Ready to elevate your trading game? Use this scalping strategy with powerful indicators to boost your chances of success in prop firm challenges.
If you are trying to pass a prop firm challenge, you are likely searching for ways that are both simple and effective. One of the methods that stand out among traders is the scalping strategy. This is a method for rapid trades, small profits, and a lot of accuracy. It can especially be useful when you are trying to reach the high standards of prop firms.
To analyze this tactic well, let’s work through it briefly and show you what kind of tools and techniques you can utilize to maximize this strategy.
Understanding the Scalping Strategy
Scalping strategies originate from the simple concept of profiting off small price changes. Especially in the prop firm world, these small profits can turn into much larger profits and allow you to hit the targets required to pass your challenge.
This strategy applies to short time frames, such as the NASDAQ index, using 5-Minute and 15-Minute charts. It’s meant to capture and exploit those small price movements without much holding time on positions. The results can be amazing when done properly.
Key Indicators to Watch
You will need to configure a few indicators on your chart to make this scalping strategy profitable. The following are the three primary tools that will drive your trades:
- Exponential Moving Average (EMA) – Set it to 111. This will help you get an idea of market movement. When the price is higher than the EMA, you concentrate on purchasing. If it is below, you plan to sell.
- Relative Strength Index (RSI) – One of the most important tools in detecting overbought and oversold conditions, ultimately serving you in finding reversals. Used together with the moving average, you may acquire confirmation from the RSI to enter a trade.
- Lux Algo – An extremely useful indicator to monitor price action and market structure. It time-stamps changes in character and fair value gaps, both of which are key notes for how to pick the up-to-date timing of entering and exiting a trade.
Executing the Scalping Strategy
Here’s how to put that strategy into action:
- Identify the Trend – Start by checking the position of the EMA relative to the price. If it is above the EMA, then you only want to be looking for long (buy) positions. If it’s below, look for short (sell) opportunities.
- Seek Divergence – Divergence is when the price heads in a certain direction, but an indicator like the RSI heads in the opposite direction. Hidden divergence is especially useful. For example, if the price is going lower and the RSI is showing higher lows, that’s a hidden bullish divergence and a potential buy setup.
- Confirmation – After you identify divergence, be patient until the Lux Algo gives you a “change of character” or “change of character plus” signal. When you start to see these signs, it’s good confirmation that your trade is aligning, and you can expect a change in market direction.
- SL & TP – In scalping, you need to set your targets as soon as possible. A standard target is a 1:1 risk-to-reward ratio, but you can also trail your stop loss once the trade has moved in your direction to lock in a profit.
- Don’t Rush – We have to wait for precise signals and not rush into trading. Precision is key in scalping, and entering trades without confirmation will only result in a loss.
What Makes This Strategy Beneficial for Prop Firms
Proprietary firms are known for their solid evaluation processes. Consistency is important, but traders must demonstrate that they are capable of doing so while also managing risk, sticking to a system, and achieving a target within a certain time frame. This scalping strategy can help you pass that evaluation because it:
- Emphasizes earning small, consistent profits.
- Helps you make decisions quickly, which is very useful in a fast-paced trading environment.
- Uses the EMA and RSI to filter the noise, allowing you to only take high-probability trades.
Final Thoughts
If you have a basic understanding of how this works and are patient, this scalping strategy could be the secret weapon you need to pass your prop firm challenge. With indicators such as the EMA, RSI, and Lux Algo, you’ll know exactly when to enter a trade, how to manage your risks, and grow your account slowly.
It’s not about making big profits from a single trade; it’s about securing small wins over time. Therefore, if you want to pass a prop firm challenge as soon as possible, consider adding this scalping strategy to your trading plan.
