Scalping strategy is often chosen by traders who want fast profits and limited hours in front of their computer. Scalp trading takes advantage of momentum and volatility. It does not encompass standard intraday or swing trading, but instead aims to take advantage of a temporary change in buying or selling pressure.
For scalpers, trend direction is not that important. The most critical factor is aligning both momentum and volatility with 'now moment' buyers or sellers. This way scalpers are not limited to trend direction, but rather to price action itself.There are many scalping techniques out there, but this guide focuses on one of favourites.
Keltner channel setup and overview
Keltner Channel is a lagging on-chart indicator that uses a combination of exponential moving averages and Average True Range (ATR).
- Admiral Keltner ( 50,10,3.75) + Admiral Keltner (50,10,2.75)
- Stochastic (14,7,3)
- Admiral Spread (optional).
Source: Admiral Keltner
Source: Admiral Keltner
Source: Stochastic Oscillator
Time frame: 15m
Pairs to trade: Any, but focus on major pairs: EUR/USD, GBP/USD, USD/CHF and USD/JPY
Buy trade is initiated when :
- The candle goes below any of the two Keltner bands, then closes back into the channel.
- Stochastic should be crossing upward, but far from the 80 line (ideally close to 20 or below it).
Sell trade is initiated when:
- The candle goes above any of the two Keltner bands, then closes back into the channel.
- Stochastic should be crossing downward, but far from the 20 line (ideally close to 80 or above it).
Your target is the middle line or 10 pips minimum.
Alternatively, if the price breaks middle line we move our Stop Loss:
- To break even
- Just below the middle line, so the trade is in profit.
Stop Loss: set at 8 pips plus the spread above/below the setup candle
Buy Trade Example
Source: GBP/USD M15 chart, Admiral Markets MT5, Jun 2018
Sell Trade Example
Source: EUR/USD M15 chart, Admiral Markets MT5, Jun 2018
First up - this strategy is easy to use and effective.
Other great benefits include:
- It serves as a dynamic S/R level indicator.
- It can be great in predicting reversals.
- It has higher profit potential than most scalping strategies, because of its unique indicator settings, and the nature of Keltner bands.
- It works well for part time traders, since you don't need to monitor lower time frames that are normally used in other scalping systems (e.g. 5 or 1 minute).
For safer trading:
- Trade at 0.5% of a risk per position.
- Keep the overall risk between 2% to 3% per day.
- Never risk more than 5% per day.
- This strategy should only be used as a scalp-swing system, and should be solely traded on an m15 time frame.
- Beginners should only be focused on major pairs, while experienced traders might want to try and trade minor pairs plus other crosses.
- The high probability nature of the strategy might limit entries to a couple per session - though this can also be a benefit, as you won't be overtrading.
- This strategy should ideally be used with the MetaTrader5 Supreme Edition, as the default MT5 does not have the Keltner indicator, and this plugin is first class.
- If you are searching for the Keltner indicator other than via this plugin - be careful as there are many poorly coded versions out there.
- Finally, note that you should always scalp with low spread pairs e.g. this strategy should be traded between 0.5 to 2 pips.
- Admiral spread indicator is therefore an ideal fit with Keltner Channels' strategy, because it shows you the spread at a glance.