Crypto scalping is considered to be one of the most profitable forms of cryptocurrency trading. But it is one of the most labor intensive trading styles that currently exists. Thus, implementing the automated scalping strategy, you will be able to enjoy both worlds such as less work and an exceptionally profitable strategy.
In this crypto scalping guide article, we will stress upon what scalping in cryptocurrency is, how it is done, how you can make a huge profit out of it and the various other related aspects of the concept.
What Is Crypto Scalping?
Cryptocurrency scalping is a technique consisting of trading with the cryptocurrencies depending on the charts that operate in a very short period of time, say for 3,5,10 or 15 minutes. The primary purpose of the method is to acquire small profits via these operations as the prices that are handled here are petty and it is the sole reason this can be done repeatedly.
Thus, it can be stated that the main idea of scalping is to take the advantage of all the movements made via the process. As the benefits in such a method are not very high, so it is recommended that you do a preliminary study of the same and ensure the right time for investing and trading several times to obtain a good profit.
What Are The Premises On Which Scalping Originates?
Crypto scalping is based on the premise that a huge imbalance of the supply as well as demand is required to cause major price changes in the value of a security. Thus, for large profits, there has to exist differences between the demand and supply. This refers to the fact that the small profit coming as a result of cryptocurrency scalping is much easier to obtain as gaining the small profit does not rely on the huge demand and supply imbalances. They can be gained comparatively easily as the large gains from the huge imbalances are quite difficult to obtain and exploit.
The scalping method also implies that it will be more probable that the security will make a $0.1% jump below or above its previously held price as compared to making a $1 move. To state it simply, it is quite easier for a security to possess a small price change in place of a big one.
Considering the entire method depending on quickly buying and reselling after exploiting the petty price change, the exposure to the market volatility is present solely for a very short time period. Scalping also implies that the lesser the duration you get exposed to the crypto market, the lesser will be the chances of any unfortunate event. Thus, providing this third premise, scalping is often favored owing to the fact that the trader is being exposed to the market for a small duration minimizing the chances of loss.
Advantages & Disadvantages Of Scalping
Similar to all other methods of cryptocurrencies, the crypto scalping although now sounds interesting, possesses certain pros and cons that we are going to state in this particular segment.
Cryptocurrency scalping brings us several advantages that are favorable while putting it into practice at the time of investing. Below are the benefits of crypto scalping:
- You are eligible to receive continuous profit every day and that too as many times as you want.
- There are not many losses as the investment per operation is not that great.
- A preliminary study is carried out for taking into account when you can enter and at what time a given operation must be considered completed.
- It promotes market research and in such a sense preparation is quintessential to be successful in this activity.
- Trading can be automated as it relieves the scalper of the major downsides.
Below are the downsides of the process. If you really want to engage in scalping, you have to consider these as well.
- Obviously, high accuracy is required.
- You can be easily fooled by noise.
- Commissions hurt as the trading costs are substantial.
- Brings in time for the money exchange.
- Very laborious and tiring.
- It constantly exaggerates emotions.
- Lack of confidence will result in missed trading shots and can accumulate losses.
- Investment in scalping bot is required that might be on the higher side.
How Does The Crypto Scalping Work?
As the scalpers prefer short profits, they can also earn by exploiting the small price changes occurring in a securities price. The scalpers keep the tight trading windows. This means that they are defining their trade in terms of the price movement and their time duration. This further means that a scalper strictly exits a trade as soon as they hit their profit targets. Thus, there is no “waiting around” to check if their profits might be more than their desired profit value.
Additionally, possessing a tight trading window could also be considered in a different light. The trader also gets out of a trade quickly as they reach their target loss level. This means that when the traders reach a level of loss, they decide to end the trade as soon as possible. They cannot wait and see if the complete trade turns around.
Coming on to the trader’s decisions of either continuing their position or closing it, as the trade is going on or before relies on the kind of the trader we are actually dealing with. The discretionary scalpers make their decisions as they are progressing into their positions. They make the conclusions on their idea of the value of a security swiftly and start their trade. In such a case, you need to note that for the discretionary scalpers, the trading parameters are determined by the traders. For instance, the time at which the trader opened their position, the duration for which they kept their trade open and much more.
Now, turning to the other side of the coin, we possess the systematic traders. These traders can be described as the quite strict ones in their dealings with the scalping trades where it is not the trader themselves but a computer programming place that initiates a trade, holds a position and also closes it according to the preset parameters of the trader. These parameters might include the maximum level of loss or profit that will close the trade, the pattern in which the computer program is supposed to look out for in order to initiate a trade and so on.
The use of such computer programs is continuously increasing and is considered to be the lesser risk-posing technique of scalping as it eradicates the reliance on human emotions in the beginning as well as closing of a trade. Additionally, if you want to look for the presence of initiating trades that are reliable themselves, this would refer to the lesser chance of errors in properly starting the trades.
The computer program will initiate a trade as it is programmed to do without asking the trader to assess that action. Additionally, it will cease a position as soon as the maximum profit or loss has been reached. With the advancement of Artificial Intelligence (AI) more of the varied features might be present in the technologies every day.
As more people possess their own way of going about several things, the same is absolutely true for the trading crypto scalping strategies. Most people will possess their own way of implementing what they have interpreted with their own beliefs and the ideas in mind that are intended to help them reach their desired goals. Considering crypto scalping, many stick to doing it completely where the trader is associated with a huge number of trades per day. This number is potentially in the hundreds or even above. As the profits earned are relatively small, more trades are required to be done in the bid to accumulate a useful profit.
Usually, the trader bears access to the Level 2 Quotations as well as the Direct Access Trading (DAT). Both of these ensure that the trader is capable of making decisions depending on as close to the real-time information as possible. The level 2 Quotations is referred to as a service run on the subscription-based model offering real-time access to the NASDAQ order book, offering a bird’s eye view to the traders and investors of what is going on in the market.
The Direct Access Trading permits these scalpers to execute their trades as swiftly as possible as they permit the traders to trade on the electronic communications networks. Usually, a scalper possesses many other tools as a part of their scalping toolkit. The ones that have been mentioned here are the most commonly used tools.
How Do Cryptocurrency Scalpers Make Money?
The crypto scalpers pay attention to the sure and valid technical analysis factors. A couple of those includes the following:
- Relative Strength Index (RSI)
- Moving Averages
- Bollinger Bands
- Fibonacci Retracement Tool
Scalping involves sourcing out for the little opportunities within the crypto marketplace and using them. However, it is essential to recognize that those opportunities can grow to be useless without difficulty when the general public is aware of the crypto scalping strategy. This is the principal reason why it is essential to discover your very own non-public approach constantly.
A good number of the scalpers also make use of the volume profits, the real-time order paper analysis, open interest and the other different complex crypto scalping indicators. On top of that, numerous scalpers also often create their custom and the best indicator for crypto scalping for offering them an advantage over the market. As compared to the other trading strategies, it is considered important for the success to discover an unique advantage over the marketplace.
Mostly, the process of scalping revolves around looking for the small opportunities and utilizing them. As the strategies can become useless as soon as they become mainstream, the scalping traders are often discrete regarding their trading suites. This is why it is necessary to establish your strategy and also perform the test runs on it.
The scalpers usually trade the lower time frames, that is the intraday charts that may be the 15 minute, 5 minute, one hour or even a minute chart. Some of the scalpers might also use time frames that are not even a minute.
However, with such time frames, the traders begin to enter the “high-frequency trading bots” area. This might not be the logical one for the traders to look at. Although it is fairly easy for the machines to process a heap of data quickly, the majority of the people will not make any good starting at 15 second charts. One more thing to consider is the fact that high time frame levels and the crypto scalping signals are usually more reliable as compared to the lower time frame signals.
This is one of the reasons why maximum crypto scalpers will still choose the high time frame market structure at first. They try to create an outline of the crucial high time frame levels first prior to zooming in to look for the scalping setups. This indicates that it can be very helpful to bear a high time frame aspect of the market structure even when it comes down to the short term trades.
What Are The Main Strategies For Scalping With The Cryptocurrencies?
At this point, there are various ways that can be employed to develop this activity. Everything depends on the profile of the investor and the behavior of the crypto market at the time. Below are the main strategies:
1. Instinct Or Intuition
In this, the traders try to make their decisions based on the behavior of the market. This is the reason why both of these are taken into account that takes into account the other factors for making a specific decision when investing in an operation.
2. Systematic Strategy
This strategy is based on visiting the market with a predefined pattern, that is a plan designed depending on the data and statistics. If everything goes appropriately as desired, the operation is carried out. Else, the traders prefer to wait until the conditions planned in the strategy are successfully met.
3. Range Trading
In this strategy, the traders patiently wait for the prices to stabilize offering time for a range breakout to happen. However, it is quite a riskier idea of scalping but the success rate of this is quite acceptable.
4. Exploration Strategy
This is a method that consists of the exploration of the difference, as the name states, that might exist between the lowest offer and the highest offer. Usually, it yields good profits if this is used properly. Thus, the practice of this is not widely used as the operations are executed automatically using the crypto scalping bots and other calculations.
What Are The Prominent Cryptocurrency Scalping Platforms?
Crypto scalping has been quite innovative for a good number of investors. A whole lot of pages from the most prestigious companies all over the world of cryptocurrencies offer to perform these operations quickly as well as safely. Below are some of the best platforms that you can consider:
It is one of the most used platforms in the world. The best crypto scalping platform possesses a great prestige and is the favorite of most of the traders. The platform offers a very simple user interface and is very easy to use facilitating more traders to use the platform. To top it off, Binance has an easy language that is designed for all of those who are taking their very first step in the world of cryptocurrency as well as crypto scalping. When we are talking about Binance, it is a known fact that all of the operations will be executed absolutely safely.
The platform is one of the kinds that allows the traders to trade any cryptocurrency. Bitmex is also considered to be one of the pioneers all over the world as far as the processes with the crypto actives are concerned. The most experienced traders place their trust on this website to the maximum extent. The best part of this platform is that the user interface is very easy to use and itr is very simple to navigate.
The Kucoin displays a very easy to use user interface. The platform is loaded with tutorials that are completely descriptive and instructive. The tutorials are said to be helpful as it can guide all types of traders in many different ways. The users who have registered with this platform have had a very pleasant experience and they have commented all things positive about Kucoin.
What Are The Indicators To Be Considered For Crypto Scalping?
The cryptocurrency scalping indicators are the elements that aid in the proper understanding of the movements occurring in the cryptocurrency market. They can project everything that may happen in a specific period. Below are the main indicators:
These are the ones in charge of projecting the value, the rise as well as the fall of the crypto prices in a process. They are the chief things in all kinds of trading. They serve as a guide to learn the real status of the operations.
Relative Strength Index
These are the ones that indicate at what time of the operation you can buy and sell, depending on the certain measures that it possesses, on its correct analysis, depending on whether or not benefits can be acquired.
These are the ones who indicate the levels of resistance somehow and also support that might happen during a trade.
This is the one that projects where the values of the cryptocurrency are going and in one way or the other. They offer an idea of where the crypto market can move.
What Are The Main Scalping Approaches?
There exists two primary approaches to crypto scalping, viz., the classical approach and the piping. Both of these approaches have their individual positives and downsides.
1. The Classical Approach
The classical approach is a crypto scalping technique that is used by the seasoned and the careful traders. While implementing this approach, the traders carefully examine the supply and the demand lines. They look for the trading figures on their charts and also use one or more indicators to get notified regarding the lucrative entry points. For such an approach to be successful, the traders are required to be acquainted even if not well versed, with the use of the technical analysis. In this approach, the indicators signal the minor jumps in the prices that can be close to nothing for all those traders who choose to hold their positions.
Usually, the traders who make use of this method open positions once in every six to twelve minutes approximately. The seasoned traders need to be good at controlling themselves. They must also know how they can trade the instruments as well and make rough forecasts regarding the marker movements in just a matter of seconds. All of these factors guarantee the profitability of scalping even with the exceptionally higher commission fees and the moderate asset price volatility.
The term “Pips” refer to the measurement units of an asset’s price fluctuations. The piping approach is also known to be the fast paced as well as the high-frequency scalping method. The traders who make use of this approach are often referred to as the Pipsers and they tend to work within 5 minutes intervals. Often they work within 2-3 minute intervals as well. This is owing to the fact that this paves way for manual trade. Nevertheless, working within the shorter time intervals can also be mentally as well as physically exhausting.
All the traders who conduct this manually most often ignore what they are doing. This is primarily because the number of the errors they end up making is pretty high within the structure of the profit that they receive eventually. This approach is also known to be one of the riskiest techniques. Irrespective of this fact, the novice traders still begin with this approach as it does not need much of a trading knowledge as compared to the other approach, precisely the classical approach.
What Are The Cryptocurrencies With Which Scalping Can Be Done?
It is a fact that scalping can be done with most of the crypto coins or digital currencies. Below is a list of the most popular cryptocurrencies that you can make use of in the process of scalping:
Advice For The Beginners Conducting Scalping
Following the state of the digger, you can tell a lot about his job. However, looking inside the minds of the crypto scalpers, it can help you to learn more about it and also can help you answer the question whether crypto scalping is for you or not.
The scalpers are pretty disciplined. They are smart enough to not hold a position for much longer for seeing greater returns irrespective of the high chances of it becoming safe. Already they are satisfied with the small gains that they are making per security as they are dealing in the large volumes. Additionally, they also understand that owing to them making very small profits, holding their positions for long can also mean exposing what they have gained to more risk.
The traders are also quick. As the price movements that they are dealing with can happen in just a matter of seconds to minutes, they are required to enter and exit the positions very accurately. Thus, they either use the computer programs along with the Level 2 Quotations and the Direct Access Trading.
So, to sum up this section, the novice traders must follow:
- Conduct a deep market analysis and study the current condition.
- Develop a good strategy.
- Make use of the good indicators.
- Never use unknown cryptocurrencies or digital coins that you are not sure of.
- Be cautious at every step.
What Should You Look Out For While Doing Crypto Scalping?
Before you start scalping your most preferred cryptocurrencies, The below mentioned are the qualities that you need to consider for in a crypto scalping broker:
Added Tools & Educational Resources
It is obviously best to look out for the educational resources or ther added tools that the broker might have provided. If you are able to find such tools, you must know that it is very valuable for you if you are new in the field, for example, in the crypto investment zone or in scalping. These tools might include a training course, webinars, tutorials, a forum or even a crypto blog.
Charges & Fees
This highly depends on the quality of the crypto broker that you might have chosen. Thus, it is necessary that you take time and look into the charges and the fees and consider if there are any hidden charges as well. The costs normally associated with the brokers include the funding fees and the commission fees. Keep this in mind that the fee depends on the broker that you have chosen.
While the crypto scalping trading involves the high costs owing to the frequency of the trades, the best kinds of the brokers also do offer reasonable scalping charges for cryptocurrencies.
Charts & Bots
Your scaling strategy for cryptocurrencies is completely incomplete without the comprehensive use of your investing crypto bots as well as the chart indicators. Scalping is considered to be a high-intensity trading strategy that functions on speed. Hence, any tools that you might use to accelerate your processes will be very advantageous.
These are considered to be the must have tools for any of the traders in the crypto field. Simultaneously, it is also important for the novices as it is important to have tutorials. A demo account permits you to figure out the actual functions of the platforms and the techniques of the market and also permits you to trade with virtual money.
As with the demo accounts, your actual amount is not under any risk, you can also practice your cryptocurrency scalping strategies and techniques without any worries prior to building enough confidence as well as experience for transferring to a real account.
Crypto scalping is a pretty new method of investment that generates very lucrative benefits via several operations and that too in a very short time period. Many of the traders have taken this method as one of their most opted or preferred methods of crypto trading and investment, even though it is comparatively riskier. Thus, in order to be successful with theis method, you need to be confident, develop a good strategy and indulge in proper study of the current market condition and consider whether or not to conduct scalping at the moment.
There is no doubt that scalping is one of the more examples that the cryptocurrencies will stay here for the time being and the future is not much far when cryptocurrencies will be considered in the mainstream of payment in almost all of the countries in the world.
On top of this, as the scalpers trade hundreds of times in each of the sessions, and also deal with the large volumes of the cryptos ranging from the hundreds to thousands, the traders need to take into account the amount they have to pay in commissions. This is where you need to focus on choosing the right broker. To begin with you must visit all the brokers about whom you have researched a lot from the various platforms. The brokers must also have the Level 2 Quotations and the DAT along with the platforms being legit.
Frequently Asked Questions (FAQs)
In comparison to long-term trading, day trading requires the traders to concentrate on the small price movements. One most important difference between day trading and scalp trading is the time frame. However, both types of trading fall under intraday trading as trading occurs within a single day, various retail traders depend on the short-term price action that is calculated in minutes and seconds for earning profits. This is the place where scalp trading is favored over day trading.
It is legal in the cryptocurrency markets as long as you abide by the rules of your crypto trading platform as well as the financial regulators. However, this method is not supported by all of the trading platforms and your account might be closed if you are trading against the terms and conditions of your cryptocurrency trading platform. Digital currency scalping possesses a lot of danger and it is recommended that the new users try to stay away from it.
A regulated cryptocurrency scalping broker lowers the risk. The broker regulations protect the consumers. Little broker regulation might lead to possible financial harm and poor services. The regulations stop fraud.
This method should and can be profitable as long as the traders or the investors take into account two of the most important factors – time and preparation. If both of them are done correctly, then there is no doubt that scalping the cryptocurrencies is bound to pay off in a very short time.