In this post, I will show you my best 5-minute scalping strategy. In this strategy, we are going to make use of 3 indicators, namely, two exponential moving average (EMA) and one moving average convergence divergence indicator (MACD). We are going to keep our take profit order at 0.5 percent and our stop loss order at 0.4 percent.
If you have been in the crypto space for a while and have been trading cryptocurrency, you must have known that choosing a trading strategy and mastering it cannot be overstated.
Depending on your knowledge of crypto trading and the amount of time you have to invest in it, there are lots of trading strategies to choose from.
Different individuals have different factors that affect them in trading, and that is why there is no trading strategy certified as the best.
If you are yet to pick a trading strategy that best suits your lifestyle, then it is nice that you read our post where we reviewed the different trading strategies and some of the factors that can help you make your choice.
A scalping strategy can be used in so many ways depending on the indicator combination and the timeframe used in trading.
Before picking a particular scalping strategy, the first thing you want to look out for is the Winrate that such strategy gives. You can check this by trying it on a demo account and seeing if it will be beneficial on your live account.
Without further ado, let’s jump into a step-by-step guide on my best 5-minute scalping strategy.
A Step-By-Step Guide to My Best 5-Minute Scalping Strategy
For the sake of clarity, I am going to show you this Best 5-Minute Scalping Strategy step-by-step, so it’s very important that you follow each and every step because if you miss one of the steps, there is a high risk that the strategy will not work for you.
In this tutorial, we are going to make use of trading view, so if you don’t have an account, you can create one by clicking here.
Step 1: Switch to Heikin Ashi chart.
Heikin Ashi candles are typically used to smooth out price action, eliminate noise, and make it much easier to identify trends in the market. A typical uptrend using regular candle sticks will likely have a mix of both red and green candles.
For example, looking at the candlesticks in the normal charts, in an up trend. We always have some consolidation in the trend. Just because we’re in an uptrend doesn’t mean 100 percent of the candles will be green. It’s normal to see pullbacks along the way, which come in the form of red candles. One of the disadvantages of this normal chart pattern is that it is very hard to know the trend.
However, if you look at a Heikin Ashi chart during the same period of time, you will see that things look very different. We have the same small consolidation, but the up trend consists of only green candles before it ends at the top. This is why it’s much easier to see trends on a Heikin Ashi candles when compared to a regular candlestick chart.
In order to switch to Heikin Ashi candles, you need to click on the two candle symbols located next to the timeframes at the top left corner of the chart, and you will see a list of options. Scroll down and click on the Heikin Ashi candles. Once you do that, it will look like the picture below.
Step 2: Add indicators to the chart.
Now that you have understood the basics of using Heikin Ashi charts, the next step to using this Best 5-Minute Scalping Strategy is to add indicators to the chart.
As already stated, we are going to make use of 3 indicators in this strategy; 2-EMA and the MACD.
To add them to the chart, click the indicator button in trading view and search for EMA, then click the exponential moving average (EMA) twice (to add it twice). Then go to the settings for the first EMA and change the length to 50 and the color to yellow; you can use any color you want.
Now go to the settings for the second EMA and change the length to 200 and also change the color to blue(depending on your preference but make sure the color is different from the first one).
You also need to add MACD to the chart. So search for MACD in the indicator tab and add it to the chart. Go to the settings and do the following:
- Remove the signal line.
- Change the time frame for the MACD to one.
Once you do these two things, the MACD will be left as a histogram and be positioned at the bottom of the chart.
Once you are done doing this, the chart will look like this:
Step 3: Look Out For When The Two EMAs Crosses Each Other And Take Position.
Once these 3 indicators are added to the chart, they will help you determine your entry trigger. You can take a short or long position depending on whether the yellow EMA (the one with a length of 50) crosses the second trend line up or down.
Now let’s take a look at this in two different scenarios.
Condition 1: If the 5o-EMA is Crossing to the Top.
If the 5o-EMA is crossing to the top, it indicates a strong uptrend, and once this happens, there are 2 main things you want to look out for on the Heikin Ashi candles.
The first is a large green body, and the second is that there is no low-wick on this green candle. Both of these criteria together indicate a strong up trend.
Also, the MACD helps us know our entry trigger. Before there was an up trend, the MACD formed a couple of big down ticks. Once this happens, usually a green body with no low wick, this indicates a strong signal to enter a long position.
Because this is a scalping strategy, the take profit and stop loss orders should be taken at a very low percentage. So we take a profit, which is around 0.5 percent, and also a stop loss of 0.4 percent, and place the trade.
Please note that the probability of a win is a lot higher closer to the crossover. So, after 3 to 5 trades following the crossover, stop trading and wait for the next crossover. And the same thing applies to shorting as well.
Condition 2: If the 5o-EMA is Crossing to the Bottom.
Similarly, when looking for a downtrend on a Heikin Ashi candle, we want to look for one large red candle body and no up-wick on these candles. Both of these criteria occurring together indicate a strong down trend.
When the 50-EMA crosses the 200 EMA to the downside, we can only take short positions. So now we wait for an uptick in the MACD that is bigger than average. And then we could enter a short position. Once this happens, we take a profit of around 0.5 percent, and also a stop loss of 0.4 percent, and place the trade.
Since we are in the 5-minute time frame, crossovers like this happen many times per day, and we only need to make five trades per day, so you have many opportunities to trade as this trend will always come back many times in a day.
The Importance Of Using The Right Leverage and Knowing Profit Potential On This Strategy.
As you can see in the profit calculator in the picture below, if we start with 100 US dollars and we have a Winrate of around 70 percent, and we take a profit of 0.5 percent and a stop loss of 0.4 percent.
If we make 120 trades in a month and use 50x leverage, we can actually make over $23,000 per month with the strategy.
The Importance Of Using The Right Exchange On This Strategy.
To trade a scalping strategy like this, you really need to use an exchange that is good for scalping. There are hundreds of exchanges out there, but only a few of them are really good for scalping.
What you need to look for is an exchange with super low fees because we are taking profits at 0.5 percent and using a stop loss at 0.4 percent.
If your trading fees are high, it will eat too much into the profit and the strategy will no longer work.
For example, if we use Binance as an exchange, with a fee of 0.1% for limit orders and 0.1% for market orders, 0.2 percent of the profit will be taken in fees, and that is obviously too much.
Because this is a very high-scalping type of trading, the only way for you to take these trades is to use bybit.
You will make more money when you are using market orders. Fees are only 0.075 percent of the total. And this is the lowest I found. And that’s enough to turn $100 into $23,000 based on the strategy when you make up to 120 trades.
That’s it for this strategy. If you have any questions, you can leave them in the comment section below. I will make sure I attend to them as soon as possible.
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