The crypto market is characterized by high volatility — in a matter of minutes, asset quotes can both soar and collapse by tens of percent. This creates conditions for profitable fast trading. One of the common strategies for such financial markets is scalping or scalp trading.
The essence of scalping is to make money on small price fluctuations over short periods of time. An experienced trader can open and close deals during minutes or even seconds, fixing profit on each operation. To do this, you need to be capable of reacting rapidly to shifts in the market environment.
Despite the potential for quick earnings, scalping is not a simple strategy that requires skill and discipline. In our material, we will look in detail at the strengths and weaknesses of scalping trading, as well as study the scalper’s toolkit.
Scalping basics: what is short term dealing?
Scalp trading is among the favorite trading strategies in the cryptocurrency market. Its essence is to gain profit due to small swings in value over short periods of time.
Unlike position players, focused on long-term growth in the value of assets, scalpers do not pursue the goal of earning a large sum from a single transaction. Their task is to earn regular, albeit small, but stable sums through a large number of transactions.
For this purpose, a scalper constantly analyzes the market situation, looking for short-term tendencies and deviations of values from the general trend. As soon as an opportunity to make money appears, he opens a position. When the target profit is reached, the position is closed. There can be several dozens of such transactions per day.
Since trading in scalping is carried out on very short time frames — from a few minutes to hours, the key role in decision making is played by technical analysis of charts. Fundamental factors are important only at the stage of choosing an instrument with increased volatility.
Thus, the scalper’s tactics directly depend on his reaction speed, understanding of the current market conditions and strict risk management. This requires from a trader high professionalism, determination and equanimity. It is no coincidence that scalping is considered one of the most difficult areas of cryptocurrency trading.
Practical aspects of making money in scalping
In many ways, successful scalp trading depends on the ability to competently analyze the market situation and find profitable points for opening and closing deals. For this purpose scalpers use various tools of technical analysis.
Among the most popular indicators are trading volume, graphical models (figures and patterns on price graphs), layers of resistance and support, moving averages, relative strength indicator RSI, Bollinger Bands.
Also important is the ability to develop your own unique trading strategies and indicators. This allows you to get a significant advantage over other market participants. After all, any public system quickly loses effectiveness as it spreads. Therefore, experienced scalpers carefully analyze the market, combine different approaches and create author’s methods.
To find market entry points, scalpers usually use small time frames — from 5 minutes to 1 hour. This enables them to quickly enter and exit positions, earning on short term swings in price.
At the same time, most scalpers analyze the general picture of the market on larger time frames (from 4 hours and above). This is necessary to understand the current trend direction and see important resistance and support layers.
In addition to the ability to analyze charts, a trader must have a quick reaction, build a strict risk management and have emotional stability. You should also be able to fix even small profits in time and not hold losing positions in the hope that the situation will improve.
Scalp trading is a rather flexible strategy. Each trader over time develops his own approach based on personal experience. The main thing is to follow the rules precisely, to pay attention to details and to be able to use the smallest opportunities to earn money.
Strategies in scalp trading
There are two main approaches in scalp trading — intuitive and systematic.
Intuitive dealers rely mostly on individual feelings and experience when opening and closing trades. They don’t have clear predetermined rules when to buy or sell an asset. Intuitive traders take into account many factors, but their solutions are eventually based on instinct and gut feeling.
System scalpers have a different approach — they use specific algorithms and a set of rules for trading. If pre-defined conditions are met, such as a certain technical indicator working, they open or close a position. This style is more based on data analysis and relies less on emotions.
Popular strategies in scalping are:
In addition, some traders combine scalping with action trading — they use short trades to get additional profits on the background of long-term positions.
Scalp trading also employs various money management techniques to ensure that your deposit is protected. For example, fixed risk per trade, limiting the total risk in percentages and so on.
Thus, there are many approaches and strategies for making profits in scalping in the crypto market. The main thing is to select the one that most suits the trader’s individual style and goals.
Is it worth scalping?
Many beginning traders wonder whether it is worth mastering the scalping strategy or whether it is better to choose a more long-term approach. To make an informed decision, it is useful to consider the main advantages and disadvantages of this style of trading.
The pluses of scalp trading include:
However, scalping has significant minuses:
Thus, before you start actively engaging in scalping, it is important to realistically assess your own skills and willingness to observe strict discipline. It is better to start with training on a demo account and gradual introduction into real trading with a small capital. This will help to minimize risks and choose a strategy that suits you.
Conclusion
Scalping is one of the most complex trading strategies. Success here largely depends on the ability to quickly analyze the current situation and make informed decisions in conditions of high volatility.
The key factors that determine the effectiveness of scalping are the development of an effective personal trading system, sharpening the skills of techanalysis, strict risk management and psychological stability. At the same time, it is important to regularly analyze your mistakes and improve your approach to trading.
Thus, scalping as a strategy isn’t suitable for every trader. It makes sense for most investors to start with less aggressive approaches. Nevertheless, a proper comprehension of scalping strategy with appropriate qualification can provide high and regular income in the market.
