Crypto trading is a hot topic right now, and the mammoth growth of crypto coins like Bitcoin, Ethereum, Dogecoin and Binance Coin has helped the ecosystem grow tremendously. The crypto market is active 24×7, and traders can round the clock to trade crypto and generate profits. Traders are now using multiple trading strategies and employing many tools to get their hands on consistent returns. One such trading strategy is Scalping, which we will discuss in detail below.
What Is a Crypto Scalping Strategy?
Scalping or Scalp trading is a short-term trading strategy where traders aim to profit off small price movements of the asset. It has become one of the most common trading strategies in the market, and every day hoards of investors try their hand at scalping. Since it is based on price movements in short timeframes, it requires quick decision making, analytical thinking and discipline if traders want to make consistent returns. Scalping is common in all major financial markets, such as stocks, Forex and cryptocurrency.
In scalping strategies, traders don’t aim to make a lot of profit on every trade, but small profits across multiple trades. As the scalper makes a profit, they can increase the volume in their orders, making additional profits. However, it is imperative to keep losses in mind, so scalpers use tight stop-losses to reduce risks.
How to Scalp Crypto?
If you are just starting with cryptocurrency scalping, here are some tips on how to scalp crypto and ensure that your investment is safe while doing so.
Choosing The Right Trading Pairs: Thousands of cryptocurrencies are traded on the market every second. They differ in prices, volume, popularity and market cap. Choosing the right trading pair for scalping is essential. The features to have an eye for are the asset’s liquidity and volatility to make sure the cryptocurrency is traded enough for you to buy and sell at your own time. Coins with low liquidity can be harder to sell, and you might incur losses because of the same.
Finding The Right Platform: This is the most critical factor while scalping cryptocurrency. The platform you select should be reliable, secure, have a large user base and plenty of positive reviews online. Moreover, it should support the trading pairs you choose so that you can trade easily. It is essential to keep an eye on any fees that the platform levies so that it doesn’t eat into your profits.
Trading Fees Is Inevitable: Since you will be making a large number of trades while scalping cryptocurrency. Therefore, factor these costs into your trade and ensure your profits are not less than the fee you are paying.
One Strategy Doesn’t Fit All: There are a lot of crypto scalping strategies, and there is no one strategy that helps all traders. Therefore, keep trying different strategies to find out which work best for you. Never stick to just one strategy and swear by it forever.
Try A Trading Bot: Everything about scalp trading ends on speed. It all matters how fast you can buy and sell. When you go to lower time frames and start trading every minute or so, the human speed becomes a problem. Using a trading bot can help you trade extremely quickly and stay ahead.
Start Scalping: Well, everything seems to be in order, and you can start scalping. It is advised that you start slow with small amounts to gradually get the market’s feel and increase the volume and investment.
How Important Is Crypto Scalping Strategy?
Crypto scalping has become one of the most common trading strategies nowadays, majorly due to low risks as traders often open smaller trades with tight stop-losses. Since the market is volatile, especially for the top crypto coins, it is easy to gain profits from price moments as they occur pretty often. Moreover, scalp trading can be easily automated, helping traders even more. But it depends on the indicators you use and the settings you implement.
But scalping cryptocurrency is not for everyone, especially beginners who have just gotten into the crypto market. It becomes risky if you don’t understand the market and can result in pretty severe losses pretty soon. For beginners, it is advised that they invest in crypto for the mid to long term and start getting returns on their investment. Once you understand the market dynamics some more, then you can test out your scalping skills.
How Does Crypto Scalping Generate Profits?
Scalping is all about finding small opportunities in the crypto market and profit from them. Your yield will depend upon the amount you invest in a trade. Scalping crypto usually works best with a short-term approach, and often scalpers trade with a 1-hour, 15-minute, 5-minute, or even a 1-minute timeframe by analysing price charts for the same time period. However, when we reduce the time frame while scalping cryptocurrency, manual trading becomes more challenging. You start competing with trading bots, which execute trades near-instantaneously and are free of human error. For example, while bots can quickly process a lot of data for small time frames, most humans will not be as efficient when analysing 15-second charts.
Therefore, scalpers generate profits by taking into account trading bots and use a timeframe that is feasible for a human trader to analyse quickly and trade accordingly. If you are looking to build a crypto scalping strategy, make sure you choose a timeframe you are comfortable with and can trade effectively.
Types of Crypto Scalping Strategies
Before you jump in and start executing a 1 minute scalping strategy that you saw on a shady crypto website, bear in mind that investing in crypto is a risky business and should be done with caution. Therefore, before executing your scalping trading strategy, make sure you understand that the market is volatile and may behave differently from other financial markets.
If you are looking on Google on how to scalp crypto, we have got you covered. We bring you some proven trading strategies for scalping cryptocurrency. Here are some crypto scalping strategies that you can use and generate consistent returns.
One of the most popular trading strategies for scalping crypto is range trading. Range trading involves observing the price movement of a cryptocurrency between the high and low levels within a specific time period. The bottom of the range works as support, while the top of the range holds as resistance until the range is broken. This means the traders should buy at support and sell at resistance levels. This strategy works very well for traders who use a 5-minute scalping strategy, but traders should add a stop-loss for when a breakout occurs.
In the margin trading strategy, traders use third-party funds rather than their own to augment potential profits. This helps traders trade with a significantly large amount than they have and obtain greater profits. Some exchanges offer margin funds to their customers, which can help traders implement their scalping trading strategy more effectively and trade with more significant capital.
The price action is the movement of a security’s price plotted over time, and many short-term traders exclusively use price action to trade. It helps the trader analyse the direction of the asset’s price and can help scalpers trade efficiently.
Arbitrage trading is extremely common for traders, and rightly so. In arbitrage trading, traders buy the asset on one market and sell it instantly on another market to profit from the price difference. Arbitrage scalpers make these trades nearly instantaneously, and delaying these traders can result in losses. Traders can also open a long position and short position at different exchanges for the same coin simultaneously and profit from the fluctuations.
Some of these trading strategies are risky and may not be suitable for all traders. If you are new to scalping cryptocurrency, you should try to implement these strategies with a demo account or paper money to determine which one works best for you.
Factors to Consider Before Cryptocurrency Scalping
While social media and certain personalities can sway some crypto coins, experienced traders stay away from the news and the social media buzz and instead focus on trading indicators and candlestick charts for reliable and real-time information. Using the charts and indicators, traders can make a detailed analysis of the prospecting trade and make informed decisions.
Trading indicators are simplified pieces of information on the price chart for a specific period and helps scalpers generate profits. Many indicators are broadly recognised as ideal solutions for scalping strategy. While there is no best indicator for scalping, here are some indicators commonly used in crypto trading, especially scalping.
Moving Average: The Moving Average (MA) is a technical analysis tool that helps traders understand where the price of an asset might move. This allows traders to enter and exit the market effectively, and scalpers can profit if they know where the market is moving.
Support and Resistance: Support and Resistance are technical analysis attributes used by traders to refer to price levels on charts that tend to act as barriers. Learning to identify where the resistance and support degrees are can aid in getting off quick scalp trades.
Relative Strength Index: The Relative Strength Index (RSI) helps traders identify entry and exit points. When calculated from 0 to 100, if the value of RSI is over 70, then the asset is overbought and should be sold. On the other hand, if RSI is less than 30, the asset is oversold and should be bought.
Best Tools For Scalp Trading Crypto
As crypto grew exponentially over the past few years, the number of tools available for traders has grown as well. Traders can now scalp trade crypto using various tools available, each with a different set of features and shortcomings. However, the actual effectiveness of these tools may depend on the trader’s knowledge, inclinations and experience. Here are some tools you can use to scalp trade crypto.
Scalping Trading Bots
Trading bots have grown immensely in recent times, and traders of all shapes and sizes now employ these bots across strategies and cryptocurrencies. While it may depend upon the bot platform, automated crypto trading bots can take over trading altogether and can be integrated with exchanges through APIs to start scalping cryptocurrency. While there are many bots available on the market, choosing a reliable and secure trading bot is a must if you want your crypto scalping strategy to yield good returns. Therefore, do some thorough research on the bot you choose, check its past performance, online review, and the number of users, among other features.
Crypto Trading Charts
Trading charts are essential for any scalping strategy. If you are trading manually, you will require charts that provide vital details such as the cryptocurrency price, trading volume, price change and much more. These details help traders build the best crypto scalping strategy and trade profitably. Moreover, one should also analyse these details to set up stop-losses to minimise the risk of losing money.
Crypto API Tools
API tools have made life extremely easy for crypto traders, and your crypto scalping strategy should involve them. APIs make it extremely easy to interact with exchanges and ensures that all interactions and transactions are secure. While the features depend upon the platform, any good platform will help you connect an API for wallet integration, transaction support, tracking market prices, and much more.
Scalping cryptocurrency has become a pretty common trading strategy among traders. But is scalping cryptocurrency the best trading strategy for all traders? Absolutely not! No one strategy is ideal for all traders, and it all depends on the preference of the trader and how much time they can put in. If you are just starting with crypto trading, you can go for more traditional trading strategies such as buying and holding to get a hold around the crypto market. You can also trade through automated crypto trading bots that do not require human interaction and trade automatically to generate consistent returns. In the end, regardless of which strategy you choose, ensure that you understand the risk crypto trading brings with it and keep proper safeguards in place to reduce losses to a minimum.
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