Scalping Trading Strategy

Scalping Trading Strategy

20.07.2022

In the world of crypto, different trading strategies are employed for the sole purpose of making profits; one such strategy is scalping.

What is scalping trading? Scalping means entering positions for a short time to benefit from small price changes instead of waiting for more significant price movements. It is one of several trading strategies with which you can leverage the volatility of cryptocurrencies. Scalpers are traders who trade the crypto market with the scalping strategy. In this article, you'll learn more about scalpers meaning and how to employ the scalping strategy for profitable cryptocurrency trading.

What is scalping trading?

What is scalping trading

What is scalping, or what is scalp trading? If you are looking for answers to these questions, you should already know how the crypto market works. Scalping is a simple strategy that involves entering a position and waiting for the price to move by a small mark. Scalpers only stay in their trades long enough before they exit once they have made what looks like an insignificant profit, but which can add up over time if done correctly!

The scalping strategy is different from the day trading or swing trading strategies because of the timing. For example, a scalping trader may purchase bitcoin at $29,035 and exit at $29,036 or $29,035.9, depending on the trader's preference. Scalping focuses on small, consistent, and repeated wins over long, inconsistent trades. The idea is to benefit from the relatively small price changes in the market value of cryptocurrencies and other slight market differences.

While there is no single best scalping strategy, technical analysis and proper time framing are essential to scrape the crypto market successfully. Technical analysis allows you to predict price movement within a time frame. It is best to use lower time frames, such as 5M, 15M, and 30M.

How does the time frame impact trading? When price follows a strong Long or Short (Buy or Sell) trend, it is easier to trade with higher time frames for swing or day trading. But when the price ranges, lower time frames are best for scalping. With a lower time frame, you can see and track the small price changes that occur, which are more visible in lower time frames than in higher ones.

How do scalpers make money?

How do scalpers make money

Traders want to make enough wins to stay profitable; scalpers are no different. If you want to get started on how to do scalping trading and make profits, there are three essential components you should know:

  • Charts (graphs): crypto charts are essential for scalpers in trading to predict price movement. Charts show price history and current movement, enabling scalpers to predict future price movements using tools such as indicators.
  • Speed of execution: scalpers need speed to enter and exit trades to secure profits and prevent unnecessary losses. Scalping is speed-dependent, especially when volatility is low.
  • Subsequence (risk management): risk management is necessary for minimizing risks and maximizing gains. This entails taking profits as they come and not overtrading the position.

Scalpers also use scalping tools to improve their trading. One of such tools is scalping robots or scalp bots. Scalping robots are specially designed computer programs that are used to execute scalping strategies automatically. Here are some of the leading scalping robots:

  • Pionex: Pionex is a scalping bot that leverages dollar-cost-averaging (DCA) to buy low and sell high. With 16 inbuilt bots, it is rated relatively high and has a history of consistent profits.
  • BitsGap: BitsGap is a top arbitrage and scalping tool that allows traders to maximize trading and automate the process. The bot has different order types that traders can use to open and exit positions automatically.
  • Coinrule: Coinrule also allows trading automation and asset management through different trading orders. The bot has a consistent profit history.

All three bots allow automation, self-customization (building your bot), and effective risk management.

How about some camping trading strategies?

Scalping trading strategies:

  1. Range trading

Scalp trading uses the same crypto trading orders. Range trading is a scalping trading strategy that follows prices and trades within a set range. Traders typically use the stop-limit order to execute range trading. A scalper utilizing this strategy will set a stop price that triggers the limit order when reached, allowing the trader to take profit at the limit price. For example, if ETH traded at $3998 at the last price, and you think it could go down when it hits $4000, you can set a limit order to Short (sell) ETH when the price hits $4000. That way, you can sell the asset without waiting and monitoring the charts when it hits your preferred level. Range trading through limit orders allows traders to take advantage of overbought and oversold assets. To trade the range strategy, you have to identify support and resistance levels and know how to use different trading orders. As a result, scalpers can leverage range trading to make small, consistent profits over time while risking little.

  1. Bid-ask spread

The bid-ask spread strategy is one of the most common crypto strategies scalpers can leverage to make profits. The bid-ask spread is the difference between an asset's highest price and the lowest price that a buyer is willing to pay and a seller is willing to receive, respectively. The spread is the difference between the bid and the ask prices. Is scalping profitable? Well, scalpers can significantly improve their scalping trading strategies using the bid-ask spread. The basic principle is to sell and buy at the right price, paying the bid to the broker for quickly matching traders. The bid-ask spread of any asset is determined by factors such as demand and supply, liquidity, and orders. Scalpers can use liquid assets with lower spreads, such as bitcoin, to sell and buy at their prospective prices. The idea is to find profitable but small entries where you see a potential Long or Short (Buy or Sell) position through any trading orders (market order, limit order, stop order, buy stop order, and sell stop order).

  1. Leverage

Every trader, even scalpers, aims to make maximum profits with the least risk. But small lot sizes may limit the profit return on successful trades. In the financial markets, traders are given a choice to increase their trading margin so that they can increase their position size. This is called leverage in crypto trading. Traders who scalp crypto can significantly increase their lot size with leverage trading. The principle is that leverage allows traders to draw or borrow funds from the exchange to open a position several times bigger than the amount they have deposited for the trade. This increased margin size gives the trader the leverage to handle drawdowns and potentially increase their profit. Leverage makes it possible for traders to maximize profits when scalping in trading. For many scalpers, scalp trade meaning is no different from leverage trading as they use it to increase potential profits. However, leverage trading risks losing a corresponding amount of funds if the trade goes a different way.

Best Time Frame for Scalping

Best Time Frame for Scalping

Timing is an essential factor for scalping strategies to succeed. Traders can view charts in different time frames. Each time frame shows different levels of trading setups, and that is why different trading strategies are built around time frames. But for scalping, there are two essential timing considerations; the chart time frame and the trading time frame. The best chart time frames for scalping are the lower time frames such as 5M, 10M, and 30M, as they give a more significant number of possible trading setups. With smaller time frames, you can find more trading opportunities. But timing depends on the particular scalping strategy that you use.

The other aspect of timing is the length of trading. You have to decide for how long you want to trade and how many trades you'll take within a period. You could have several trading setups within a period, but it is your choice to trade all or some of them. Scalp trading is potentially profitable. But your overall trading strategy and other factors such as trading fees may significantly impact your profitability. Crypto exchanges do not take spreads as profit; they charge trading fees instead. Another factor you must carefully master is your mental alertness and capacity to handle trades.

Scalping requires quick thinking and mental and physical speed to enter and exit trades. You need a high mental discipline to stick to your strategy and handle trading results whether or not they go your way.

You should learn more about what is scalping in trading and what scalp meaning in trading means for you as a crypto trader.

Should you start scalp trading: Pros and Cons

If you are considering the scalping strategy for trading crypto, you should consider these:

Pros:

Scalping is a low-risk crypto strategy traders can use to make profits while risking relatively little. Scalping is more straightforward because scalpers only have to watch for small price movements and take little profits as they come. This, in turn, makes it easy for scalping to be automated as a good crypto strategy. Scalpers have the chance to take several successful trades within a short time without having to perform fundamentals. The trading setup is also relatively more straightforward since lower time frames are used.

Cons:

On the other hand, scalping requires speed, mental concentration, and a high level of discipline. The requirements may be too much for a new trader. The profit is also relatively small and requires several cycles to grow the funds substantially.

You should get a firm grasp of scalping trading meaning if you want to trade the strategy to make profits.

While scalping helps traders to make money, there is another way to earn cryptocurrency, such as bitcoin, without actively trading the market. You can do this through bitcoin mining hosting.

Profitability gives scalp trading meaning. The strategy can be profitable, but several factors include speed, mental focus, and risk management. The small, consistent profits may add up to a significant amount.
Scalping is a low-risk strategy that can provide small but consistent profits with low risks. To know what is scalping in crypto, traders enter trades for a short time and exit after a small price change.
Any time frame between 5M and 30M is suitable for scalping. You should use other tools to make an accurate analysis. One of such, the moving average, is probably the best indicator for scalping.
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