There are plenty of strategies that traders can use to succeed in digital options. Most trades are short-term and are conducted with expiration ranging from 1 to 5 minutes. Therefore, a lot of traders choose scalping strategies that go in line with this style of trading. By reading this article, you will see the top 5 scalping strategies that will help you improve your trading results or make your first steps in trading.

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Key Takeaways

First, let’s highlight some key points that this article covers. Here they are:

• Scalping is a good strategy for short-term digital option strategies as the main goal is to capitalize
  on small price movements. This approach is extremely effective for those trading with an expiration ranging between 1 and 5 minutes;
• To be successful in scalping, traders should use a combination of indicators, which increases the reliability of each trading signal;
• Combining technical indicators with price action may significantly increase your chances for success;
• Trading should be conducted in the direction of the main trend;
• Traders should learn more about the indicators they apply to make the most out of them.

Scalping Basics

Before delving into strategies, it is worth looking at scalping itself to understand what you are going to deal with. Scalping strategies appeared long ago with the development of margin trading and digital options as a response to the growing demand for trading systems that would allow market participants to make money on small price fluctuations.

The idea behind any scalping strategy is that a market participant buys or sells an asset (or buys a contract) for a short period trying to capitalize on small fluctuations. While eventual profits for one trade are small, scalpers aim at opening a lot of trades to increase their general outcome.

When it comes to digital options, scalping suits these contracts the best as a trader does not need to open a lot of trades to rely on heavier profits. Each contract allows them to make up to 50-90% of the investment amount, which is a great reward for such risks. Therefore, scalping is ideal for digital options and now we are going to provide you with some powerful trading techniques that may help you change your whole strategy and results.

1: Stochastic + RSI Scalping Strategy

One of the simplest and most effective strategies is based on the Stochastic indicator, which is coupled with the Relative Strength Index. Both indicators allow market participants to see where the market is overbought or oversold. You can use only one of them, but mixing Stochastic and RSI will be even better.

The idea of this strategy is to engage when both indicators leave oversold or overbought areas. In our example you can see that Stochastic and RSI go above 30, which means that they leave the oversold area and a trader can expect a reversal or an upside correction at least.

One of the benefits of scalping, by the way, is that you don’t need to think whether this signal ends the previous trend or just stops it for a while. The idea is to predict that at least one or a couple of the upcoming candlesticks will be of different colors. For instance, if the price was moving downwards and a signal came, then you can expect that at least a couple of candlesticks will be bullish (green). On the other hand, if there was an upside movement and both indicators left the overbought area, then you can expect that the price will change the direction for at least two candlesticks.

This is enough to make money when trading digital options. Getting back to our example, you can buy a Higher contract once both indicators cross 30 and move higher. As you can see, there are three green candlesticks confirming that this strategy is working.

2: Stochastic+RSI+Price Action Strategy

Let’s try to make this strategy even more powerful by adding price action there. This will decrease the number of signals, but each one will be confirmed by two indicators and candlestick analysis, which makes it an almost ideal signal for trading.

In this particular example, we can see that RSI leaves the oversold area and Stochastic has a crossover at its top, while there is a green Shooting Star candlestick on the chart. What’s important here is to notice that the Stochastic indicator does not leave the overbought area at the moment when the signal comes. However, the crossover in the indicator window is another signal confirming reversal. 

When a trader sees such a confluence of signals, they can buy a Lower contract. As you can see, the price moves downwards for a while, allowing digital options traders to make money. It is important to be on time as the price makes some upside movements later. Therefore, when working with this strategy, you should be quick to make decisions. 

Now let’s consider another situation when we have this confluence of signals after the bearish market. As you can see, there is a kind of a hammer pattern on the chart, while RSI is leaving the oversold area. Stochastic is almost there as well, but as we have already mentioned, it is enough to see the crossover below the 30 level to make a decision.

3: A Double Moving Average Scalping Strategy

Moving averages are technical indicators that show traders the average price for a particular period. They are widely used by various categories of market participants, including those trading digital options. Knowing the average price, you can see the direction of price fluctuations as well as catch signals to buy digital contracts.

The idea behind the strategy is very simple. First, you need to set up two moving averages (SMA20 and SMA200). Next, you need to check, when the price rebounds from SMA20. If this happens below the SMA20, then you can buy the Lower contract and if this happens above the moving average, then the Higher contract should be your pick. However, to be more sure about the signal, a trader should also look at SMA200. For Lower contracts, the price should be below this long-term moving average, while for Higher contracts, it should be above the line.

In our example, we have a couple of entry points that are located below the SMA200. Moreover, these signals go in confluence with price action as we have reversal patterns there. In the first case, there are several Shooting Stars, while in the second, there is a clear Bearish Engulfing.

When it comes to bullish markets, the situation is pretty much the same. You need to check the direction of the long-term moving average first and then seek to find signals when the price rebounds from the SMA20. There are three possible entry points in our example with clear price action signals. In the first case, we have a bullish Hammer pattern (red candlestick), in the second and the third cases, there are Bullish Engulfing patterns.

In all cases, the best scenario is to buy the Higher contract. The price moves upwards allowing market participants to capitalize on small price movements.

4: Parabolic SAR Scalping Strategy

Parabolic SAR belongs to trend-following indicators, but it can also be used to find reversal points. If you look at the chart, you will see that dots appear below the price for some time and then, when the direction is changed, they appear above the price. This is how we are going to use this simple scalping strategy.

In the first example, we have a reversal signal that comes from price action (Shooting Star). This means that it would be a good idea to buy a Lower contract. When it comes to the Parabolic SAR indicator, it changes direction too. You can see that dots start to appear above the chart for a while. Keep in mind that the Parabolic SAR indicator is a lagging technical analysis tool, which means that you are going to use it as confirmation. Once the dot appears above the chart, you can buy a Lower contract (not at the moment when the Shooting Star candlestick closes).

The same is relevant for those scenarios when the price reaches its lowest point and a bullish reversal takes place. As you can see, there are two reversal patterns on the chart, but we do not buy Higher contracts right away. It is better to wait until dots appear below the price to enter the market. Once this happens, a trader buys a Higher contract.

5: A Scalping Strategy with the Fibonacci Retracement

Another scalping strategy that you may find interesting is one with the Fibonacci retracement. To use it, you first need to learn how to add it to charts and make it a powerful tool for your trading techniques. After you have added and stretched it, you can start using Fibonacci levels in your scalping strategies.

The idea behind this strategy is very simple. You need to find price action signals on retracement levels and use them to buy a particular contract.

For instance, in our example, you can see that there are two clear reversal signals allowing you to buy a Lower contract. Both are Shooting Star patterns signalling that the market is going to reverse.

To use this strategy, you need to wait until the Shooting Star candlestick closes and then buy a Lower contract. 

Scalping Strategies Tips and Tricks

Now that you know some of the best scalping strategies, it is almost time to move to the trading platform and start using them.  However, first, spend some time reading some recommendations that may be very useful to you, whether you are a beginner or have some trading experience:

• Choose a reliable broker with a higher percentage of profitability and fast execution. Being able to have as much profit as possible is one of the key conditions of success in scalping. With Binolla, you can find contracts offering up to 92% profitability, which allows you to make $92 per each $100 invested, which is one of the highest profitability values in the market. Moreover, Binolla allows you to execute trades instantly, which is another huge advantage of trading with the brokerage company;
• Learn your strategy and create a trading plan. Knowing all the details of a strategy is the key as even a small mistake may lead to losses. Moreover, traders should have a clear trading plan in order to avoid situations when they start making decisions randomly;
• Stay focused and disciplined.  Discipline is what distinguishes a successful scalping trader. Unlike many other strategies where you may have time to think, in scalping you should make your decisions at the speed of lightning. Therefore, you should be focused all the time;
• Learn how to manage your funds. Proper risk management is important for all types of strategies. However, when it comes to scalping, it is of particular importance as you need to know in advance how much you will spend and stick to this amount. Those who do not stick to this plan may have heavy losses;
• Create a diversified portfolio and learn more about the assets you trade in advance. Having a range of assets at hand will allow you to find various trading opportunities for scalping. You should be prepared in advance and be quick enough to browse between various assets to make your trading decisions;
• Take time to make an analysis. While analyzing trades is important in general, those using scalping strategies should make it mandatory. You may lose your focus during a series of fast trades. Therefore, it is a good idea to make pauses from time to time and review your trading sessions to find mistakes and work on them in order to avoid such failures in the future.

Conclusion

Our top 5 scalping strategies introduce you to the world of this fast-paced trading style. By grasping these tactics, you will have more chances to start making money in the financial markets. Before applying any of these strategies, make sure that you know how to use it. You can test them on the demo account before investing real money.

FAQ

Which Scalping Strategy is the Best?

There is no strategy that can be named the best when it comes to scalping. Each one has both pros and cons and your main goal is to be able to pick one that suits your trading style and abilities the most. 

Which Technical Indicator is the Best for Scalping?

Similar to the previous question, there is no ideal technical indicator that can be used in scalping and bringing profitable signals only. You should choose your own one that provides clear signals that you understand and allows you to be aware of the current market situation.

Is Scalping Really Profitable?

Yes, if you know how to apply strategies and how to choose the one that meets all your expectations, scalping will be profitable for you. 

How to Master Scalping Trading?

To master scalping trading, you should stay focused and disciplined all the time. Moreover, you should have a strategy that provides you with clear signals so that you can curb price fluctuations in most cases.