Crypto traders have many ways to profit. They are not afraid of risky strategies and spend a lot of time monitoring price changes. For such people, scalping is the preferred strategy for net profits.
Let’s discuss what scalping is, learn how it works, and share tips to help you prepare well and start trading cryptocurrencies.
What is Scalping?
Before talking about scalping strategies, let’s take a look at some terms. Scalping is a short-term trading strategy that a trader uses to make frequent small profits from minor price changes. They can then add up to a larger amount.
This strategy is popular in the cryptocurrency market because of its high volatility. Scalpers often use leverage to open a large number of trades.
Crypto traders and forex traders react quickly to price changes. Unlike holding a position for hours, days, or weeks, when scalping, a trader usually reacts within minutes or sometimes even seconds. Consistency and speed are the main factors determining scalping success.
Scalping requires a currency pair with high volatility. Significant price fluctuations can bring big net profit, but scalpers use short-term bursts more often. If you compare scalping to intraday trading or swing trading, scalping has relatively low risks as well as quick profits. However, the results largely depend on the trader’s persistence, self-discipline, and a large number of assets.
Profits from Scalping
Every trader develops a personal trading strategy to get the maximum possible profit, but it is possible to distinguish some general similarities between them. Scalping is based on technical real-time analysis; a trader spends minimum time for fundamental analysis of the market.
On average, scalpers open positions approximately once every 5-10 minutes. A timeframe of five minutes is considered to be the most preferable because it works with most scalping strategies and can be analyzed, which can help predict price movements.
There are two completely different approaches to cryptocurrency scalping – manual and automatic. If a trader trades on their own, they need to focus on the movement of the market and constantly monitor the trades.
An automated trading system implies that scalpers create a unique program for their strategies. It is designed to reduce risks and automatic execution of deals while traders cannot follow the situation.
In most cases, scalpers have to make a trading decision on a specific asset in a limited amount of time. In this case, intuition is the only assistant to the trader
Cryptocurrency Scalping vs Forex Scalping
If you’re in doubt about where to start online trading, let’s look at the most obvious differences and similarities between the two types of scalping.
If you compare forex and cryptocurrencies, you will find that they have 3 similar features:
- Supply and Demand. The price of any currency, whether cryptocurrency or fiat money, is determined by the supply and demand factor, overbought and oversold.
- Digital Platforms. Both markets are traded over the internet, allowing many currencies to be traded on different digital platforms.
- Bots. Both are automated trading, you just need the right tools. With the help of bots and artificial intelligence, traders can scalp anywhere and anytime.
Next, let’s look at how they differ.
Any novice trader would assume that Forex and cryptocurrency are almost identical. However, the truth is that they have different goals and objectives. Unlike cryptocurrency, the forex market is older and universally recognized.
The cryptocurrency market is a relatively new concept and is characterized by volatility and significant price fluctuations. Consequently, strategies must be different in each case. Four following features should be taken into account:
- Volatility. Cryptocurrencies tend to be much more volatile than fiat money. An experienced scalper enjoys the opportunity to make large profits on the crypto market.
- Intermediaries. Forex trading usually involves an intermediary, which leads to higher costs and fees. In the crypto market, there is no need for an intermediary. Thus, commission costs will be much lower.
- Time. The cryptocurrency market is open 24/7 on any day of the year, allowing anyone to trade at any time. Exchange-traded forex markets, on the other hand, are only available five days a week during business hours.
- Regulation. Forex trading is regulated by law and centralized governments support traded fiat capital. Cryptocurrencies are only recognized in some countries. Consequently, the crypto market is much riskier and unpredictable.
So, scalping is not suitable for all traders. If you are a newcomer who just took the plunge into the crypto industry, you might want to try something less complicated. However, if you are confident in your abilities and ready to get into business, scalping is not a bad place to start.