Crypto Scalping. How to use this strategy correctly?

📌 I’ve heard numerous questions about the trading through all my crypto way. People asked me to advise the most profitable and utility trading type to earn fast and efficiently. It was really tough for me to answer this question those days because I did know anything. Now, after the hours, days and months of integration to the deep aspects of trading — I can have a position. I can have the arguments and the voice. So, let me explain about one of the most well-spread trading types nowadays.

🔷 The Definition of Scalping

According to the information of Cointelegraph:

🔹 Crypto scalp traders target small profits by placing multiple trades over a short period, leading to a considerable yield generated from small gains. Scalpers step in for highly liquid and significant volume assets that result in greater interest owing to the news. Scalping strategies require knowledge of the market even though it is a short-term trading strategy. To capture the difference between supply and demand, scalpers use a spread, which involves buying at the bid price and selling at the asking price. If traders are prepared to accept market prices, this approach permits making a profit even when orders and sales are not changed.

🔍 A scalper is an individual who predicts buying and selling prices in lower time frames to generate profits. The primary function of a scalper is to gain an advantage of the volatility or price variation by setting orders using a specific price range in the crypto market. A trader must have a strong strategy to instantly sell their coins because a minor error in scalping can destroy a portfolio.

⁉️ How does it actually work?

🔻 Scalping is based on the concept that all the coins make an upward movement after experiencing a fall in prices, yet making accurate predictions is nearly impossible. A scalper attempts to take as many small profits as possible, which is the opposite of the popular concept of HODL. This strategic move achieves positive outcomes by sacrificing the size of wins and increasing the number of gains. It goes against the norm where an investor holds their coins for a long time to gain profits by winning even less or half of their trades. Instead, it follows the idea that the number of successful trades should be much bigger than the loss. While keeping their profits slightly higher than the losses, a skilled and successful scalper has a higher ratio of winning trades than losing ones.

Example ⬇️

📈 3 Crypto Scalping Strategies

1️⃣ Range Trading

One popular scalping crypto strategy is range trading, which involves monitoring the price movement between the high and low levels within a certain time period. The bottom and top of the range will hold as support and resistance, respectively, until the range is broken, meaning traders will aim to buy at support and sell at resistance.

The more frequently the price touches either level, the more likely the level will break. This scalping crypto strategy can work well for traders using a 5-minute timeframe, though a stop-loss will be essential for when a breakout occurs.

2️⃣ Bid-and-Ask Trading

Scalpers often aim to exploit the bid-ask spread, which is the difference between the bid and ask prices. Scalpers can profit from any considerable difference between the two. There are a couple of key scenarios to consider:

1. Firstly, a wide bid-ask spread is when the asking price is higher and the bid price is lower than usual. This tends to happen when there are more buyers than sellers, causing the price to rise. Crypto scalpers will normally be selling at this point.
2. Conversely, a narrow bid-ask spread is when the asking price is lower and the bid price is higher than usual. In this scenario, the sellers outnumber the buyers.

3️⃣ Arbitrage Trading

We can also categorize arbitrage trading as a scalping strategy since arbitrage traders also seek to make money off little price differences in the market within a very short time.

This trading strategy allows investors to profit from minor price differences between cryptocurrencies traded on different markets or exchanges. This way, you can buy crypto from one exchange or market and sell it at a higher price on another.

4️⃣ Narrow Bid-Ask Spread

When the number of buyers exceeds the number of sellers, the asking price is lower, and the bid is higher than usual. Scalpers use this strategy to accelerate buy-in frequency to offset selling pressure.

🆒 Advantages of Crypto Scalping

🔝 Easy Automation: Scalping strategies are easy to automate, which removes the physical and mental stress of using them.

🔝 Low-Risk Trading: Since trades size and position are very short, they can be considered a low-risk way of trading. Most scalpers lock in their profits within minutes.

🔝 Volatile Market: Traders skilled in scalping strategies can potentially make better use of crypto market price swings that result from some crypto news than those who trade long-term strategies.

🔝 Leverage Advantage: Scalpers also tend to make more with leverage. A little price movement can result in a lot of profit when leverage is used correctly.

🔝 Quick Profit: Scalpers don’t have to bother about long-term market movement. They are more concerned about what is happening and what will happen in a couple of minutes than what will happen in a couple of hours or days.

⛔️ Risks of Crypto Scalping Strategy

🔻 Leverage — If you are margin trading, scalping requires use of leverage which can be risky, especially for inexperienced crypto investors.

🔻 Fees — As you are making numerous trades per day, fees can quickly add up. Make sure to consider all the costs involved before choosing a crypto broker.

🔻 Competition with bots — Whilst it can be beneficial to utilize automation when scalping cryptos, this does also mean that you are trading (and competing) in a market that is heavily saturated with intelligent bots.

🔻 Commitment, speed, and patience — It requires fast reactions, quick executions, and a good level of patience. As a result, this type of investing is considered a high-risk strategy that is generally better suited to experienced traders.

🔻 Transaction costs. The high trading fees in some exchanges can significantly reduce overall profits. Scalpers need much mental strength to cope with the fast-paced and high-pressure crypto scalping routine. Finally, this requires sticking to your trading strategies and avoiding trading with emotions.

📢 When to use crypto scalping signals?

🔊 Trading in quiet markets

Crypto scalping signals can work in your favor in these scenarios. By highlighting where you can make little profits frequently, you’re much more likely to focus on viable opportunities rather than making bad trades. You can scalp small amounts rather than waiting for a big move and hoping you’re on the right side of it. This tends to be a lot better for traders’ confidence, as making small wins is much more psychologically positive than trying to anticipate where the markets are headed next.

🔊 Trading in high-timeframe ranges

If you’re a swing trader with a target that the market seems to be taking an age to reach, crypto scalping signals can provide opportunity in the meantime.

When you rely on trading as a source of income, you don’t want to wait while the market resolves itself. You need to be looking for opportunities that can supplement your trading balance. This is why scalping signals are an excellent alternative; you can build up your balance slowly while waiting for your longer-term trade to play out.

🔊 Trading in uncertain markets

We’ve all been there: the daily chart points to weakness, but the hourly looks positive. Instead of forcing an opinion (and potentially a bad trade), you can stay neutral and scalp while observing the market.

If you’re finding it difficult to form a bias, you can play both sides with crypto scalping signals. Even if you finally develop a bias and it’s wrong, you have some of the profits made by scalping to soften the financial and psychological blow.

🔊 Trading in volatile markets

It can be immensely frustrating to set a logical, reasonable stop loss, only for it to be wiped out due to increased volatility. There are two commonly touted solutions to this problem: find better entries, or move your stop loss further away. We’d all love to find the best entry possible, but sometimes it’s simply not feasible. And while moving your stop loss away can work, it either increases the risk you’re taking or decreases the amount of profit you can make (if the position size stays the same).

⁉️ How to find the best crypto scalping signals?

➡️ Transparency: Any worthwhile provider should be 100% transparent about their signals.

➡️ Track record: Their track record and testimonials won’t be perfect (in fact, this is also a negative sign!), but they should demonstrate they know what they’re doing.

➡️ Age: While new providers aren’t necessarily going to be low-quality, going with an established crypto scalp signal provider generally yields better results.

➡️ Live trading room: Not only are trading rooms useful tools to learn and grow as a trader, they allow subscribers to voice any concerns they might have. By seeing what the community is saying, you can truly gauge how satisfied their customers are.

➡️ Offerings: Many of the best providers will offer interaction, trading rooms, and justifications for their trades. These are often just as valuable as the signals themselves, as they provide an opportunity to learn and develop your skills as a trader in the long term.

➡️ Time zone: Pick providers that post during the times you’re awake and trading, otherwise you’ll be wasting your money.

➡️ Best for you: You’ll likely have your own criteria for deciding whether a signal provider is for you, and it’s important to stick to it. There’s no point going for a provider who posts the bare minimum if you know you’re going to be frustrated with the lack of justification for the trade.

🔝 Best exchanges for scalping

◾️ KuCoin

Trading Fee: Compared with other leading exchanges, KuCoin offers fairly low trading fees. Users can expect to be charged between 0.0125% and 0.10% per trade.

◾️ Kraken

Trading Fee: The maker trading fee varies from 0.16% — 0.10% for 30-day transactional volumes of between $0 and $500,000. The taker trading fee varies from 0.26% — to 0.20% for 30-day transactional volumes of the same amount.

◾️ ByBit

Trading Fee: Compared with other major exchanges, ByBit offers low trading fees. Traders can expect to be charged 0.10% per trade on spot trading.

◾️ WhiteBIT

Trading Fee: The trading fee on WhiteBIT is only 0.01%. The number of trading pairs exceeds 400.

◾️ Crypto.com

Trading Fee: 0.4% maker and taker trading fee for Level 1 ($0 — $25,000 trading volume) to 0.04% maker and 0.1% taker trading fees for Level 9 ($200,000,001 and above trading volume).

💎 Best cryptocurrencies (crypto pairs) for scalping

1️⃣ Bitcoin (BTC)

Traders can use scalping strategies when they trade Bitcoin contracts for difference (CFDs) through a broker. In this way, traders can take advantage of price movements in either direction without owning physical Bitcoin, exempting traders from having to ensure that their coins are kept safe.

2️⃣ Ethereum (ETH)

Day trading is possible and profitable with Ethereum because of the liquidity that the coin sees. One of the best scalping strategies involves using crypto scalping bots and automated services because they do the heavy lifting in the crypto market. However, one thing that day traders must be cautious of when they scalp ETH is momentum. Ethereum can pick up momentum extremely quickly and if traders do not react swiftly, they could lose a significant amount of capital.

⚫️ BTC/ETH

BTC and ETH prices have a high correlation coefficient of 0.94 according to Cryptowat.ch. This means that their price moves mirror each other but not at the same time which is ideal for scalpers as that is precisely what is needed in order to earn money from this technique.

3️⃣ XRP (XRP)

Because of the unique features that XRP provides to the digital world, the coin sees significant volatility and liquidity daily, making it a feasible option for short-term trading strategies. XRP has high unpredictability in its price and this can present the perfect opportunity for price jumps and subsequent profits, especially for scalpers. With XRP, advanced traders tend to use a combination of fundamental analysis and technical analysis, because the price of XRP is influenced by news, price action, and technical factors.

4️⃣ Litecoin (LTC)

Litecoin is an open-source project that promotes peer-to-peer crypto transactions. Litecoin is often referred to as a little brother to Bitcoin, or the silver to Bitcoin’s gold. Litecoin can be used as a medium of exchange because of its instant payments which are truly borderless, with lowered transaction costs. When day trading Litecoin, traders must ensure that they use price charts as well as volume graphs, providing traders with the ability to predict price jumps.

5️⃣ WhiteBIT Token (WBT)

It’s absolutely the new project in the crypto market, but even so, the token has already shown tremendous potential and results. So, I guess it has the all perspectives to become the “number one” crypto asset for scalp trading. The WBT token will become a project platform for tens of thousands of blockchain startups, as well as a useful and reliable asset, the storage of which provides numerous benefits to the WhiteBIT users. WBT allows its holders to reduce trading fees and receive benefits from using the exchange. WBT provides numerous integrations with exchange products that are divided into two main groups: bonuses for owning and for holding the token.

📈 Scalping trading vs Day trading

✔️ Similarities:

1. The two approaches don’t believe in leaving trades open overnight. They believe that the overnight session presents substantial risks that can lead to significant losses.
2. The two approaches can be applied in all types of assets, including stocks, currencies, bonds, and even exchange-traded funds.
3. Day trading and scalping require excellent money and risk management strategies to work. Some of the top risk management strategies to use are having a stop-loss, position sizing, and leverage.

✖️ Differences:

1. Scalping refers to a situation where a trader holds a financial asset for less than 5 minutes. Day traders, on the other hand, can hold trades for several hours.
2. Scalping requires opening tens or even hundreds of trades per day. Day traders, on the other hand, can open just a few trades per day.
3. Day traders can rely on concepts like fundamental analysis. In scalping, this type of analysis is usually not necessary.

📈 Scalping trading vs Swing trading

✔️Similarities:

1. In my experience, both scalpers and swing traders use similar techniques in trading, just in different time frames.
2. Both trading styles are only as safe as the overall trading method used to control your risk.
3. They tend to use a mixture of both fundamental and technical analyses.

✖️ Differences:

1. Holding Period: In Scalp trading — a few seconds to minutes, never overnight. In Swing Trading — a few days to weeks, even months at times; most commonly held for a few days.
2. Number of Trades: In Scalp trading — Can be hundreds during a day. In Swing Trading- A few.
3. Chart: In Scalp trading — Tick chart or 1–5 minute charts. In Swing Trading — daily or weekly charts.
4. Trader Traits: In Scalp trading — Vigilance, impatience work well here. In Swing Trading- Greater patience and precision required to understand trends.
5. Tracking: In Scalp trading — Constant monitoring throughout the trading session. In Swing Trading — Reasonable monitoring; requires up-to-date info on news and corporate events.
6. Suitability: In Scalp trading- Not for novice traders. In Swing Trading- Suitable for all, from beginners to moderate and advanced players.

📈 Scalping trading vs. Forex Scalping

✔️Similarities

1. Supply and demand: The price of any currency, either crypto or fiat, is determined by the supply and demand factor, making both markets thrive.
2. Digital Platforms: Both markets provide electronic trading via the Internet, making it possible to trade numerous currencies on various digital platforms.
3. Bots: Automated trading is plausible and manageable with the right tools. By utilizing the online auto-bots (robots) combined with artificial intelligence, traders can scalp on the go.

✖️ Differences

1. Volatility: Cryptocurrencies tend to be much more volatile than fiat money. A proficient scalper tends to quickly seize the opportunity to generate greater profits with the crypto market.
2. Intermediaries: Forex trading usually requires an intermediary in which leads to higher costs and fees. Crypto trading, on the other hand, evades the use of middlemen. So, the transactional costs will be significantly reduced.
3. Time: The cryptocurrency market is available within 24 hours on any day of the year, making it possible for any person to start trading at any moment. However, the forex exchange markets are accessible only five days a week within business hours.
4. Regulation: The forex market trades are legally regulated, and centralized governments back the traded fiat. Cryptocurrencies are only recognized in certain countries. Hence, the crypto market is much riskier and more unpredictable.

☑️ Conclusion

In general, scalp trading can be aggressive and demanding and may be highly draining for untrained brains. Because the return from each trade is too small, more substantial capital is required to produce meaningful outcomes. And, of course, as there is a “no one size fits all” crypto trading strategy, one should utilize the techniques that best fit their risk-return portfolio. A lack of confidence in one’s abilities while dealing with risky assets may prove unproductive in the long run.

The most crucial lesson for scalpers to learn is likely risk management. Compared to choosing entry and exit points, choosing how to manage risk can have a much more significant impact on the financial performance of the investment portfolio.

‼️ Breaking crypto news this week:

1️⃣ Crypto wallet provider Blockchain.com is the latest company to soon cease to provide services to Russian nationals due to the latest sanctions by the European Union. Also, Crypto․com reportedly begins restricting Russian-based accounts.

2️⃣ Google announced a new deal with Coinbase that will allow a select set of customers to pay for its cloud services using digital currencies such as Bitcoin and Ether. It will take effect early next year.

3️⃣ WhiteBIT and NaUKMA will carry out joint activities in the field of development of blockchain technologies, regulation of virtual assets and circulation of cryptocurrencies.

4️⃣ After the Binance temporarily suspended its blockchain network after hackers made off with around $570 million worth of its BNB token. BNB Chain to boost European Web3 startups with DApp incubator program.

5️⃣ Crypto exchange Huobi Global announced that About Capital Management (HK) Co. Ltd, a Hong Kong based-asset management firm, became the exchange’s controlling shareholder following a successful buyout deal.