It is always advisable to make use of multiple crypto trading strategies, as each approach has its pros and cons. One of the tactics that are certainly worth considering is scalping.
What Is Scalping?
Scalp trading, or scalping, is a strategy in which a trader’s goal is to take advantage of small price differences. This approach doesn’t entail receiving massive gains at once, yet the small profits accumulating over time can add up to a substantial sum.
What You Need To Know About Scalping
As you could understand from the scalping definition, it is important for traders who use this technique to know how to analyze market movements and respond to them swiftly. Scalpers usually rely on technical analysis and use charts with a timeframe of 15 seconds to 15 minutes.
Some of the most common technical indicators used in scalping are:
- Moving averages
- Relative Strength Index (RSI)
- Bollinger Bands
- VWAP
- Fibonacci retracement
However, fundamental analysis can also influence trading decisions since coins with increased interest created by news or events are likely to have high volume and good liquidity for some time. This means a great opportunity for scalpers to generate profits, as they can take advantage of the increased volatility.
Two common scalping strategies are:
- Range trading. Scalpers using this approach wait for a price range to be established and trade within it. The idea behind it is that until the range is broken, the bottom of it will hold as support and the top will hold as resistance. It’s helpful to prepare for a breakout from the range by setting a stop-loss.
- Bid-ask spread. This strategy involves traders profiting off a significant difference between the highest bid and the lowest ask. It is best suitable for algorithmic or quantitative trading, which means that the field is dominated by bots.
Scalpers often try to boost their position size with leverage and use margin trading platforms and futures contracts. Yet, since the aim of scalping is to get profit from smaller moves with larger positions, it’s critical to be aware of slippage.
