To open a position, some traders prefer to wait for a complete setup. Once they have spotted the slightest hint on the trend changing a direction, they will make a move. This is what we call momentum trading. It represents a fast ride based on trend reversal combined with instant position exits.
If this particular trading style applies to you, you probably seek a solid and trusted trading technique that will help you spot the best market entry and exit points. This is where a 5 minute scalping strategy may come in handy. Not only does it help to ensure the profit with EMA, but also increases it when following specific rules in case of going short or long.
As stated earlier, 5 minute forex scalping strategy refers to the momentum trading style. The main idea is to generate slower profits from more occasions of trend-making a reversal. To utilize the tactics properly, you will need the following technical indicators:
Besides, you will need to set your charts for a shorter possible timeframe. Then you need to have the above-mentioned indicators activated and plotted. The first one (20 EMA) will make it possible to indicate the trend direction. It uses recent price data and providers more in-depth insights if compared, for example, with SMA due to its increased price sensitivity.
The second indicator (MACD) will make it easy to confirm the momentum. The good news is that it does not require additional configuration. Traders may use the default settings featuring a 9, 12, or 26-period signal line.
Once we have activated indicators, we may enter a trade in two different parts. Do not forget to place a stop loss in the first part. It will make it possible to lock in the potential profit. While moving to the second part, it is required to move the stop loss in order to minimize the risk of losing capital once it has approached breakeven.
Traders will have to keep the position open for as long as possible before triggering the trailing stop loss. To make the most of the 5 minute scalping strategy, it is better to use advanced trading platforms with automated stop loss placement, market entries and exits, trailing stops, etc.
If you decide to use a long position, you will have to wait for MACD and 20 EMA crossing within the last 25 minutes (or five bars). This is the time when the price is also supposed to cross above. If that occurs, you need to do the following:
To enter a short position, you need to wait for the price to move below the EMA. What’s more, MACD is supposed to be negative over the last 5 bars (25 minutes). The steps to trade are as follows:
The main idea of the strategy is to generate revenues from trend reversals. While traders generally use EMA and MACD indicators, they try to reinforce each other. It results in signals not always given correctly. We need to take into account that the ranges to trade can be too wide or too tight, which is natural for scalping. So, you may expect the price to fluctuate around the EMA indicator, while MACD will be turning both positive or negative.
The 5-minute scalping strategy will be a good choice for scalpers who want to benefit from a momentum short burst. It helps traders to open and close positions at the best possible point. Besides, mart participants will get a chance to stay on the trend for as long as they can with minimized risk thanks to properly utilized stop loss and trailing stop loss placement.
This material does not contain and should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments. Before making any investment decisions, you should seek advice from independent financial advisors to ensure you understand the risks.