What is Scalping in Crypto and How Does It Work?

Scalping is a trading strategy that aims to profit from small price changes in crypto assets. Traders who apply this strategy are called scalpers.

Traders will make tens to hundreds of transactions a day in the belief that small price movements are easier to capture than large ones. Scalpers utilize technical analysis and value gaps caused by bid-ask spreads and demand flows.

This article will discuss scalping, how it works in crypto, the advantages and disadvantages of scalping in crypto, whether this strategy is difficult and how much capital is needed to do it.

What is Scalping andHow does it work?

Scalping requires precise timing and execution. Scalpers use small time interval charts such as one minute and five minutes to observe price movements.

Scalpers usually create a spread, namely buying at the bid price and selling at the ask price, so that the value differs between the two price centers. Scalpers try to hold their positions for a short time, reducing the risks associated with this strategy.

Additionally, traders who use scalping techniques must react quickly to take advantage of minutes or even seconds of short-term volatility. This way, scalpers can consistently accumulate profits over time.

But how do scalpers make money? Some scalping tools used by scalpers to gain profits include leverage, range trading, and bid-ask spread, as explained below:

Leverage 

Leverage describes how much traders contribute from their own pockets to increase their margins. Some scalpers use this method to increase their position size.

Range trading 

Scalpers involved in range trading watch for transactions to close within a predetermined price range. For example, some scalpers use stop-limit orders, which execute transactions at future market prices.

Bid-ask spread 

By using this strategy, scalpers can take advantage of the significant price difference between the highest bid and lowest ask.

Arbitrage

By buying and selling the same asset in different markets, arbitrage scalpers can take advantage of price differences.

How to Prepare a Crypto Scalping Strategy?

To set up a crypto scalping strategy, follow the simple steps below:

Select the crypto asset you want to trade

Make sure the asset has high liquidity and volume, as well as low volatility and spreads. Some examples of crypto assets that are suitable for scalping are Bitcoin (BTC), Ethereum (ETH), and Ripple (XRP).

Choose a trading platform that suits your needs

Make sure the platform has features that support scalping, such as fast execution, low fees, leverage, and technical indicators. Some examples of trading platforms that are popular among scalpers are Binance, Coinbase, and Bitfinex.

Select the technical indicators that will be used for scalping

Technical indicators are tools that help you identify trends, support and resistance levels, momentum, and optimal entry and exit points. Some examples of technical indicators that are often used by scalpers are moving averages, Bollinger bands, stochastic, MACD, and RSI.

Determine the rules and trading plan

Trading rules and plans are guidelines that help you make objective and disciplined decisions when scalping. You must determine factors such as position size, profit target, stop loss, risk management, and trading frequency.

You should also perform backtesting and forward testing to test the effectiveness of your strategy before using it in the real market.

Advantages and Disadvantages of Scalping in Crypto

Scalping in crypto has several advantages and disadvantages, namely:

Advantage

• Scalping allows you to profit from small price movements that frequently occur in the crypto market, which is known to be highly volatile.
• Scalping reduces your exposure to market risk, because you only hold your position for a short time and are not affected by long-term price changes.
• Scalping gives you a lot of trading opportunities, as you can make many transactions in a day and take advantage of every opportunity that arises.

Deficiencies

Scalping requires high levels of concentration, precision and speed, as you have to make split-second decisions and react to rapid price changes.

• Scalping requires large amounts of capital, as you have to use leverage and high transaction costs to increase your potential profits from small price movements.
• Scalping requires sufficient knowledge and experience, because you must be able to analyze the market using technical indicators and other scalping tools.

Conclusion

Scalping is a trading strategy that aims to profit from small price changes in crypto assets. Scalpers carry out many transactions in a day using technical analysis and scalping tools such as leverage, range trading, and bid-ask spreads.

Scalping requires precise timing and execution, large capital, and sufficient knowledge. Scalping has advantages and disadvantages, such as reducing market risk, providing many trading opportunities, but also requires high concentration, speed and experience.

How To Buy Crypto With Bittime

You can buy and sell crypto assets in an easy and safe way via Bittime . Bittime is one of the best crypto applications in Indonesia which is officially registered with Bappbeti. 

To be able to buy crypto assets on Bittime , make sure you have registered and completed identity verification. Apart from that, also make sure that you have sufficient balance by depositing some funds into your wallet . For your information, the minimum purchase of assets on Bittime is IDR 10,000. After that, you can purchase crypto assets in the application. 

Monitor price chart movements of Bitcoin (BTC) , Ethereum (ETH ), Solana (SOL) and other cryptos to find out today's crypto market trends in real-time on Bittime.

Read also:

What is Day Trading?

What is Margin Trading?

What's that Arbitrage Trading?

What Is Coin-Margined Trading?

DISCLAIMER: This article is informational in nature and is not an offer or invitation to sell or buy any crypto assets. Trading crypto assets is a high-risk activity. Crypto asset prices are volatile, where prices can change significantly from time to time and Bittime is not responsible for changes in fluctuations in crypto asset exchange rates.