When we talk about scalping strategies, most of them are trend following strategies. This is because intraday trends can be very powerful.
But the strategy that we will discuss today is a mean reversion strategy.
For this strategy, we will mainly use 2 indicators.
The first indicator that we will use is the Bollinger bands indicator.
The Bollinger bands are a very popular indicator that helps us in identifying market reversals. Bollinger bands consist of three lines. The middle line on the indicator is a simple moving average. By default, the Bollinger bands are set to 20 and 2 settings. This means that the middle line here is a 20-period moving average.
An important point to remember here is that we will need some kind of confirmation before we enter a trade.
That confirmation will come from looking for divergences in the M-A-C-D indicator. M-A-C-D is a simple indicator that oscillates from the values of +400 to -400. It consists of thee elements, the mac d line, the signal line, and the histogram.
For this strategy, we only need the histogram. So we will remove the signal line and the mac d line.