Trend Scalp Indicator For MT5
Table Of Contents:
- Trend Scalp Indicator For MT5
Trend Scalp Indicator Introduction
The Trend Scalp Indicator for MT5 is a custom indicator that you can download online or in this website and then install in your MT5 platform. As you can see in the above graphic, this indicator is plotted as an oscillator below the main chart. Using a calculation similar to that of the T3 moving average, the trend scalp displays a smooth line that fluctuates up and down and plays around its center line.
As will be discussed in detail later, the trend scalp indicator is an effective trading tool that might be able to aid your trading. You can use it to trade different scenarios. As a leading indicator, it can predict market reversals by showing classic divergences and highlighting overbought and oversold conditions. It can be used as a trend-following tool as well. When price trends up or down, the indicator follows suit. For example, if price trends upward, the trend scalp line crosses above the zero level and stays there until price makes a reversal or correction.
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Trend Scalp Input Parameters
The indicator provides three external variables in inputs that you can adjust at will. Changing the values of these variables will affect how the indicator displays on the chart. These variables and their default settings are discussed below:
- Period = 15
- T3 Period = 5
- Level = 100
Period
The Period variable defines the number of bars used to compute the values of the indicator. By default, 15 bars are used. Further computation is applied to the initial result to arrive at a smoother oscillator. This is done through the use of the T3 Period variable.
T3 Period
The T3 Period is the period used in smoothing out the result of the initial calculation. The smooth line in silver that you see on the Trend Scalp sub-window and that oscillates below and above zero is the output of the smoothing calculation. The variable got the “T3” modifier from the T3 moving average, whose calculation is being used in this indicator. Setting a higher value for the T3 Period will result in a smoother line, lower value in an erratic line. Keeping the default value seems to be the best option.
Level
Meanwhile, the Level refers to the +100 and -100 levels above and below the zero level. This is the level used to define overbought or oversold conditions. Anytime the Trend Scalp value exceeds the 100 level, the underlying asset is considered overbought, while a value that falls below -100 means that the asset is oversold. You can set any value that you believe is more suitable to define overbought and oversold conditions.
Trend Scalp Components
The Trend Scalp indicator contains three components that you must understand so you can use it properly in your trade analysis. These components are outlined and explained below:
- Trend scalp line
- Trend level
- Center line
Trend scalp line
The trend scalp line is the main oscillator line that is moving above and below the center line. It is the smooth silver line in the above chart.
Trend level
The trend level interacts with the trend scalp line and its value is either +100 or -100. If the trend scalp moves above the center line, the trend level also moves up and assumes a value of 100. If the trend scalp moves below the center line, the trend level also moves down and is assigned a value of -100.
Fill areas
The filled areas represent the overbought and oversold zones. A brown fill means that the trend scalp is below -100, while a blue fill means that the trend scalp is above 100. This color coding helps the trader quickly see if the indicator gives overbought and oversold readings and where they occur.
Center line
The center line corresponds to the zero level, and it is at this level that you can see a lot of action. Traders consider each crossover of the zero level as a shift in market sentiment, prompting the opening of a trade position.
How to Interpret the Trend Scalp Indicator
The trend scalp indicator has three main uses as a trading tool, that is, spotting divergence, giving overbought and oversold readings, and indicating a trend change. Each of these functions are explained below.
Divergence
Like the MACD indicator, the trend scalp indicator is a powerful trend reversal trading tool because of its ability to give accurate divergence signals. These divergence opportunities do not occur very often, but when they do, you are likely bound to get a lot of pips. The divergence entries will be generally more successful if you use higher timeframes as in the chart above where the indicator is applied to the daily chart of EURUSD.
Overbought and oversold readings
You can use the trend scalp indicator to trade trend reversals when you see that the indicator is in overbought or oversold territory and price movement in one direction has been significantly extended. This is the situation in the sample scenarios shown in the above snapshot. As with other oscillators, just bear in mind that this indicator may give oversold/overbought reading while a trend continues.
The best way to use this indicator is to trade pullbacks in the direction of the overall trend. For example, if the trend is up and price makes a retracement, you can enter a buy trade when the trend scalp registers an oversold reading while the uptrend is still intact.
Trend change
Another common way to use the trend scalp indicator is trading trend reversals. As with the relative strength index, this indicator can issue a buy or sell signal every time it crosses the zero level. From observation, it appears this signal is relatively more effective than when the RSI crosses its 50 level as far as the number of accurate signals is concerned. While this seems to be true, it is still prudent to take the signals aligned with the current trend and to ignore those signals counter to the trend.
Trend Scalp Trading System
A simple trading system is presented below that will help you learn how to use this indicator in your trading. True to its name, the trend scalp is used here for trading with the trend.
The indicators used in this trading system are as follows:
- 200 exponential moving average
- 20 exponential moving average
- Trend scalp indicator
This trading system requires the occurrence of certain conditions in the correct order before one should consider an entry. The steps involved in trading this system are delineated below:
- Wait for the 20 and 200 EMAs to cross.
- Allow the trend scalp indicator to enter and complete a correction phase.
- Open a position when the trend scalp indicator has crossed in the trend direction.
- Manage the trade.
Moving average crossover
The first step involves a crossover of the 20 and 200 moving averages. This situation is shown in the image above. This type of crossover is bullish, so we are looking for a buy entry.
Market correction
Next we allow price to consolidate to be able to gather long orders. While price is consolidating, the trend scalp line enters a correction phase as well. What it does is it goes down the zero level and says there for a while.
Trend continuation
Our long entry is triggered the moment the trend scalp line crosses above the zero level. This indicates that market sentiment is now bullish. After the crossover and the candle has closed, a buy trade is taken on the next candle.
Trade management
Now that you have opened a long position, it is time to set your stop loss and take profit targets. To minimize the trade risk, you can put the stop loss a spread below the recent swing low. The take profit is entirely up to you. You can use a fixed target as a multiple of the stop distance, or you can trail the stop.
