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BackProfiting from Short-Term Trades
Being an accessible and inclusive financial space, crypto makes it possible for everybody to join in and benefit on their own terms. As far as trading and investing goes, this actually means you can earn money by choosing a specific strategy that you understand and fits your profile.
Some people prefer to #hodl their assets for long periods of time. This, of course, has proved to be a very good idea throughout time. Some other folks, however, are having success by approaching the markets from a different angle. With scalping trading, some traders manage to grow their portfolios by making incremental profits in very short time periods. The key for this technique lies in the ability to replicate that success with every opportunity the market offers, sometimes even several times a day. If scalping trading is something you have been considering, read on to learn more about it and understand how you can integrate it into your daily crypto habits.
In this article, you will learn:
What Is Scalping Trading?
Scalping Trading Strategies
- Range Trading
- Bid-Ask Spread
- Leverage Scalping
How to Integrate Scalping Into Your Trading
What Is Scalping Trading?
Simply put, scalping is a trading strategy that involves holding open positions for a very short time, often minutes or seconds, to take advantage of small price movements. The aim is to make many small trades whenever the opportunity is given, compounding up to a significant profit over time. Said differently, a trader can use a fast and efficient execution system to profit from incremental market movements, given that consistency is achieved over time.
Scalping can be applied to any asset and market, including forex, stocks and cryptocurrencies. However, scalping the crypto markets can potentially hold more opportunities on a daily basis, given that a lot of crypto assets easily move up or down 5-10% each day. With Forex and Stocks, markets are less volatile, allowing little room for such maneuvers.
How about earnings? Even small profits like 0.5% – 1% – if repeated several times a day – can slowly and steadily grow your holdings. Scalping can be done using an 📈 exponential investment system – keeping all profits and investing them over and over again will accelerate the rate at which your portfolio is growing.
Speaking of which, it’s mandatory we factor in the exponential power of numbers. Investment at large, and scalping trading more specifically, can greatly benefit from a compounding, exponential system. Jump to our Learning Lab to learn how:
💡 Read more about how you can Make Money Work for You with exponential investment systems. 💡
Scalping Strategies: Range Trading, Bid-Ask Spread & Leverage Scalping
With scalping trading, there are several angles you can take in order to ensure your portfolio keeps heading north with most of your trades.
Range Trading
The range trading system allows you to set the price range in which your trades will be executed. By accurately analyzing the historical resistance and support levels of the asset in question, you can pre-determine the probable “range” the market will likely exhibit going forward. Therefore, your short-timed trades will be executed within this price range, as you consider it to be a predictable market behavior.
In other words, range trading means identifying the lowest and highest price you think the market will reach and then profiting from any short upswing in that range that can give you small profits, in the range of 0.5% and more.
Bid-Ask Spread
The bid-ask spread is the difference between the highest bid and lowest ask price for which a security can be purchased or sold. This is important for a scalper because the lower this difference, the larger the potential profits will be if they are traded at exactly that point.
When the spread is narrow, it means the market is liquid and there are many buyers and sellers, making it easier to execute trades at the desired price. A narrow bid-ask spread is ideal for scalping traders who aim to make a small profit on each trade. On the other hand, when the bid-ask spread is wide, it can be more difficult to execute trades profitably, as the difference between the bid and ask prices is larger, meaning traders need to make a larger profit to break even.
Leverage Scalping
A trader may also use leverage to profit from market volatility. Leverage allows traders to amplify their trading results. For instance, if you use 5X leverage, even small profits of 2% will actually mean 10%, and all of a sudden, scalping is not such a small return margin strategy anymore.
With leveraged trading specifically, it is crucial to be diligent in risk management, setting stop-loss orders, and not taking on positions that are too large for your risk tolerance. This strategy can be a very dynamic and fast way of trading. It is designed for people who can think fast and act fast when the situation calls for it. The nature of scalping on margin leaves no room for doubt and hesitation. Why? Because even incremental moves can mean big profits or losses. You will need to take advantage of such small margins that might be available in the markets for seconds only.
How to Integrate Scalping Into Your Trading
Scalping the crypto markets involves some other things besides simply pressing the “Buy Bitcoin” button. Although more complex in nature, with the knowledge and technology available, scalping crypto can serve anybody willing to put in the work and the discipline. Here are some things that can help you better your scalping journey:
Chart Analysis
If you want to become an expert scalper, it will imply reading charts as your second nature. The markets reflect everything, and charts are a good indication of market behavior. When you master the chart analysis, you have a better chance of understanding where the markets have been and where they are going next.
💡 Read this blog to learn How to Read Candlestick Charts and better understand market behavior. 💡
Money Management
For scalping to set you on a path toward growth, you must apply a flawless money management scheme. Above all, this means you function by a predefined, profitable risk/rewards ratio. This implies the right position size, the right number of trades per day and using stop-loss to name a few. All this can limit your exposure to risk while creating the framework for your profits to slowly add up.
The amount you invest with each trade, as well as how much profit you take and how you limit your losses should not be subjected to emotional and impulsive decisions. Instead, these boundaries should be well-thought-out and planned in advance, structured in such a way that your game has a positive risk/reward ratio. In other words, your manner of trading should have a positive expected value. And it starts with…the money.
Discipline & Consistency
The best scalping strategies and techniques will be worthless if you lack the discipline to execute properly and the consistency to replicate the success on most days. Scalping, day trading and other such dynamic strategies demand a special mental and emotional composure. You need to have the temper to wait, objectively analyze and then act at the right time. In other words, you need to be able to calculate position size, stop-loss and risk/rewards ratio on spot, and instantly buy and sell as the markets are making opportunities available.
💡 But how do you develop such a state of mind? You need to get some skin in the game, of course. And one of the best ways to do so is to start trading on demo first. Trading on demo will give you a good sense of the markets without risking your real funds, allowing you to learn and become a better trader and investor. 💡
📈Try the Coinmetro Demo Platform 📉
Ultimately, scalping trading cryptocurrencies can return good profits to anybody willing to walk the walk. But at this point, you probably understand that it’s a different walk than simply buying and holding some Bitcoin.
With scalping, your main objective should be to replicate the consistency as often as you can. The profits will be small, and for a while, your portfolio will look like it’s on diet. However, your focus should be on the next market opportunity and on keeping up the consistency. Give yourself 3 months to look back and analyze the progress. Then give yourself 6 months and then 1 year. Before you will realize it, you will get skilled at scalping profits out of the crypto markets, and if you use the right exponential growth system, your crypto scalping endeavor will grow legs. 🏃♀️
Keep us posted with your scalping trading journey on our Discord and Telegram community channels – a place to learn, chat and have fun every day. Should you need any help, feel free to reach out to our world-class Customer Support Team via 24/7 live chat or email at hello@coinmetro.com.
To become a Coinmetro user today, Sign-Up now, or head to our new Exchange if you are already registered and experience our premium trading platform.
