This is a perfect choice for traders who depend on scalping. In scalping the trader open a trade ready to close with a profit or a loss it is usually a fifty kind of a gamble. This is the reason as to why the Volatility Scalp Trading System was invented; to reduce the risk during scalping.
This trading system should only be used by the brokers that own ECN accounts. More so, it should mainly be used to trade the EUR/USD currency pair. This is because this pair has a small spread.
It is best if you use this system on the 1M to a maximum of 15M timeframe otherwise you will not be scalping.in scalping you use the least timeframe so that you will be able to detect the smallest movement in the market. Considering that the EUR/USD is very volatile it is advisable to go for the 1M timeframe.
The Volatility Scalp Trading System, is made of several indicator namely: the Damiani noise indicator, ADX (DMI) indicator, momentum indicator and the T Stop indicator.
Fig. indicating the various indicators used in the Volatility Scalp Trading System
While using this scalping strategy, you have to be very careful since sometimes it is very difficult to make a decision on which trade to open. Mainly if you look at the ADX indicator which is the core of every trade, its sky blue line rarely crosses the 28 level. Therefore you should observe the signal given by the other indicators and then confirm them with the ADX indicator. You confirm by checking at the direction of at least two of its lines (it has three lines; a continuous sky blue, broken red and a broken blue)
When to open trades
The sell position (sell order): traders should open a sell when the ADX of period 14 becomes less than 28; meaning that the ADX crosses the 28 level mark on its way down. Then the momentum (14) indicator should cross the middle level line downwards. If all this is done do no forget to check if the Damiani noise indicator is indicating that there is good volatility.
Fig. showing when trades are opened and closed
The buy position (buy order): traders should open a sell when the ADX of period 14 becomes greater than 28; meaning that the ADX crosses the 28 level mark on its way up. Then the momentum (14) indicator should cross the middle level line moving upwards. When all the above is has occurred do no forget to check if the Damiani noise indicator is indicating that there is good volatility.
When you open a trade you should be ready to close it when the market moves with at most 5 pips. When trading the EUR/USD which is very volatile, the market prices changes very fast and if you wait for it to move more, you the market may reverse its trend giving you losses.
The volume indicator is of paramount importance especially after opening a trade. This indicator should be monitored closely for any color change. If for example you open a buy trade and all after some time you notice that the volume indicator starts to form a red bar, you should immediately close the trade.
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