Scalping indicator - the panacea for the Forex market?
Many people who are new to the Forex market sooner or later start to learn scalping. Having learnt the basics of the market the newbies turn their attention to Forex indicators which in their opinion help them in trading and enable them to make profit.
However, in most cases it is not so and 90% of indicators available for free are absolutely useless.
Let's take for example lagging or overripping indicators which can lead to a rapid loss of money but are widely available on the Internet. The same thing is with scalping indicators. The very notion of an indicator for scalping is not really comparable to what happens in the market and has nothing to do with the formation of large market movements, which often only happen when big market players such as banks or hedge funds come into play.
A good indicator for scalping is a very expensive thing, especially if it is a really working indicator. It will not cost 15 or 20 dollars as many people think, but its real price starts from 1000 USD and above. Most likely, these indicators will be based on the market volatility and volumes, and they will be bound to certain less volatile pairs. Why namely to them? Because these indicators are usually designed for intra-band movements and only losses from the trend markets. As a rule, the indicator is used for scalping during the night time and Asian sessions, when the market volatility is very low and when it is possible to hit the opposite trend movement with minimal risk.
Another problem for trader, who uses indicator for scalping, is the constant work at the monitor. It is necessary to trace the market fluctuations on minimal timeframes and watch the changes of indicator and price and make decision about entrance and exit from the market. As scalping deals usually do not last more than 3-5 minutes, it causes a strong emotional and psychological tension in a trader and leads to invalid decisions and as a result to huge losses, especially if the entrance according to the indicator was wrong and the market went in the opposite direction.
Another problem of a trader who uses the indicator for scalping is absence of profit targets or fixing of losses. In other words, a trader waits for a return signal from the indicator to exit a trade, which usually appears when the market has taken 1/3 of the profit. And taking into account spread and commission, it turns out almost half of the profit is lost. Absence of Stop Loss may lead to the loss of part or all of the deposit, if the trader did not guess right with the entry or the signal turned out to be false.
Why do you lose the whole deposit? Because scalpers use large volumes, which usually exceed 15-20% of the deposit, which is a losing strategy. And if a trader gets into a large price movement of 50-100 points, there is practically no way to escape a losing deal.
All of this leads to the following conclusion: if you are going to use indicators for scalping, then use them in your trading strategy together with robots and trading experts, who will calculate at least a Stop loss and Take profit for you. This will allow you to initially stay in the market and optimise your EA and your trading strategy.