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Best Scalping Strategy According to Alan Farley

Scalping is one of the popular trading strategies among traders, with many variations available. However, one of the best scalping strategies recommended by Alan Farley may be worth considering. Scalping involves multiple opportunities in one go, with an aggressive trading style requiring high concentration and discipline to avoid turning into overtrading. While not many successful traders admit to using scalping as their primary strategy, they can still provide insights into this trading technique. To delve further into a recommended scalping strategy by an expert, let's explore Alan Farley's method.

  1. 1. Entry with Moving Average Ribbon

  2. The best scalping strategy according to Alan Farley starts with the use of a combination of popular classic indicators, namely Moving Average (MA). You can use three Simple Moving Averages (SMA) with periods of 5, 8, and 13. These three SMA lines will form a dynamic channel resembling a ribbon, known as the Moving Average Ribbon. For entry signals, pay attention to the crossover between SMA 5 with SMA 8 and 13. If SMA 5 crosses both other SMA lines from below upwards while the price is in an uptrend, it becomes a BUY signal. Conversely, if the price is in a downtrend and SMA 5 crosses SMA 8 and 13 from above downwards, it becomes a SELL signal.

  3. 2. Exit with Relative Strength/Weakness

  4. An essential part of a trading system is determining how to exit the market to ensure positions end with a profit. According to Alan Farley, scalping traders can use a combination of Stochastic and Bollinger Bands indicators to determine exit points. Crossings of Stochastic lines at overbought levels indicate a reversal downwards, which can be an exit signal for BUY positions. Conversely, bullish Stochastic crossings in the oversold zone can be an exit signal for SELL positions. To filter out less effective Stochastic signals in trending markets, use Bollinger Bands. Look for confirmations between Stochastic crossings and price testing Upper/Lower Bands of Bollinger Bands.

  5. 3. Confirmation with Larger Time Frame

  6. The best scalping strategy not only focuses on signal speed but also requires strong confirmation to sustain consistently. Alan Farley suggests using a larger time frame as a confirmatory factor. If you're using a 30-minute time frame for entry and exit, use a 1-hour time frame to confirm the trend direction. This will reduce noise risk on smaller time frames and provide stronger confirmation.

Scalping can be done with various indicators that respond quickly to price movements on lower time frames. However, it's important to remember that technical strategies are only effective when the market is trending or sideways. If the market doesn't show a clear direction, it's better to avoid scalping and wait for better opportunities. The forex market is always active, so there are always opportunities for trading at the right time.


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