Chart Indicators for Scalping | Technical Indicators

Siva, an options scalper with 15+ years of experience is recognized for consistently generating returns as an options buyer. He uses many data points and indicators before initiating a trade.

When it comes to indicators, he prefers using these 4 on a 3-5 minute time frame:

1. VWAP

One of Siva’s most important indicators, the volume-weighted average price indicator (VWAP) conveys the average price of a security, based on both volume and price. A security’s price trading above the VWAP line is considered bullish and the security’s price trading below the VWAP is considered bearish. The VWAP is particularly helpful as it helps us identify the movements of large players, i.e. ‘smart money’ in the market.

2. Parabolic SAR

The Parabolic SAR indicator helps determine trend direction and potential reversals in price. Represented by a dotted line, the SAR line forming below a security’s price is a buy signal and when the line forms above a security’s price, it’s a sell signal. This indicator is useful in giving early signs of a reversal.

3. Supertrend

This lagging indicator combines the average true range (ATR) with a multiplier to calculate its value. This value is then added to or subtracted from the asset’s closing price to plot the supertrend line. Similar to other indicators, a security’s price trading above the Supertrend line is considered bullish and the price trading below the Supertrend line is considered bearish. Siva uses this as a confirming indicator.

4. VWMA

A variation of the simple moving average, a volume-weighted moving average gives greater weight to periods of higher volume, helping us determine the true average price of a security over a period of time. A 20-period VWMA line acts as a short-term support or resistance, another confirming indicator.

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