Robust Scalping Strategy To Increase Profits On Swing Trades
Swing trading and scalping are two different trading strategies. The temperaments of the traders who follow each of these different trading styles are often seen to be at conflict.
Scalpers must pay constant attention to the market in order to find trading opportunities that only last a few seconds or minutes. Swing traders like to keep their positions open anywhere from a few days to a few weeks.
The fact is that swing traders can add profits to their trades with swing trading strategies.
A Swing Trading Strategy
Look at the following daily chart for Apple, Inc. (NASDAQ:AAPL). The candle highlighted is called a hanging man pattern. It appears in downtrends and signals a reversal in the trend.
The logic behind it is that the price opened, then sellers pushed the price down and continued the downward trend.
Then, the buyers pushed the price back up. This short body on top of a long lower shadow identifies a hanging man pattern. It represents a rejection of the downward trend.
You could buy the stock at that point and ride the trend upward. Or you could buy a smaller position in the stock to hold long-term and then use scalping strategies to identify scalping opportunities and open and close short-term trades all the way up the long-term trend.
A Swing Trading Strategy + Scalping Strategy
By combining the exponential moving averages with 5, 8 and 13 periods, you get a signal generator for scalping opportunities. When the EMA5 crosses above the EMA8 and EMA13, this is a buy signal.
When the EMA5 crosses back below the EMA8 and EMA13, it is a sell signal. A Bollinger Bands indicator with 13 periods and 3 standard deviations can also generate reliable sell signals. When the price penetrates the lower Bollinger band, it is a sell signal.
You can make these trades on top of your long-term trade, scaling into the scalping position and then scaling out once you get the sell signal. This keeps the long-term position open and the gains from the long-term position can serve as a buffer against any losses you suffer while scalping. Scalping while holding a long-term position can also help the monotony of holding onto a long-term trade.
You can see the opportunities in the chart below that present themselves on a 10-minute chart. Scalpers sometimes use charts with periods as short at 5 minutes or even 1 minute.
Swing trading can deliver great profits. The hanging man candle pattern shown above is reliable, and it is by far not the only swing trading strategy. The profits you make from swing trading can be enhanced with scalping.