“Scalping” sounds pretty grim, but it’s a simple technique that you can apply to conventional trading and crypto. Here’s a little insight to this definition of finance, and how you should put it into practice.
Scalping in traditional trading
Scalping is most widely used by Forex traders, and includes apparently low-risk profiles, requiring a lot of planning and intense trading.
A scalper wouldn’t have positions held overnight. Scalping’s goal is to manipulate predictable price movement throughout the day. This is important, as the profits per transaction are almost guaranteed to be low.
Arbitrage and spread scalping are two common methods to scalping. Arbitration involves finding a difference between the offer and asking for rates that are significant enough between two different brokers and buying from one broker and selling to another for a profit that is locked-in. Spread scalping involves taking advantage of the same sort of price discrepancies but with the same broker. Note that brokers prohibit this activity in many situations.
As we’ll demonstrate, scalping in traditional markets has fundamentally different characteristics to cryptocurrency trading.
Implementing scalping in crypto trading
As you can see from the example in Forex, scalping is sometimes very difficult and involves skill and effort. As before, a crypto market scalper can take advantage of small price swings to lock in small gains.
The scalping investor sees an upward trend in the alt, goes long on ALT and short on BTC, and has an exit strategy of selling back to BTC as soon as the trade is realized with a profit, as opposed to normal trading where an investor might “let the profit run” for a longer period.
This requires the crypto market’s technical analysis to determine the outlets in the demand and then compete against price incentives outside that network. For example, a scalper will buy an overpriced asset and then sell it immediately for a marginal gain. Essentially, the cryptocurrency trader takes advantage of rising volume of trade in just a few seconds to make small gains.
Scalping trading is hard to get rich from crypto but the uncertainty of the market makes it very likely. The drawbacks are that bad things can happen, and although the scalper isn’t exposed to losing too much on a single trade, if a large number of these trades go South they may suffer heavy losses.
Is scalping trading for you?
Scalping is time-consuming even when it works correctly. You need to track the prices of many crypto assets (e.g. Bitcoin, Ethereum, XRP) if you are making full use of the strategy, you need to be able to quickly execute trades, and you need a big enough bankroll.
As you can imagine, that requires a huge amount of technical knowledge. Anyone can get started and since one’s potential losses are mostly minimal, it’s also a useful practice to help learn technical analysis, just don’t expect to make a lot of income.
If you still want to pursue this approach, make sure first of all that your productivity calculation involves factor fees. You can then scalp on any exchange that helps you to transact quickly enough.
Trading with Smart Crypto Bot
Smart Crypto Bot is a robust market-based automated crypto trading bot. It is a graphical representation of the style and parameters of your trading which makes it much easier to use. If you are interested in trading Bitcoin or any other available crypto coins on the market, you are likely to be more successful by using SmartCryptoBot.