What is scalping? This is a popular trading style that many traders prefer. To find the right Crypto trading method, traders need to research and experience a lot. In this article, Crypto Trading will introduce the Scalping trading method. If you want to know if Scalping is worth trying, don’t miss this article!
Scalping strategy method
Traders often use this method to aim for small profits but accumulate gradually. Why is that? Let’s learn more about the definition and conditions for using this method!
What is scalping?
What is scalping? Scalping is a term used to describe the act of “surfing,” holding positions for a few seconds or minutes. This is a method of short-term and frequent Crypto trading in the exchange market. Traders open and close multiple positions during the day to make small profits.
Scalping is a popular trading style among new traders. These traders are called scalpers. The goal of scalpers is to “surf” during peak hours. They make profits from a few pips to a few dozen pips and quickly exit the market.
Typically, they make 5-10 pips per trade and repeat this process several times a day. The small profits accumulate to create a significant return for the trader.
Why should you trade using the Scalping strategy?
Many investors will wonder: “Why should I choose Scalping among the myriad of methods? Is Scalping suitable for me? To answer those questions, follow the following content:
- One of the main reasons traders choose Scalping is the advantage of short-term trading with small fluctuations. Scalping helps to make profits faster than long-term trading, taking advantage of small fluctuations to bring high profits.
- In addition, scalping can help scalpers accumulate large profits. The principle of “small gains add up” when applied correctly.
- And with Scalping, investors have many opportunities to open orders and make profits in a day. At the same time, they can also increase their income and develop their Crypto trading skills.
Scalping requires you to be well-informed, analyze charts, and be willing to take risks. Even if you are interested, you need enough knowledge and skills before starting. Always be careful and think carefully before making any financial investment decisions.
See more: How to “get rich” thanks to crypto trading for trader
Conditions to become an investor following the Scalping strategy
Scalping is not suitable for all traders. So what conditions can investors apply the method? What is scalping?
- Continuously monitor the market
To be successful with Scalping, you need to monitor the market regularly so as not to miss the opportunity to make a profit. Because Scalping is a fast and small trading method. Scalpers must focus on observing price fluctuations, spending time investing in continuously monitoring price charts. Notably, the profit from each Scalping transaction is usually very small, plus spread and commission fees.
- Passionate about challenges, willing to face risks
Scalping takes place in a short period and is not based on market analysis, so the risk is very high. If you are not adventurous and do not accept risks, then Scalping is not suitable.
- Flexible and passionate about trading
In addition, Scalping is an ideal choice for flexible investors and Crypto trading enthusiasts. Because the trading time is very short, flexibility is important to catch the opportunity. And also to decide when to open and close orders.
- Know how to choose the right trading platform
To become a proficient scalper, choosing a reputable and quality trading platform is very important. Currently, information about Spread fees is often public on the exchanges, you can find out for yourself or discuss it with the exchange’s consultant.
- Not suitable for new, inexperienced traders.
Scalping is not suitable for new traders. They lack the acumen and experience to make accurate trading decisions and face risks. However, if you still want to try, you can practice on a demo account first.
Advantages and disadvantages of the method What is scalping
Any method How to make money from crypto has its pros and cons. And this method also requires a lot of skills. To know if Scalping is suitable for you or not, it is necessary to clearly understand its pros and cons. So what are the pros and cons of the method What is scalping?
Advantages of Scalping Crypto
- Quick Profit
This method takes advantage of small fluctuations in the market, helping scalpers make profits in a short period. Often, orders are opened and closed in just a few minutes. This allows them to know the results of the transaction immediately without having to wait for many days.
- Seize and take advantage of many trading opportunities
Scalping is done on very short timeframes like M1 or M5. It allows scalpers to open dozens, even hundreds of orders per day. This creates a flexible environment full of opportunities to make profits.
- Avoid psychological impact
With short holding times and closing orders immediately after opening, scalpers often do not have to worry about the psychology of market volatility. They do not need to constantly watch the charts and fear unwanted fluctuations.
- Not greatly affected by the news
When trading Scalping, scalpers often choose to enter orders when there is not much important news in the market. This helps them avoid the effects of sudden fluctuations due to news releases.
Disadvantages of Scalping Crypto
Besides, investors need to consider the disadvantages of the Crypto-Salping method to trade safely. The main disadvantages of the strategy What is scalping?
- High transaction costs
This method requires traders to open and close many orders in a short period, increasing transaction costs. In particular, the spread also increases, which is an important part of the broker’s profit.
- Risk of big loss if a stop loss is not set
In Scalping, not setting a stop loss can lead to huge losses. Some scalpers often think that setting a stop loss is unnecessary due to the short holding time of the order. However, this can cause great risk and lead to heavy losses.
No matter what strategy or style you use, placing a stop loss is a necessary rule. It helps protect your investment capital. Don’t take this lightly, because it can be the difference between success and failure in trading.
The difference between Scalping and Day Trading Strategies
Crypto Scalping and day trading are both short-term scalping strategy, but they are quite different. Scalping is essentially about taking advantage of short-term fluctuations. Day trading is about using a trading system for a single day. The main difference between the two is the holding period and the approach to the market.
- About transaction time
Crypto Scalping has very short trading times, with an average of 30 seconds to 2 minutes. Meanwhile, day trading usually lasts from 1 to 2 hours or even half a day.
- About trading volume
Scalping has a large trading volume. Day Trading has an average trading volume, sometimes trading with a slightly larger volume.
- About the level of risk
ScalpingCrypto is suitable for people with high-risk tolerance. Day Trading has a lower risk level.
- About trading experience
Scalpers are usually less experienced, even new traders. While Day Traders are usually professional investors and have more experience. For them, choosingScalping is a serious decision, based on a deep understanding of the market.
- About the time to receive results
Scalpers get results instantly. But Day Traders have to wait longer, even until the end of the day.
Each method has its advantages and disadvantages and is suitable for different investors. After understanding the difference between day trading and What is scalping investors must consider it carefully. Each investor will choose the method that suits their personality, knowledge, and goals.
See more: Open an Bybit account – explore the crypto exchange
Some effective strategies in What is scalping
Scalping is a trading method that can bring quick profits, but it also comes with high risks. Therefore, understanding what is Scalping strategy is extremely necessary.
Combining Crypto Scalping with indicators increases the success rate to nearly 90%. Profits will increase rapidly if applied correctly and with a strict closing strategy. Here are the indicators that help bring optimal profit results for scalpers.
- Moving average
Moving average (MA), is a technical indicator that helps reduce fluctuations and identify real market trends. Using the MA indicator when trading scalping helps identify price trends and eliminate random fluctuations. Thereby, exploiting market fluctuations, predicting directions, and developing reasonable trading strategies.
- RSI Index
Like MA, the RSI indicator is a popular tool for candlestick chart analysis. RSI fluctuates from 0 to 100. It determines the level of recent price fluctuations and overbought and oversold zones. Combining MA and RSI increases the effectiveness of Scalpingstrategy in Crypto.
- Parabolic SAR indicator
Parabolic SAR helps identify price trends and parabolic reversal points. This allows traders to know when to close their positions. Using Parabolic SAR in short-term trading helps to measure short-term momentum. And find appropriate stop-loss points.
Conclude
Scalping is a trading method that can bring quick profits but also comes with high risks. Hopefully, through the above article, you have a better understanding of What is scalping and whether it is suitable for you. Follow Crypto Trading to explore and find the Crypto trading method that is right for you!
Questions related to the scalping method
Who should not choose scalping?
New traders and those who are not keen on high risks should not choose scalping because it requires good risk management skills and the ability to make quick decisions.
What is the biggest disadvantage of scalping?
The biggest disadvantage of Scalping is high transaction costs due to many orders being opened and closed continuously, and the risk of large losses if stop-loss is not set properly.
What are the main advantages of scalping?
The main advantage of scalping is the ability to make quick profits and create many intraday trading opportunities.
