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Hi guys I’m back. Recently, there has been a lot of positive feedback about the reversal trading strategies introduced on this blog. So I write this article for those who are not experienced enough to trade reversals or catch the top-bottom accurately. I will show you the scalping strategy with 2 moving averages, take advantage of the push of the trend to get a bigger profit than your capital investment thanks to leverage when trading Forex in IQ Option.
It is recommended to use a demo account to test the strategy with the conditions below before trading for real.
- Currency Pairs: Any but preferably major pairs with good liquidity.
- Time frame: 5 minutes.
- Trading hours: European-American session.
Register IQ Option and Get Free $10,000 Risk warning: Your capital might be at risk.
Description of the scalping trading strategy with 2 Moving Averages
As we all know, most indicators give trading signals slower than what is happening in the market. So we will turn this disadvantage into an advantage in our trading. It is the use of MAs as signals to predict the trend.
The movement of the two moving averages does not overlap or cross each other. Most importantly, both go in a separate direction to form a river-like image. And in this article, we will use “river” to describe the area between the 2 moving averages.
Conversely, if turbulence occurs, the lines intersect, not showing a clear direction. Then, it is a struggling market and there is no specific trend.
Scalping trading rules with 2 Moving Averages
On the M5 timeframe, you need to use 2 MAs– EMA 20 (purple) and EMA 50 (red). If these two lines do not intersect and go in the same direction (bullish or bearish), that gives us a very visual image like a river (the market is trending).
When the market is in trend, with a correction, the price should not stay too long in this river. That means there should be no more than 3 candles closing in the area between the 2 MAs. If there are 4 or more closing candles in this area, then we ignore that trade signal.
The example below shows more than 3 candlesticks closing in the river area, so we don’t trade this signal.
After 3 candles closes in the river, the next candle closes below MA20. We will trade at this closing candle position.
BUY entry conditions
- The price is above MA20 and MA50.
- MA20 is above MA50 and is parallel to each other upward, forming a river
- The price corrects and touches MA20 or MA50 but it must be inside the 2 MAs. Especially no more than 3 candles close continuously in the river.
- Next candle closes above MA20: Enter a BUY order
As for the stop loss, you should put it at the nearest trough. And take profit will have 2 times the distance from entry to stop loss.
SELL entry conditions
- The price is below MA20 and MA50.
- MA20 is below MA50 is parallel to each other downward, forming a river
- The price corrects and touches MA20 or MA50 but it must be inside the 2 MAs. Especially no more than 3 candles close continuously in the river.
- Next candle closes below MA20: Enter a SELL order
When placing a Sell order like this, the stop loss will be the nearest resistance zone. The take profit point will be twice the distance from the entry to the stop loss.
With this order, the win rate will be higher than other orders. Because the cluster of 3 candles inside the 2 MAs is an Evening Star candlestick pattern, signaling the price to reverse from bullish to bearish.
Never forget about capital and risk management. With a trading system, the capital management level is always 1-2%/a trade and the Risk/Reward ratio needs to be at least 1:1.
Conclusion
This is a trading system with a very simple strategy. Notice the important thing: we don’t trade if the price stays in the river for a long time. The maximum acceptable level is 3 consecutive closing candles.
In addition, the analysis of waves based on price action will give you a lot of experience to choose trading opportunities as well as eliminate a lot of risks.
Pay close attention to these rivers and choose “beautiful” ones with the opportunity to increase your profits a lot.
Register IQ Option and Get Free $10,000 Risk warning: Your capital might be at risk.
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