The Scalping strategy is a trading strategy for experienced Crypto investors. However, for new investors, Scalping trading is still a strange concept. Below, Crypto Trading will help you learn in detail about this trading strategy with 3 most effective and potential implementation methods.
What is Scalping Trade and Who Should Apply This Strategy?
The scalping strategy is a swing trading method, taking advantage of many transactions to make small profits. It is a short-term trading style that many traders love to use. Scalping orders are usually only open for a few minutes, never leaving orders overnight. Even rarely over the M30 time frame.
What are the characteristics of What is scalping?
- Short-term trading from seconds to minutes
- Take advantage of small market fluctuations to trade, so you need to be constantly observing so as not to miss any fluctuations.
- Traders who want to trade Scalping need to know technical analysis and know how to use indicators and charts. This method mainly uses technical analysis, not fundamental analysis to trade.
- High-profit rate thanks to placing many orders in a day.
With the above characteristics, experienced and decisive investors will be very suitable for this method. Moreover, traders who do not have much time can also consider choosing Scalping to trade. When you have enough knowledge and skills, you can successfully trade Scalping. Otherwise, the pressure will defeat you because this method requires high concentration and sharp analytical skills.
What are the advantages and disadvantages of Scalping Trading?
Advantage:
- Simple: Trading with this method is quite simple, placing orders is easy according to real-time market
- Low risk, high profit: The profit from the Scalping strategy is not too high, however, by continuously placing orders, traders can collect small profits to create large profits. The volume of each transaction is also quite small, so if there is a loss, it will not be too much.
- No worries about news affecting the market: With this How to make money from crypto, you won’t need to pay attention to the news, just focus on the chart.
Defect:
- High costs due to a large number of open orders. So if you do not optimize costs, your profits will be much lower than what you earn.
- Risks in technical analysis, order delay risks, platform risks… Scalping results are calculated in seconds and if everything is delayed even by 1 second, you may miss the profit.
- Trading according to the Scalping strategy is very stressful mentally and will cause fatigue. Especially because of swing trading, requires high concentration when trading.
See more: How to “get rich” thanks to crypto trading for trader
What is the method to trade the Scalping strategy?
Understanding what Scalping trading is, traders also need to know how to implement this method. Below is the general method that many professional traders are applying:
- Build the safest risk management plan, and calculate costs to balance profits. Determine the most reasonable R:R ratio according to the strategy.
- Combine multiple trading strategies to increase Scalping efficiency: Instant trading, arbitrage trading…
- Focus highly on each transaction, and adhere to the principle of leaving the market when the number of wins/losses reaches the allowed limit.
With this method, traders can deploy a Scalping Strategy in 2 forms:
- First, choose to trade a large amount of assets with small positions. That is, at the same time, the trader can trade many different coins with a fairly small volume of each order. The profit from each order may only be a few points, but thanks to opening many orders in many assets, the amount earned will be equivalent to a large order. The risk of this method is quite low, but it will be difficult to control because too many orders are executed at the same time.
- Second, only have a few orders with the maximum trading volume possible. That is, the trader only opens 1-3 orders, puts capital into them, and even uses leverage to increase the position. This way can help you make a huge profit but the risk is equally great.
The most effective ways to apply the Scalping strategy
What is the strategy to succeed with Scalping trading? The general principle is that traders will trade according to the price channel during the period when the asset has high volatility, prioritizing coins with strong liquidity. In this method, technical tools and indicators are fully utilized, in which the following 3 methods are used by most traders for Scalping:
Using trend lines to implement the Scalping strategy
With this method, traders can enter a type of order right from the start. The main goal is to take advantage of the trend line to profit from corrections or retracements. Short-term trends will be maximized for traders to deploy surfing strategies.
The 2 trend lines used in this Scalping strategy are the Stochastic Oscillator and the Awesome Oscillator. These are 2 moving averages that can help traders identify the correct price trend:
- Set default levels 20 and 80 for the indicator.
- H1 frame analysis: If both lines are pointing up, then place a Buy order. The target profit is 5 – 10 points. Place a stop loss a few points away.
- H1 frame analysis: If both lines are pointing down, then place a Sell order.
Using the Ichimoku indicator for Scalping
Unlike conventional indicators, Ichimoku is more complex in formula. But in return, it will form an independent basic trading system for traders. When using the Scalping strategy, traders can use this indicator to trade:
- Buy order: The Tenkan line intersects the Kijun line below the chart
- Sell order: The Tenkan line intersects the Kijun line above the chart
When these lines intersect, traders should quickly place orders, just a few candles later the price can change. Orders are closed after 1 – 3 candles or when there is a confirmed reversal signal.
Although the Ichimoku indicator does not generate signals frequently, its signals are quite accurate. It is important that traders ensure speed when trading. Within 5 minutes, a good trader can earn 6 – 8 points if he takes advantage of this indicator. Scalping trading will no longer be too complicated when trading with Ichimoku!
See more: Instructions for opening an OKX exchange account
Scalping Strategy Using Market Psychology
In essence, this is a Scalping strategy based on price fluctuations. Because price is a reflection of market psychology, price movements are an important factor in determining a trader’s entry point.
In this way, traders will use the MA line. From there, calculate the probability of breaking the price channel’s boundary. When the price breaks the boundary, it may just be an inertial price movement. It is not a sign that a new trend is starting, but it is simply a price movement.
Even within the channel, price movements can become chaotic. Market sentiment changes and so do targets. Making good use of signals will help traders identify potential turning points within the price channel and make appropriate Scalping decisions.
Conclude
There are many ways to use the Scalping strategy in trading. Traders may not even need to use indicators but only need to use market orders and pending orders to trade, taking advantage of the smallest time to make a profit. Read more articles from Crypto Trading to gain more experience in Scalping investment, you will definitely be surprised by the effectiveness of making money from this method.
FAQs
What is the way to optimize costs when Scalping trading?
Traders should choose exchanges with low fees and transparent transaction fees. Calculate the fee to pay for each transaction and balance it with your strategy to see if it is suitable.
Is Scalping only suitable for volatile markets?
Since this is a way of trading that takes advantage of small waves, traders can even trade on days when the market is not very volatile.
How long does Scalping usually take?
Each transaction only lasts 1 – 5 minutes, never more than 1 hour, and never keeps orders overnight.
