FREE Forex Scalping System For M5 And M15 Timeframes!

In this post, I will discuss a simple forex scalping system that works well on the M5 and M15 timeframes for me. I prefer to use this forex scalping system on the M15 timeframe more.  Now before you continue reading this post, you should have a clear idea on how to find divergences.  You can use the Stochastic as well as the RSI and the MACD oscillators to find divergences. Divergences are powerful reversal signals and need some expertise to identify as the probability of misidentifying a divergence signal is large for new traders. You need to know this fact: identifying a divergence pattern properly needs experience.

If you are not sure, you should download these two PDF FREE that show how to trade with candlestick and divergence patterns in combination with moving averages. On shorter timeframes like M5 and M15 you won’t find candlestick patterns to be of as much use as they are on the higher timeframes like H4 and D1. However, one candlestick pattern which is known as the pinbar is very important. Professional traders use this pattern a lot in making decisions. This pattern has a very small body and a very long shadow either on the upside or the downside. It is also called the hanging man or a hammer as well as the morning star and the evening star. This one candlestick pattern is very important in telling you about the price reversal. Generally it is known as the pinbar. However, this pinbar pattern is also known as the Lucky Spike. This is a very important pattern and I use it a lot in my trading as do most other professional traders. You should get thoroughly familiar with this lucky spike or the pinbar pattern. This candlestick pattern is explained in detail in one of these 2 PDFs. So I would suggest you go through these 2 FREE PDFs on Candlestick Patterns and Divergence Patterns before you continue reading if you haven’t done so already.

This forex scalping system just uses two indicators Stochastic and the MACD. MACD is the main indicator that is used to make the entry and the exit decisions while the Stochastic is used to identify the overbought and oversold condition as well as to identify the divergences. Below is the screenshot of this scalping system in action on M5 timeframe.

FREE Forex Scalping Sytem

These are the entry and exit rules for this system. When the MACD signal line crosses the histogram line as shown above by the up arrow, you will make an entry according to the direction of the trend. In the above screenshot the signal line crosses above the histogram line which is an indication of a downtrend so we will enter into a short trade. We will stay in the trade as long as the signal line is above the histogram line. When the signal line again crosses the MACD histogram line and goes below, we will get out. In the above screenshot, we got in around 1.3220 and got out around 1.3185 making a total of 35 pips in around 2 hours.

M15 Is The Best Timeframe For Scalping

But as said above, I use this scalping system on M15 timeframe more as the potential of making pips is double that as compared to the M5 timeframe plus you have more time to make the entry and the exit decisions which makes trading less tiring and more relaxed on M15 as compared to M5. Below is the screenshot of this forex scalper system in action on the M15 timeframe.

Forex Scalping Sytem

As you can see in the above screenshot, a clear bearish divergence pattern is appearing on EUR/USD M15 timeframe. So we wait for the signal line to cross above the MACD histogram line which it does pretty soon. So I got in around 1.3250 and stayed in the trade as long as the signal line was above the MACD histogram line. When the signal line crossed the histogram line and went below it, I closed the trade around 1.3180 making a total of 70 pips in around 4 hours. Below is another screenshot of this scalping system in action trading EUR/USD on M15 timeframe!

FREE Forex Scalper Sytem

As you can see in the above screenshot the up red arrow when the MACD signal line crossed and went below the histogram is an indication of a potential long trade. You should also observe the bullish divergence appearing on the Stochastic, so I went long just as I closed the short trade around 1.3185. Around 1.3223, I closed the trade as the MACD signal line had crossed the histogram line and was now above it meaning a downtrend. So I made 38 pips from this long trade that lasted about a couple of hours. On M15 timeframe you will get almost 3-5 signals with this system daily so you can easily make something like 50-100 pips per day with this system. Just make sure you don’t overtrade, pick one or two trades daily with this system and you can easily make more than 1000 pips in a month. The best time to trade with this system are of course the London and the NY Market Sessions. Below is another screenshot of this system in action making more than 100 pips this time!

Forex Scalper Sytem

A Word About False Divergence Signals

As you can see in the above screenshot, this time MACD is showing a bullish divergence pattern. So you wait for the signal line to go below the MACD which it does after 4-5 hours. The problem with divergences is that you can get in too early to find the price going in the same direction to your horror. This happens to many new traders. There can be triple divergence before the price reverses itself. I use MACD to confirm the divergence pattern as explained above. Divergence indicates price about to reverse. I wait for the MACD signal line to tell me when this is confirmed and then enter into a trade accordingly. In the above trade, I got in around 1.3190 and got out around 1.3290 making around 100 pips. Please feel free to ask any questions below!

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25 Comments

  • Ronald

    Reply Reply April 9, 2013

    Hi there. Looks like a nice system. Too bad there’s no mentioning of the moving averages (or did I miss that?) and the MACD Hist_Alert, with arrows, isn’t easy to find… Would it be possible to get this indicator and perhaps a template – or at least the values for the MA’s?

    Thanks in advance.

    Greetings,

    Ronald

    • admin

      Reply Reply April 11, 2013

      Hi Ronald, thanks for commenting. Moving averages are there on the screenshot. Red is EMA5 and yellow is EMA20. These moving averages are not used much in scalping. These moving averages just tell you about the trend. But I seldom use them in making the entry or exit decisions. I solely depend on divergences to make the entry and the exit decision. You need to confirm the divergence signal before you make the entry. When MACD histogram lines change color, it can be taken as a confirmation signal. You can also use minor trendlines to confirm the divergence signal. Once in the trade continue as long as there is no opposite divergence pattern appearing. MACD settings are the standard settings of 12,26,9. Download MACD_ColorHist_Alert indicator below. You will find this indicator in the list of indicators on this page 13 positions from the bottom. Once you find it, you can download it.

      http://www.forexfactory.com/misc.php?do=showattachments&t=211188&hideimg=1&page=2

      Best
      Hassam

      • lokesh

        Reply Reply June 4, 2013

        but in all your charts MACD is showing 12.26.16 insted of 12.26.9

        • admin

          Reply Reply June 5, 2013

          Yeah, you are right. The correct settings for MACD are 12.26.16. 12.26.9 was a mistake.

          Best
          Hassam

          • Jonathan

            August 16, 2014

            Please, you get me confused here. The default settings of MACD is 12,26,9 even on the downloaded macd color-hist. Please, where is the 12,26,16 coming from? Or do I have to change the settings myself?

          • admin

            August 27, 2014

            The MACD settings are 12,26,9.

          • Jonathan

            August 27, 2014

            Ok. get it. But which settings should we use for this strategy? Should we leave the macd settings at 12,26,9 or change it to 12,26,16?

          • admin

            September 3, 2014

            The settings 12,26,9 is the default setting and I use it. 12,26,16 was used for testing but later I reverted to the default 12,26,9.

    • Aleks

      Reply Reply June 8, 2014

      ты что, олень? Тебе стрелками показывают, а не индикатор!

  • Raj

    Reply Reply May 15, 2013

    Hi, I like your simple trading system. still i have doubts that Divergence based on MACD or Stochastic? Divergence has soon on both. please explain. also need templates.

    thanks

    Raj

  • Raj

    Reply Reply May 16, 2013

    Hi, thanks lot and after going through all i understood. once again thanks.

  • Fred

    Reply Reply May 23, 2013

    This system is very interesting.

    You don’t use much stochasting indicator; you obtain only a divergence.

    Can you have other usefull indications from stochastic, or RSI, into your strategy?

    Thanks.

    Fred

    • admin

      Reply Reply May 28, 2013

      Hi Fred, thanks for the comment. Yeah, you are right. Stochastic is used only for getting divergence. You can also use RSI or any other oscillator for that matter. The best trade setup is when both the MACD and the Stochastic show a divergence.

      Best
      Hassam

  • defond

    Reply Reply June 4, 2013

    wher can we find the macd divergence indicator, and stochastic divergence indicator? Thanks

    • admin

      Reply Reply June 5, 2013

      Hi Defond, thanks for the comment. You will have to spot divergence yourself on MACD and the Stochastic. MACD Divergence Indicator or a Stochastic Divergence Indicator are not available right now.

      Best
      Hassam

      • Jonathan

        Reply Reply August 16, 2014

        You can get an auto divergence recognizer indicator from http://www.forexmystery.com or from fx5 website.
        I have both; you can contact me if you need them.
        richjoe.707 (-at-) live.com

        • Dudu

          Reply Reply November 23, 2014

          Hey Jonathan,

          Please I would appreciate it if you can send me the divergence recognizer and candle pattern recognizer indicators, and other indicators that will help me as I am a newbie.Do they come with alert prompting one for the occurance of the divergence or pattern? With your experience like how many trades are generated with this system daily on EURUSD? and what is the success rate?

          Thanks.

  • John Bello

    Reply Reply September 5, 2013

    Thanks very much for your post can it work on all currency. Then how can I determine the entry point and the exit

  • John Bello

    Reply Reply September 23, 2013

    Thanks very much for this wonderful system that you give free mr Hassam, have check out some pattern on it on my platform it amazing sir when I see the result thanks very much sir once again. Have been working over six month now to have a trading pattern but am not able to achieve that but this your system is lovely, please sir have put the MACD colorist alert on my platform But the color did not change please what can I do.

  • Jerry

    Reply Reply November 9, 2013

    i wud like to try ur strategy, however u did nt mention bout any stop loss. SO is ur strategy with or without stop loss? hope u could give some advice on stop loss.

    • admin

      Reply Reply November 10, 2013

      Thanks Jerry for making a good comment. You must use a stop loss. It helps avoid taking big losses plus it confirms your analysis. If you are not making the right analysis, your stop loss will get hit which means you should not make the same mistake again. Now as far as placing the stop loss is confirmed, place it 5 pips above or below the support or resistance that you have confirmed using divergences.

      Now I use this strategy to confirm the the support or resistance on M15. When I find a divergence developing, let’s say it is bullish, I let stochastic go from oversold to overbought and then return to oversold. If price action respects the support level, the divergence pattern is confirmed and I make an entry.

      In the same manner, when I find a bearish divergenve, I confirm it by letting the stochastic go from overbought to oversold and then return to overbought. This I do because I have been trading divergence for many years now and multiple divergence is a common phenomenon that I have observed. Multiple divergence develops when the stochastic gets stuck in the overbought or the oversold region and keeps on making new highs or low while at the same time showing divergence. Using this method I filter out false divergence signals almost 99%. So this is what you should do. When you observe divergence, let the stochastic go from one condition to the other and then return to the original condition. If price action respects the support/resistance that you have observed, you have a confirmed divergence signal. I have been able to make an entry within 5-15 pips of the support or resistance using the above method.

  • Kerry Tan

    Reply Reply December 26, 2013

    Can this be use in Binary ?

    • admin

      Reply Reply January 25, 2014

      Yes, why not! My simple forex binary options strategy is a version of this scalping strategy.

  • Srinivas

    Reply Reply December 28, 2013

    Very simple Forex trading Strategy ,very clearly explained
    Many Many Thanks

  • Jesus martinez

    Reply Reply June 10, 2014

    Hola deseo saber donde se instla el MACD_colorhist_alert

    Gracias.

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