15.6 min read
Crypto Scalping ➤ Making small wins with rapid trades
A comprehensive guide to crypto scalping trading strategies by Btcman 💲 Explaining the principles of scalping crypto and discussing techniques, platforms, and bots for executing rapid trades and capturing small profits in volatile crypto markets.
Written byRazum Capital
September 11, 2023
Scalping in crypto is a trading strategy aimed at achieving small profits through quick transactions in the cryptocurrency market. It allows investors to execute more frequent trades, taking advantage of short and instant price fluctuations in cryptocurrencies, and earning a modest but stable income. The strategy requires rapid responses to market events and effective risk management.
For those looking to trade cryptocurrencies, scalping crypto is important because it provides the opportunity to generate profits even in highly volatile market conditions. It also enables traders to gain experience and develop analytical and trading skills. However, it's essential to remember that scalping crypto trading demands a high level of attention, discipline, and caution, as the risk of loss can be significant with a careless approach.
The purpose of this article is to elucidate the essence of cryptocurrency scalping and explain why it is crucial for cryptocurrency traders.
What is scalping in crypto?
Crypto trading scalping is a strategy where a trader aims to execute numerous small trades using short timeframes and instant price fluctuations.
What is crypto scalping? Key principles of scalping include:
- executing trades as quickly as possible to capture the smallest price movements;
- trading on very short timeframes, such as minutes or seconds, to identify instant opportunities;
- scalpers typically seek small profits from each trade to mitigate potential losses;
- keeping risks under control and setting protective stop-loss orders.
The characteristics of crypto scalping encompass a high volume of trades, the need for a fast internet connection, and powerful equipment to swiftly react to market events. It is also crucial to maintain discipline and composure, as this method can be demanding and stressful due to high market activity.
Can you make money scalping crypto?
This method can be used to make money by employing the cryptocurrency scalping strategy. However, the success of this strategy largely depends on individual skills, experience, and market conditions.
Examples of successful crypto scalpers who have achieved profits include:
- A trader known as "BitMEX Rekt" published their results on the BitMEX platform in 2018, demonstrating a profit of over 900% over a specific period using scalping crypto meaning;
- In a report by Bitwise Asset Management in 2019, it was revealed that cryptocurrency scalpers can profit from market volatility and quick trade execution.
Trading cryptocurrencies also involves the risk of capital loss, so it's important to study the market and develop skills before embarking on cryptocurrency scalping.
Is scalping crypto illegal?
Overview of the situation in the American market:
- In the United States, cryptocurrency scalping is regulated by the SEC (U.S. Securities and Exchange Commission) and CFTC (Commodity Futures Trading Commission). The legality depends on the nature of the activity and the trading platform.
- Canada also regulates cryptocurrency scalping through the Securities and Exchange Commission (SEC) and other authorities. Here, the cryptocurrency market is subject to strict oversight.
- In various European Union countries, regulators may have their own rules regarding cryptocurrency scalping. EU-wide standards also include requirements for KYC/AML (Know Your Customer/Anti-Money Laundering) and the licensing of exchanges and brokerage firms.
Rules and regulations can change, so it's important for traders to stay updated on regulatory developments and consult with lawyers or financial experts to ensure compliance with relevant requirements.
How to scalping crypto
Getting started with best time frame for scalping crypto:
- Choosing a cryptocurrency. Consider your choice of cryptocurrency for trading. Popular cryptocurrencies like Bitcoin (BTC) and Ethereum (ETH) can be good options due to their high volatility and trading volume. It's also worth exploring lesser-known altcoins, but exercise caution and conduct your own market analysis.
- Chart setup. Configure charts on your trading platform for analysis. Set timeframes, such as 1-minute, 5-minute, or 15-minute, to monitor short-term price movements. You can use indicators like RSI, MACD, or Bollinger Bands on the charts for technical analysis.
- Setting goals and risk management. It's essential to set profit targets and maximum loss limits before each trade. For example, you may decide that profit should be no less than 1% of your capital, and the maximum loss should not exceed 0.5%. Additionally, consider different capital management crypto scalping strategies, such as a fixed percentage of capital or the use of stop-loss orders.
Thorough analysis and caution are key elements of successful cryptocurrency scalping, along with continuous refinement of your strategy in response to market changes.
The best crypto for scalping
The Best crypto for scalping:
- Bitcoin is a popular asset for scalping due to its high trading volume and volatility;
- Ethereum is also a frequent choice for scalping, thanks to its active market and diverse opportunities;
- Altcoins like MATIC, ATOM, BNB, and others, while less known, can be volatile assets suitable for scalping. Trading altcoins can potentially increase the balance of your assets.
Volumes and volatility:
- Choose cryptocurrencies with high trading volumes as they provide easier access to liquidity and reduce the risk of large spreads.
- Volatility can increase during various periods, including significant news events, release announcements, or market changes. Additionally, volatility can be higher during active crypto trading sessions and market activity peaks.
It's also crucial to stay informed about market events and changes to make informed trading decisions.
The best crypto scalping indicators
The best indicators for scalping crypto can assist traders in analyzing asking price movements and making trading decisions based on technical scalping crypto signals. Let's explore two popular indicators:
Relative Strength Index :
- when RSI crosses above 70, it may indicate an overbought market, which could be a signal to sell or close a short position;
- conversely, when RSI crosses below 30, it may suggest an oversold market, signaling a potential buy or entry into a long position;
- exiting a trade can be justified when RSI risk-returns to the 50 level, as it may indicate a loss of strength in the current trend.
Moving Average Convergence Divergence:
- An entry signal may be observed when the MACD histogram crosses the zero line above (indicating an upward trend) or below (indicating a downward trend). This can signal a change in momentum and be a trigger to open a position in the corresponding direction.
- Exiting a trade can be justified when the MACD histogram crosses the zero line in the opposite direction, signaling a potential reversal.
Traders should also test and optimize their strategies using these crypto scalping indicators, tailoring them to their specific needs and trading style.
The best crypto scalping platform
When selecting a best crypto scalping platform, pay attention to the following aspects:
- Interface. It's important for the interface to be intuitive and provide quick access to tools and charts.
- Order Types. The platform should support various order types, including market and limit orders, for effective trade management.
- Analytics. Some platforms offer advanced analytical tools such as indicators and charts for technical analysis.
Choose a crypto scalping platform that best suits your needs and skills, and ensure that you feel comfortable trading on it.
The best crypto scalping bot
Some popular crypto scalping bots include 3Commas, HaasOnline, Cryptohopper, and others. To set them up, you need to:
- Choose a cryptocurrency trading pair and timeframe;
- Configure parameters for entering and exiting trades, such as entry and exit signal conditions, position sizes, stop-losses, and take profits;
- Set the crypto scalping bot to monitor market events and execute the strategy automatically.
The best crypto scalping bot can simplify the scalping process, but it's essential to monitor their performance and settings to ensure they align with your strategy and risk management.
The best exchange for scalping crypto
Choosing an best crypto exchange for scalping:
- Volumes and liquidity. Opt for exchanges with high volumes and liquidity to gain quick access to trades and avoid significant spreads.
- Commission costs. Examine the exchange's commission costs and look for ways to minimize their impact on your profits, such as utilizing VIP statuses or volume-based fee structures.
Crypto scalping strategy
Basics of scalping crypto strategy:
- Risk and сapital management. Avoid taking excessive risks and adhere to capital management rules. Never risk more than a defined portion of your capital on a single trade.
- Planning. Have a clear entry and exit strategy in place before starting scalping. Include asset selection, goal setting, and stop-losses in your plan.
- Psychology. Maintain emotional resilience. Avoid emotional reactions to market fluctuations and stay disciplined while scalping.
5-minute crypto scalping strategy
If the price on a 5-minute chart reaches a new low and bounces upward, it can be a signal to enter a trade. For example, if the chart's low is $10, you enter a position after the price reaches $10 and bounces upward.
To determine profit-taking and stop-loss levels, use Fibonacci extensions.
For instance, if after entering the trade, the price reaches $12, you can set a profit-taking level at 1.618 Fibonacci extension from the move between the low and entry ($12 + ($12 - $10) * 1.618 = $13.36). The stop-loss can be placed around the 0.618 Fibonacci level ($10 + ($12 - $10) * 0.618 = $11.23).
This 5-minute crypto scalping strategy utilizes the rebound from the previous low and Fibonacci extensions to determine entry points, profit-taking, and stop-loss levels on a short time frame, such as the 5-minute chart.
1-minute crypto scalping strategy
For using a 1-minute chart, you can apply the "breakout" strategy. For example, if the price has been trading within a narrow range trading for a certain period and suddenly crosses above a specific level (e.g., the level of a previous high), it can be a signal to enter a trade in the breakout direction.
Example: If on a 1-minute chart, the BTC bid price has been ranging between $40,000 and $40,100 and suddenly crosses above the $40,100 level, you can consider this as a signal to enter a buy trade on BTC. To set profit-taking and stop-loss levels, use your strategy and risk profile. For instance, set a profit-taking level at $40,200 and a stop-loss at $40,080.
This 1 minute crypto scalping strategy is based on short-term breakouts on a 1-minute chart for quick entry and exit in hold trades.
Crypto scalping bot strategy
The "EMA crossover" strategy utilizes two exponential moving averages: a short-term and a long-term one. An example of such a strategy could look like this:
- Entry Signal. The bot tracks the short-term (e.g., 5-minute) and long-term (e.g., 15-minute) EMAs. When the short-term EMA crosses above the long-term EMA from below, this can be a signal to enter a buy trade.
- Exit Signal. The bot can set a target profit-taking level at a certain distance from the entry, e.g., 1% from the entry price. You can also set a stop-loss at a certain distance from the entry price to limit potential losses.
Popular crypto bot scalping bots that traders can use include:
- 3Commas: This bot allows for various strategies, including the use of indicators and EMA crossovers;
- HaasOnline: It offers a wide range of settings to create custom strategies, including technical analysis and EMA crossovers;
- Cryptohopper: This bot offers diverse strategies, including EMA crossovers, and has automated scalp trading capabilities based on signals.
This is just one example of a crypto scalping strategy, and many other options are available for customization in bots that assist day traders in analyzing markets and making real-time decisions.
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