Traders employ a variety of strategies in order to be able to consistently beat the markets and profit – however, there are few methods of trading as effective as scalping. Scalping refers to a form of trading that relies on making a series of small profitable trades, focussing on quantity rather than quality in order to boost profits. The primary focus of such strategies is to utilise trading volumes rather than performing a lot of complex technical analysis. There are several such trading strategies, and one of them has been discussed in this article. Read on to find out more.
There are 3 main indicators used in this trading setup, and each of these indicators has been explained below in detail.
Known as the SSL, the Semaphore Signal Level channel chart is an indicator that is primarily used to identify trends. It does this by combining a variety of moving averages to give a clear visual signal of price. The SSL is primarily just a combination of moving averages, however, using the combined indicator as opposed to the individual average lines makes the charts cleaner and less cluttered. The SSL channel shows blue and red lines to show you when a price trend is forming.
QQE Mod Indicator
The QQE indicator can be used to confirm the reversals of a trend in the same way as the RSI indicator – what it basically does is indicate when particular security is overbought and oversold. It can be thought of as a heavily smoothed version of the RSI indicator. The QQE Mod indicator used in this strategy is just a combined version of 2 separate QQEs that provide better signals.
The EMA is simply the exponential moving average of the stock’s closing price over a given number of trading sessions. It works in a very similar way to the SMA (Simple Moving Average), except it gives more priority to more recent data as this is considered to be more relevant than old data. The parameter that you have to enter for the EMA is the time period. Usually, traders only go long when the current price is above the EMA, and short when prices go below the EMA.
For this particular trading setup, a 200EMA was combined with the default settings on the QQE Mod and the SSL indicators.
A long position was initiated whenever the SSL channel showed a blue line, the price was above the 200EMA, and the QQE Mod confirms the trade as being in the blue.
A short position was initiated whenever the SSL channel showed a red line, the price was below the 200EMA, and the QQE Mod confirms the trade as being in the red.
The risk-reward ratio was fixed at 1:2.
Results and Adjustments
After backtesting the strategy over past data using the 15-minute candles, the overall results were:
Profitability: 87.29% net profit
Number of Trades: 90
% of trades profitable: 40%
Profit factor: 1.349
Some additional indicators and settings that could be added in order to increase the win rate and reduce the risk employed are:
- The ADX indicator could be added to weed out bad trades that would have occurred when the trend was just about to end.
- The stop-loss and take-profit points could be tweaked and used to improve the profitability and the risk.
Scalping has been proven to be one of the most profitable trading strategies out there, however, even when you’re scalping, you need to ensure that you have a high win rate so that the strategy is fruitful and profitable. Using the strategy discussed above, you will be able to profit in both bull and bear markets consistently. You can even tweak the settings to suit your level of risk and trading style, finding the right balance between the win rate and the net profit.
- The Most Accurate Buy Sell Signal Indicator in Tradingview | 100% PROFITABLE TRADING STRATEGY TESTED – YouTube
- TradingView Indicator
- Settings Used in the Video
- SSL Channel – Forex Central
- QQE Indicator – Tradingtact
- Exponential Moving Average – Investopedia