What is scalping?
Description
There is a large number of strategies that traders use to successfully work and earn money on the crypto market. Scalping trading is one of the most popular strategies. What is scalping, variants of strategy use, scalping meaning, and types of this type of trading in our material.
What is scalping? Scalping is a trading strategy based on making numerous short-term transactions over a short period (for example, one day), each of which is aimed at making a small profit.
Scalping, defined as a strategy, is one of the most important tools for the trader in the market.
What makes scalping profitable
Scalping involves a trader making several quick trades and profiting from an asset's high volatility (price fluctuations).
What is a scalper?
A scalper is a user of digital assets who uses a scalping strategy. The high volatility of assets on the crypto market is a goldmine for the scalper. Unlike traditional markets, where prices change extremely slowly, cryptocurrency is always stormy. But don't be afraid, the storm is understandable and can be rideable.
By focusing on small profits on each trade, a scalper always builds up over the course of the trading day to make a cumulative and tangible profit. Scalping looks like the most attractive strategy for trading cryptocurrencies in terms of fast profits. You should agree; knowing that assets have high volatility, you can always buy and sell and still expect a guaranteed profit. Thus, even during a quiet daytime and, let's say, a calm sideways trend, a huge number of long and short trades can be made during the day. The main thing is to catch the right moment, apply methods of technical analysis and follow indicator signals (for example, RSI).
Scalping meaning
Let's sum up – in cryptocurrency trading, and scalping is advantageous because even in a single day, there are many more chances of making large profits than in traditional markets.
Basic principles of trading strategies scalping
As you already know, the main principle includes making several small transactions within a short time. However, there are some nuances to this statement:
-- Don't be greedy. Assess the trend and choose the right take-profit. For example, if you see that price should not go much higher shortly but understand that an increase (even small) is inevitable, it's better to settle for a small but guaranteed profit.
-- Remember the risks. While subject to basic valuation methodologies compared to traditional markets, the highly volatile crypto market is sometimes unpredictable. So, always hedge your funds with stop-losses. You should note that stop-losses are set automatically on the EXEX platform (for more details on EXEX risk management, see our article on the topic).
-- Always keep your finger on the pulse. Scalping trading is a pretty time-consuming way to make money. You will need to constantly monitor the charts and the price fluctuations and calculate the moment to enter/open a position. As traders like to joke, 'scalpers never have a day off.
In all this crypto trading madness, there's one big plus for both novices and professionals – EXEX has an automatic risk management system, an RSI indicator-based widget-assistant, a wide range of top cryptocurrencies to trade, and high leverage. By using leverage, together with the platform tools listed above, you will not only have an easier and faster understanding of trading, but you will also increase your capital.
Types of scalping trading
Besides good intuition, traders like to make their predictions using the following methods of scalping options:
Fundamental analysis in scalp trading
Fundamental analysis means studying the background news. In films and TV programs, you have probably seen that a trader has several monitors on their desktop, and one always shows the news channel. It's the same here – there's a whole layer of traders motivated to make decisions about this or that transaction based solely on the news.
An example of such behavior would be a situation when a trader monitors the main Twitter accounts of famous crypto enthusiasts, companies, or exchanges. So (in a recent case), seeing the news that Tesla has started accepting payments in DOGE coins, the trader realizes that this: a) popularises this cryptocurrency, b) increases its daily transaction volumes, and c) stimulates its growth by increasing interest in it among buyers. The trader then realizes that increased interest in the Altcoin will predictably increase its price. The trader buys a certain amount of that crypto and sells it at a higher price at the peak of the day's trading.
Technical analysis
Technical analysis is a comprehensive study of crypto assets price charts. We won't go into techniques, pattern studies, or explanations of support and resistance levels (see the 'Top 10 terms to help the novice crypto trader' article). The main thing is that traders who trust only their vision and technical analysis always focus on studying price movement patterns and decide to open a trading position based on their analysis.
Order book trading
The exchange interface often has an order book. In it, orders in the list to buy crypto are marked in green, and orders to sell are marked in red. By examining the order volumes in the order book in detail, the trader can see which orders are higher at the moment and in the short term. So, seeing that there are more orders to sell the asset, the trader understands that the asset will be massively sold, which means that the price will go down, and therefore a sell position should be opened.
Trading solely on indicator signals
Here traders use a wide range of stock indicators, oscillators, and other smart algorithms. The most popular ones are the RSI indicator, MACD indicator, and some kinds of 'moving averages.
Conclusion
The EXEX platform has developed a unique interface with simple and straightforward scalp trading tools to simplify the overall methodology. There is a canonical chart for technical analysis, an RSI indicator-based widget assistant, and a unique automatic take-profits and stop-loss system.
You can learn more about our training materials in the 'Traders' school' section to strengthen your basis for making the right decisions and choosing the right trading strategy. Remember, EXEX does not give trading advice, and it's up to you to choose your path and strategy. Start small, and you will get to the top!
