Cryptocurrency markets are notoriously unstable, as anybody who has ever invested in them will attest. Its wild swings might have investors fleeing the stock market in despair. Still, it’s an excellent place for scalping traders to work their magic.
This scalp trading article will help you determine whether this trading method is suitable for you.
Table of contents
- The Basics of Scalping in Trading
- How Successful Is It to Trade on a Scale?
- Can Cryptocurrency Be Better Traded In A Day?
- Learn Scalping with These Four Best Demo Accounts
- One, ByBit Two, TradingView Three, BitMEX
- Superior Cryptocurrency Scalping Trading Strategies from StormGain
- Using the Bid-Ask Spread Method 1.
- 2) Trading Within a Comfortable Range
- Scalping in Cryptocurrency: The Pros and Cons of Automated Trading
Scalping Trading Explained
- Profiting quickly from small price changes throughout the day is the essence of “scalping,” a trading strategy used extensively in the cryptocurrency market.
- Trading on such a short time frame necessitates frequent intraday adjustments that provide incremental gains. Cryptocurrency scalping is not illegal.
- Scalpers needing to make a living must be focused and level-headed.
- Gain-to-Pain Ratio (GPR) is a measure of success that should be at least 2.0 (and ideally 3.0) to justify the potential discomfort.
- The GPR is found by dividing the sum of all positive monthly RORs (Rate Of Return) by the sum of all negative monthly RORs (Rate Of Return).
- Because of the small price fluctuations that cryptocurrencies and forex assets create, both markets are well suited for scalp trading. A booming cryptocurrency scalper must be able to capitalize on price fluctuations within minutes or even seconds.
- Therefore, there are three main components to scalping:
- Ability to Read Speed Charts Consistently
- Once these three abilities are mastered, the next step is to choose currency pairings with high volatility so that even small price swings may provide a profit.
- Taking advantage of slight price differences across token pairings has far lower risks and offers much faster returns than the day trading made famous by Dave Portnoy.
How Profitable Is Scalping Trading?
You may choose from more than five thousand different alternative cryptocurrencies.
As a result, a vast selection of token pairings may be leveraged by traders engaging in “scalping.” As a result, every scalper eventually settles on a method that works best for them.
However, scalping still uses the same building blocks as legitimate businesses:
- As it pertains to technology, the term “technical analysis” To be accurate, this analysis of an asset must be performed in real-time, factoring in the asset’s current volume, historical pricing, and market activity. Furthermore, predicting the future direction of a price requires studying many charts, indications, and pricing trends. Therefore, it often employs technical indicators, including the Japanese Candlestick chart, price support, resistance levels, moving averages, the Relative Strength Index (RSI), Fibonacci retracements, and Bollinger Bands.
- Since scalp trading requires such a rapid response, fundamental analysis (FA) receives just a fraction of the focus it deserves. Instead, this statistic focuses on the economic environment in which an item is valued. For instance, should you invest in GameStop (GME) if it follows a business strategy that has historically been unsuccessful for brick-and-mortar retailers?
- Scalp traders use these essential instruments to react to market fluctuations in short time frames, often 5 minutes (M5) or less.
- There would only be enough time for a good TA if that were the case. Scalping on time frames shorter than M5 is known as intuitive scalping since it is based on the trader’s prior expertise rather than any specific indicators.
- TradingView candlestick chart of Polkadot’s (DOT) price changes
- The candlestick chart shows that the most profitable time frames are between 5 and 30 minutes. When investors enter the market, they depend on their judgment to determine when to sell.
- The payoff depends on how well these informed guesses pan out and how long a position is kept open.
- Therefore, this high-frequency trading approach needs extreme concentration and self-control to succeed. Therefore, make it your principal trading technique or risk results of less than 1.0 GPR.
Is Crypto Scalping Better Than Day Trading?
The period is the most notable distinction when comparing day trading (also known as swing trading) with crypto scalping.
Even though both occur on the same day (intra-day trading), many retail traders dislike having open positions while they sleep.
As opposed to day trading, scalping may be a better match for you.
However, day trading is only for you if you have the time to sit in front of your computer for half the day, starting and closing dozens, if not hundreds, of positions.
However, you might develop the habit of selling off winning positions as soon as they turn a little profit. Dopamine is a potent behavior regulator, but it may also work against you.
A recent FCA study of 517 people who call themselves investors corroborated this.
A concerning 38 percent of respondents said they don’t trade because they have a good reason not to. Instead, they prioritized their euphoric rush while trading and the status signals they sent to others. Overconfidence coupled with incompetence is, obviously, the worst-case scenario for traders.
The goal is to practice scalping without risk so that you can make investment choices based on logic rather than emotion. This is why many cryptocurrency markets and exchanges provide practice accounts.
Top Four Demo Accounts for Scalping Training
1. ByBit
When trading cryptocurrency futures, this platform offers leverage of up to 100x. It has a sleek interface and is simple to use, and it provides a robust suite of indicators and charts that may be used for training purposes by scalpers. A testnet may be quickly and easily established using ByBit, allowing you to begin honing your high-frequency skills quickly.
If you want to learn how to interpret charts and indicators for crypto values, a testnet is the best option since it displays accurate data. In addition, the only reliable way to respond to price shifts is by perusing market data. Therefore, this is of great use. However, you’ll need to invest some work into getting your testnet up and running.
2. TradingView
- TradingView has replaced all other charting and market research tools in the cryptocurrency industry. The level of personalization and simplicity of usage is unparalleled, even for the free account.
- It is hosted in the cloud, so you can view it from any computer with an internet connection. Although the sample account provides a high-quality assortment of indicators and charts, mastering all of its functionalities will take some time.
- TradingView is a social network where traders can learn new trading tactics and get vital information from industry experts via regular blog entries. With support for more than 100 different cryptocurrencies, TradingView will have whatever alternative currency you want. But, first and foremost, it provides accurate market data to simulate trading.
3. BitMEX
- BitMEX, created in 2014, is one of the biggest P2P trading platforms in the world, despite its seeming antiquity. Setting up a testnet platform is more complex than setting up ByBit. Although it is now only available to traders in the United States, it provides complete anonymity and boasts the market’s most excellent liquidity.
- It works with Bitcoin and seven other essential cryptocurrencies. Fill or kill, good until canceled, immediate or canceled, trailing stop orders, stop limit orders, take profit orders, limit orders. Secret orders are just some of the many order types available on the platform, making it ideal for scalping trading.
- Similarly, BitMEX provides a full suite of instruments for plotting your path to margin gains, with simple controls for adjusting time scales, graph kinds, and incorporating various market indicators.
4. StormGain
Stormin is a new cryptocurrency trading platform that offers up to 200x leverage on 17 separate futures contracts, which is a unique offering.
Its demo account accurately represents the real thing, down to the live, completely adjustable price charts, cryptocurrency pairings, indicators, patterns, trend lines, and wallet balances.
The clean and elegant StormGain interface is ideal for configuring individual price indications across many displays. However, just six cryptocurrency options are available on this user-friendly, future-oriented website as of this writing.
Best Crypto Scalping Trading Strategies
As was said earlier, every crypto scalper develops a unique approach to trading to maximize profits and minimize stress. However, when it comes to pairing currencies, Bitcoin’s volatility stands out as having great potential.
Below are a few of the most widely-used scalping techniques; search “scalping” on the TradingView site. Consistently, I hear about fascinating new variations on tried and true methods.
1.) Bid-Ask Spread Method
- By definition, the bid-ask spread is the price difference between a trader’s purchasing price (the bid) and their selling price (the ask) (selling). At each moment, there is a significant and advantageous disparity between them; you should act to capitalize on it.
- Generally, bid-ask spreads are used when there are more buyers than sellers. If you understand the relationship between supply and demand, you realize that this will lead to a higher price. A large gap between the bid and the asking price provides an opportunity for “crypto scalpers” to make a profit.
- The bid-ask spreads the contract similarly when there are more buyers than sellers. A lower asking price means you can go on a mini-shopping binge.
2.) Range Trading
You’ve probably heard the words “support” and “opposition” in your reading thus far. With the former, you can purchase since prices are so low. The opposite of support is resistance, which indicates a price is too high and should be sold. A market entrance may be made at the level of support, and a market departure can be made at the level of resistance.
Range trading keeps an eye on how far the price moves between two predetermined levels. When prices repeatedly bump up against a level of support or resistance, the level will soon give way.
A “breakout” is a familiar name for this situation. A scalper uses a stop-loss order to earn money in this situation. Because of this, candlestick charts are often used for scalping. S/R levels are combined with moving averages to help determine the direction of a market.
3.) Automated Trading
The typical reaction to today’s manufacturing employees is asking, “Why is this boring task not automated?” It usually boils down to a choice between increasing costs and increasing salaries. Fortunately, the ability to automate trade is limited less by the price of physical externalities and more by the ingenuity of programmers.
Fast, intense, and tiring describe high-frequency trading, unlike factory labor. Due to this need, scalping bots have been programmed to recognize various patterns to open and close trades at optimal times. Scalping bots may be found by the hundreds online and in retail stores, but most of them cost several hundred dollars.
Moreover, the market is flooded with fraud because of the great demand for efficient scalping bots. The apparent difficulty arises from the need to rigorously test a new bot across various market situations and user bases. Meanwhile, the con artist is banking on victims’ desire to peddle useless software.
To avoid this, shop for a scalping bot with positive reviews from a wide range of reliable sources. For example, expert advisor (EA) robots consistently provide outcomes as of this writing.
Pros and Cons of Scalping Crypto
Pros:
- It may be mechanized, sparing the scalper the extremes of emotion and the long hours that take a toll on personal and professional relationships.
- You will only lose a little money if you fail a trade with a concise position.
- Perseverance is rewarded monetarily. Determine your daily earnings target, say $30 to start, and strive to meet or exceed it.
Cons:
In trading, a lack of confidence causes missed trading opportunities, which leads to a cumulative loss.
Scalping’s reliance on making dozens or hundreds of daily transactions raise a hefty trading cost.
The top scalping bots may be what you’ll be up against most often in trading. This puts you at a disadvantage unless you can afford to purchase a scalping bot service on par with your competitors.
Conclusion
Training and knowledge are essential to making it a crypto scalper. A trial version is required for both of them. Before risking real money, spend at least 30 hours practicing scalping on a virtual platform.
To respond swiftly to the market’s price swings while scalping manually, you need to thoroughly comprehend dozens of chart kinds, patterns, and indicators.
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