These indicators are some of the best for scalping when intraday market is trending strongly or range-bound.
Scalpers profit from minor market movements. When technical conditions push the ask price lower than normal, they would enter a long position; and when technical conditions push the bid price higher than normal, they would enter a short position. Profit or loss can be gained in minutes.
Scalpers use technical indicators that are tailored for short-term opportunities to meet market challenges. These real-time tools use signals that are similar to those used in longer-term market strategies, but they are applied to time frames lower than 1 hour (H1). They are most effective when the intraday market is trending strongly or range-bound, and become less effective when there are whipsaws or choppy price movements.
1. Multiple EMA
Moving Average is the indicator of choice for most beginner traders. Some may choose Simple Moving Average (SMA), but Exponential Moving Average (EMA) is actually the best for scalping because it provides specific information in a much more timely manner.
By applying several EMA lines on the chart, you can also gain accurate buy and sell signals through historical averages of divergences and crossovers. Each trader may concoct their own multiple EMA combination through trial-and-error in a demo account. One of the most well-known is the 5 and 15 EMA setup in 5, 10, or 15 minutes time frames.
Multiple EMA setup allows a beginner-friendly scalping strategy. However, overreliance on EMA also limits your options because it would only work well in trending markets and, more specifically, trend-following tactics. To increase your profit consistently, you should also learn further about additional -and likely more elaborate- trading indicators for scalping.
2. Parabolic SAR
Parabolic SAR is an excellent solution to gain thorough information on price action trends at a glance, making it one of the best indicators for scalping. The general idea is that while the trend is down, the SAR chart position will appear above the price and you should enter a short position. If the market trend is upwards, the SAR chart position will fall below the price and you should enter a long position.
Making use of this tool, you could determine short-term momentum in crypto, forex, and stock market. It will also assist you in learning deeper about the trend and how to correctly place a stop-loss order.
On the downside, Parabolic SAR at times has the disadvantage of feeding erroneous trade signals. This can result in an early exit or entry. To obtain an optimum advantage, make sure to combine it with other technical indicators.
J. Welles Wilder Jr, the creator of Parabolic SAR, suggested combining Parabolic SAR with the average directional index (ADX) momentum indicator to provide a more precise assessment of the strength of the existing trend. Candlestick patterns and Moving Averages can also be used by traders.
3. Candlestick Patterns
More experienced traders prefer to make use of price action analysis for scalping. It means they prioritize seeking trade signals from candlestick patterns, rather than technical indicator setups. In this case, the candlestick chart takes the role of "trading indicator" by itself.
To emulate them, you'll need to equip yourselves with all the necessary knowledge related to candlesticks. It is also crucial to understand the basics of popular one-candle, two-candle, and three-candle patterns, including but not limited to Doji, Hammer, Shooting Star, Three Black Crows, and Morning/Evening Star.
Other Things to Note...
Scalping can be an extremely profitable approach. Scalpers are also exempt from following basic fundamentals because they are virtually irrelevant in shorter time frames.
Scalping as a trading strategy, however, has some disadvantages. First and foremost, scalping may involve dozens or hundreds of trades a day. Because you pay a commission on each trade, opening a large number of trades results in greater transaction expenses. Furthermore, this method is time-consuming and needs high-level perseverance. Successful scalpers are generally diligent individuals with longer experiences in both demo and real accounts.