be above the entry candle.
• The Stochastic reaches level 80, or drops to it or just below it.
• Execute a sell order if the two conditions above are met.
• Place the stop loss above the nearest resistance level, or 10 pips (whichever is closer).
• The profit target should be 10 pips.

Scalping the Stochastic can let forex traders aim for small gains over short periods, and over time these small results may add up. Keep in mind that outcomes vary and any signal can fail.

For this trading strategy, the timeframe to use is the 15-minute chart. It can also work as a scalping approach on the 1-minute and 5-minute timeframes, and you can use any currency pair you want with it.

Frequently asked questions

Is trading halal or haram?

Forex trading in itself is not a problem in terms of being permissible or forbidden, but the ongoing disagreement among scholars concerns the ruling on leverage and margin trading. This topic is long and needs more detail; you can read the article on the ruling of forex trading on the Easy Trade website, which explains the ruling on trading in the forex market with evidence.

How do you succeed in forex trading?

Follow these steps:

• Learn the basics of the market and technical and fundamental analysis.
• Choose a reliable trading strategy and apply it professionally.
• Manage capital effectively and set stop-loss and target levels appropriately.
• Watch the major economic events and geopolitical factors that may affect the markets.
• Analyze news and developments related to currencies and markets regularly.
• Keep trading records, analyze your mistakes, and learn from them.
• Be patient, stay focused, and don’t rush your decisions.

What are the best trading strategies?

There is no single trading strategy that suits everyone, because the strategy to choose depends on each person’s goals, personality, and investment knowledge. That said, here are some common strategies traders can use:

• Reversal strategy: this relies on analyzing supports, resistances, and technical indicators to identify the critical points that signal a rise or fall in prices, and using that to make trading decisions.
• Trend-following strategy: this aims to identify the market direction and trade in the direction of the trend rather than relying on news or fundamental analysis. It is done using technical indicators for technical analysis.

What are forex strategies?

Forex strategies are a set of rules and principles that traders use when trading foreign currencies (forex), with the aim of making profits and reducing risk. Forex strategies differ from one person to another, since each trader chooses the strategy that suits their personal style and financial goals.

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