With thedevelopment oftechnology and thespeed of information exchange, trading strategies more and more often include scalping — frequently opening short-term orders in thedirection ofthemarket trend to gain afew points ofprofit. Successful traders manage to demonstrate -digit profit margins during the day, which is much more effective than many investment strategies. How to earn with such tactics, and a detailed explanation of all nuances and important points, will be discussed further.
The technical side of the issue
Scalping of cryptocurrencies has been used by many traders since the first days of trading platforms. “Crypto” is a highly volatile asset, and not leveraging the opportunities that appear every minute would be shortsighted.
Technically, scalping is divided into two types:
- high-speed
- high-frequency
The first type is considered manual trading, where the trader is responsible for managing orders. The second is used in discussions of automated exchange systems, where a special algorithm can place multiple orders per second.
The duration of holding a trading position in crypto scalping does not exceed 15 minutes, sometimes even less — one or a few minutes. Ideally, each trade aims to generate a profit increase to the trading account. Multiple positions combined create the potential of scalping. For beginners, this type of trading can be characterized as standard trading with small lots and over a narrow time frame. A small lot — one of the main conditions, as this allows closing the position with a single click and eliminates the need to gather a liquidity pool for executing a large order.
Often, even by looking at the order book in the terminal, one can determine that scalping is taking place — there, many small-volume orders are visible, which are quickly closed with counter-offers. Learning scalping involves mastering the ability to swiftly send trading orders to the market and understanding where the chart will move in the next few minutes.
From all this, the main conclusion can be drawn — the tool used for scalping must be sufficiently volatile, and cryptocurrencies have a hard time finding a worthy competitor. Even the least known assets can show opposite movements daily. And if a medium-term trader would call such a situation a “flat,” then for crypto scalping, the situation is very convenient. One reason is the ability to clearly identify levels where a significant move is likely to begin after crossing support and resistance levels, as breaking through these levels is always accompanied by volume growth.
A scalper can avoid the need to predict the trend; trading with minimal profit begins and ends within a single time interval.
Another advantage of scalping is that it can be part of a longer-term strategy. For example, when the main lot is opened on a daily timeframe with a planning horizon of several weeks, and scalping is used as an opportunity to generate additional income.
Basics of earning on crypto scalping
As already mentioned, a 1-2% price fluctuation is sufficient for a scalper, both in crypto instruments and futures. Many cryptocurrencies can show movements of 15-30% during the day, and at each specific time segment, there will be an opportunity to open a profitable short-term order. Entering within $50-100, a trader can take their coveted few points, minimizing risks at the same time. But to do this, your trading strategy must clearly define how many points of loss must be closed at market.
If a profitable order is considered to be 5-7 points, then the loss should be evaluated at least 30% lower, for example, 3-5 points. This way, mathematically, you can ensure that profitable trades outweigh losing ones. Before starting trading, it is essential to carefully study the commission sizes, as they must be considered when developing a profitable trading system. Otherwise, brokerage costs can negate an 80% profitable order coverage if the profit is offset by mandatory payments.
It is common for the number of losing trades for an average scalper to exceed the profitable ones. A well-calculated system allows you to profit even in unfavorable situations.
Ideally, a short-term analysis should be conducted. Even understanding the same technical levels can prevent a trader from entering the market at an unfavorable time. For example — selling when the price is close to a support level. Most often, the time frame for classic scalping is too small to gather enough market volume to overcome that level. The same rules apply to support.
For beginners, scalping trading is considered successful with a 60/40 ratio, while experienced traders find systems that ensure 70% or more profitable orders.
The lot size is another important parameter. It should be related to market capabilities. If volatility is sufficient, it is safe to open an order for several hundred dollars. But if the liquidity pool shows small positions, it is more rational to decrease the volume.
Statistics show that on good days, scalpers manage to grow by 25-30% from the start of the day. More impressive figures — up to 60% — are also possible. Anything higher is rare. An important factor for any scalper is to limit activity if several successive orders result in losses. In this case, it is better to take a break, analyze, and find the reasons for failure. Most often, such “trading breaks” are only beneficial.
The most common scalping methods
There are as many scalping systems as traders. Everyone tries to adapt their trading style to themselves. Some similar strategies stand out, and we will describe the most interesting ones below in simple words.
Pipsing
The most dynamic of scalping systems. 5 minutes — the maximum investment horizon, and orders are often not held in the market longer than 2-3 minutes. Due to high speed, there is no time for analysis, making it the riskiest. But if a trader decides to only trade buy positions in a general upward trend, pipsing can become profitable.
Beginners start with this method, as it helps hone technical skills.
Classic scalping
It involves preliminary technical analysis using indicators and specialized programs as starting points for opening positions. Most of the time, technical indicators generate signals at the slightest price fluctuations, which serve as a basis for buying a lot of the selected asset. The average duration of positions is 6-12 minutes.
Other nuances
A contentious issue is whether to use margin trading. Due to high risk, many prefer not to use leverage. The situation here is similar to classic trading — if you are confident in your abilities, no margin lending can hinder you; it can only increase profitability.
Another cornerstone of scalping is commissions. The minimum size is set by the least liquid or new platforms. The choice is whether to trade less popular instruments with minimum commissions or to have more liquid instruments but higher costs. Each trader must decide for themselves. The ideal approach is to test your trading system on a chosen platform (a week is enough for scalping). This helps understand what trading horizon, instruments, and conditions are most suitable and comfortable for a particular trader.
The choice of asset is the most critical aspect. Tools with frequent and inexplicable price changes, as well as low-volatility instruments, are useless. For this reason, scalpers are advised to stay away from highly volatile markets, choosing more predictable assets, and luckily, there are plenty of crypto assets on exchanges.
To scalp or not?
In conclusion, one can say that with the proper approach and discipline, as in short-term trading, good results can be achieved in scalping. And the cryptocurrency market is the best today for realizing the potential of a short-term trader.
