Keltner Quick Scalp Forex Trading Strategy

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Keltner Quick Scalp Forex Trading Strategy

Today we will be discussing once again another strategy that would allow you to scalp the markets several times in a trend for multiple profits. This is basically the point of doing scalping, it allows traders to make quick small profits many times in a market.

So, how do we do this with high accuracy? Trade with the trend. This is probably the simplest way to make profits constantly from the markets. This is because the odds are in your favor if you are trading with the trend.

Also, we should be buying at pullbacks on the support. This is probably one of the things that most momentum traders miss out. They keep buying on strong momentum candles but tend to buy high, leaving them with less to no room for profits. To go around this, we will be entering the market prior to the strong momentum move. This allows us to participate and make profit on those strong momentum candles.

To aid us in our quest for quick profits, we will be using our good old trusted Keltner Channel indicator. The good thing about using the Keltner Channel is that we have everything we need in a single indicator. We have our Exponential Moving Average (EMA) which represents our support. We have the outer bands that use Average True Range (ATR), which represents the overbought and oversold conditions, which in effect could mean short-term mean reversals. We would want to get out of the trade prior to these short reversals for us to make quick small profits. Plus, the Keltner Channel itself could also be indicative of trend direction.

We will still be using a pretty basic setting with our EMA at 20 periods, ATR at 20 periods, and multiplier at two (2).

So, for the first part, we will be looking for charts that are trending and wherein price is respecting our 20-EMA represented by the middle line. A chart that looks somewhat like what we have below.

keltner quick scalp forex trading strategy 01

As you would notice, price does tend to stay on the upper half of the Keltner Channel more often than not, indicating that it is a trending market. Even with just a simple eyeballing of the chart, you would also notice that price does tend to go on an upward direction.

Also, you would notice that price does respect the 20-EMA. If you’d look at the chart, price doesn’t usually stay below the 20-EMA for long but instead bounces up.

This is the kind of trending chart that we would want to trade.

The Setup: Trading the Keltner Channel for Short Scalps or Day Trade

For this strategy, I find the 5-minute chart to be a good fit. Candles don’t form too long allowing us to trade multiple times. But even though this is considered one of the lower timeframes, on a good trending market, whipsaws don’t occur too often as they would with the 1-minute timeframe. Charts would be easier on the eye with lesser whipsaws on the 1-hour timeframe and above, but those timeframes would give us lesser opportunities. I wouldn’t also consider that as scalping, candles take too long to form, and targets are too wide. The 1-minute timeframe on the other hand, would be more of a scalp trade than the 5-minute chart, but even on a trending market, too much noise could still be seen on the charts, causing confusion and even fear for some traders, making them exit the trade prematurely. If you could handle the heat on the 1-minute chart, that would be great. But if not, it would be best to stay on the 5-minute timeframe. Although scalping purists wouldn’t consider it as a scalp but rather a day trade.

So, onto the setup.

Buy Entry:

  • Look for a bullish trending currency pair with price staying above and respecting the 20-EMA middle line of the Keltner Channel.
  • If price is above the Keltner Channel, set a Buy Limit Entry Order right on the 20-EMA line.
  • Trail the pending Buy Limit Entry Order at each close of the candle until a trade is opened.

Stop Loss:

  • Stop loss should be just below the lower outer band of the Keltner Channel.
  • Trail the stop loss on each candle close.

Exit:

  • Close the trade on a candle that closes near or above the upper band of the Keltner Channel.

keltner quick scalp forex trading strategy 02

On this chart, there would have been several successful setups and would continue on further for a longer trend prior to reversing. Below are the would been successful setups covered by this chart, with the open represented by the upward pointing arrow and close represented by the downward pointing arrow.

keltner quick scalp forex trading strategy 03

Sell Entry:

  • Look for a bearish trending currency pair with price staying below and respecting the 20-EMA middle line of the Keltner Channel.
  • If price is below the Keltner Channel, set a Sell Limit Entry Order right on the 20-EMA line.
  • Trail the pending Sell Limit Entry Order at each close of the candle until a trade is opened.

Stop Loss:

  • Stop loss should be just above the upper outer band of the Keltner Channel.
  • Trail the stop loss on each candle close.

Exit:

  • Close the trade on a candle that closes near or below the lower band of the Keltner Channel.

keltner quick scalp forex trading strategy 04

This particular trade did have one more retracement prior to closing near the outer band. This is quite normal since we are in the lower timeframes where price tends to whipsaw EMAs at times. Still, the trend held up and continued on.

Again, you would also notice that several opportunities were available in this trend that could have made profit. Below are the possible trades with the downward pointing arrow representing the entry and the upward pointing arrow representing the exit.

keltner quick scalp forex trading strategy 05

On this chart, there was an entry at the middle that showed that the trend almost reversed but didn’t and continued on. However, the last entry was the actual reversal and that would have been for a loss.

Conclusion

This strategy is an excellent strategy for scalping a trending market, which is not too fast and where the momentum is not that strong. It should be a slow chugging movement towards the direction of the trend, with several retracements. These retracements are our opportunities. Because the Keltner Channel outer bands is our basis for the stop loss and exit, our Risk-Reward Ratio should be close to 1:1 or slightly better due to the trailing of the stop loss.

Another advantage of this strategy is that once you catch a trend, you would have so many opportunities to trade, and your loss would only be during the actual reversal of the trade.

Your psyche is your friend and enemy on this type of trading. This is because the entries are Pending Limit Entry Orders. Sometimes, you would be seeing price retracements having a slightly stronger momentum and you would see price have a deeper retracement. Some would doubt the setup and would prematurely exit at a loss.

However, this strategy is also not perfect. It wouldn’t do you good to trade this on a ranging market, and a market with a lot of whipsaw, understandably. However, it also wouldn’t be tradeable during strong momentum trending markets since retracements would be very few and what might already seem like retracements could actually be reversals, because during strong momentums, the market could get exhausted really quick.

The key is to find a trending chart that has price touching but respecting the 20-EMA mid-line, and catch it early on.

Happy trading and stay green.

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