There are many different types of trading that you can participate in when it comes to cryptocurrency. Today, we’ll be talking about scalp trading!
This interesting form of trading allows you to make profit quickly, but what is it? How do you do it? Is it working for Bitcoin or for some other altcoins as well? We’ll answer all of your questions for that and give you some pointers to help you to get started.
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What is cryptocurrency scalp trading
While swing traders are normally looking to make bigger profit by holding an asset for a period of time, crypto scalp traders are typically happy coming home with a little bit less. This is because their method of making profit typically involves creating many small trades very quickly.
The initial gains for one of these trades may not seem like much, but they all add up. If you’re patient enough to complete a strategy like this, then the gains could be substantial for you when they’re added up at the end of the trading day.
However, keep in mind that for this strategy you’ll need to be quick and you’ll have to be laser focused. This style of trading isn’t for everyone, but it can be a great way to make a profit on small price movements.
The good thing about this strategy though is that small wins are easier to obtain. Cryptocurrency prices are constantly moving and this leaves many great opportunities for scalping.
How to do crypto scalp trading
Cryptocurrency scalping is heavily based on technical analysis, and if you want to be able to scalp then you’ll need to learn at least the basics. A scalper will use charts or possibly even big release news to make money on an investment within a very short time frame.
Your goal is not to hold on to an investment at all but simply to take advantage of growing trading volume and then get out with a small gain. Doing this many times over the course of the trading day is how you win here.
Many crypto scalpers will actually use a five-second chart of their trades and place their buys and sells quickly. They might even make 100 deals during a trading day if they are particularly active.
This obviously requires a ton of fees, so make sure your trades are actually profitable after that is taken before diving in. You need great planning and even greater discipline if you want to be a scalper.
Bitcoin vs altcoin scalp trading
Bitcoin tends to have less volatility than altcoins do. This means that the amount of profit you can make is less, but it will likely be more reliable.
Compared to BTC, altcoins can have highly unpredictable volatility, so if you get in over your head, then it’s possible that you might never make back your profit. You’ll need to choose wisely here to succeed.
Is scalping trading profitable
Scalping strategy can be very profitable if you’re dedicated to learn how to do it correctly. However, if you’re easily frustrated or you can make a solid plan and stick to it, then it’s easy to lose money here too. Scalpers need to have certain exit plans.
Scalp trading indicators
Here are a few popular trading indicators that you can learn to use to get started with cryptocurrency scalp trading.
Relative Strength Index
RSI is an easy to use indicator for beginners which can help you to identify entry and exit points. If the RSI is above 70, this typically means it’s a sell and if it’s below 30, then it’s a good idea to buy.
Support and Resistance
Learning to identify where the support and resistance levels are can help you to get off quick scalp traders. Beware of breaks in these levels that could quickly take profits out of your wallet.
Using the moving average indicator is a good way to get an idea of where the price of an asset is going. You can use it much like you would for any other trade, just now you will be making your trading windows much smaller.
Cryptocurrency scalp trading tips
- Avoid altcoins with low volume, this is a trouble for scalpers.
- Have a plan and stick to it.
- Always have a solid exit strategy.
- Don’t put everything into one trade for safety.
- Don’t forget to factor the fees into your trades.
- Use proper technical indicators.
Pros and cons of automated or bot scalping
The pros of automated scalp trading are that it takes emotion out of the picture. Your bot trades for you based on the rules you set and you don’t really have to do much else. This means there’s less time for you to make emotional decisions that ruin your plans.
The drawbacks of automated scalping with cryptocurrency of course are that sometimes, actually more than sometimes, your first plan will be wrong. This could result in a bad loss for you if you’re not around to fix it, so you’ll need to have your bot act accordingly for unexpected events which can’t be charted.
Scalp trading simulator / demo mode
Bitsgap has an awesome demo mode that allows you to learn trading cryptocurrency using a variety of different methods. You can even draw right on the live chart to do your TA, making it an easy way to practice your scalp trades without losing any money.
Scalping can be pretty high risky, so it’s actually a great idea to learn doing it using a demo tool first. It’s also free to get an account, so you won’t have to risk any money at all to practice.
Scalping vs day trading
Scalp traders, believe it or not, hold on to their assets for an even shorter period of time than crypto day traders. While day traders might make a couple of deals per day, a scalper will make many trades in quick succession.
Scalping vs swing trading
Swing traders are generally looking for larger price swings based on various criteria. A scalper typically uses technical analysis or news to find small price movements to profit on quickly. A cryptocurrency swing trader could hold their assets for some time, while a scalper is ready to dump them as soon as possible.