Cryptocurrency has been gaining a lot of attention in the past years. One reason it’s becoming popular with many is its volatility and high return over the years. Other cryptocurrencies‘ prices have increased astronomically over the years. Those who’ve let their money sleep on Bitcoin and Ethereum for years have seen their investments increase by hundreds or even thousands of percent.
Some say that only those who can wait years or even decades will benefit from investing in cryptocurrencies. However, there’s a way to make money from it even if you’re not patient enough to wait it out, and that’s by scalping. With the help of the best crypto scalping bot and the right strategy, many are making money from small price movements in the market.
What Is Scalping?
Cryptocurrency scalping is a trading strategy that seeks to profit from small market movements in a short amount of time. The goal is to open and close numerous daily trades and make a small profit from each trade. Easy right?
6 Things You Should Know Before You Start Scalping
Even though it may sound easy, scalping is a high-risk and high-reward strategy that’s not for everyone. This article will go over what you need to know about crypto scalping to be equipped with the right knowledge before you start.
1. Trading Bots Can Streamline Crypto Scalping
If you’re unfamiliar with bots, they’re computer programs that can automate repetitive tasks. In the case of trading, numerous bots can do things like place trades, monitor the market, and set alarms.
However, some crypto exchanges might not allow bots, so it’s always good to check if your exchange does allow it, like Pionex. Pionex is great to use for many scalpers as it offers built-in bots for free.
2. Understanding Price Action Is A Must
Many scalpers rely on price action, which is how a cryptocurrency’s price has moved in the past. Price action can help you get an idea as to where it might go in the future.
The best way to understand price action is by using candlestick charts. These charts show an asset’s open, close, high, and low prices for a specific period.
3. You Need To Be Able To Stomach Some Risk
As with any kind of trading, scalping involves risk. Since you’re opening and closing many trades, there’s always the chance that one or two might not go your way. That’s why proper risk management is essential to being a successful scalper. Traders who follow proper risk management know when to take profits and cut losses.
4. Going For Bigger Profits Can Be Counterproductive
One mistake many new scalpers make is going for too much profit per trade. While it’s always great to aim for big profits, you must remember that scalping is about making small but consistent profits.
The key is to always keep your risk in check and never risk more than what you’re comfortable with. Using a stop-loss is one way to protect your investments. Stop-loss is an order type that automatically sells your position when it reaches a certain price, which helps you limit your losses.
Some traders also use trailing stops, a stop-loss that adjusts as the price moves in your favor. For example, if you buy at USD$10 and the price goes up to USD$12, your stop-loss would automatically adjust to USD$11. This way, you can still lock in some profits even if the price drops.
5. Not All Coins Are Suitable For Scalping
When scalping, you need to be picky with the coins you trade. Not all cryptocurrencies are suitable for scalping due to their low liquidity or large spreads.
Some good examples of coins that are great for scalping are Bitcoin, Ethereum, Litecoin, and Ripple. These assets have high liquidity, so there’s always a buyer or seller available. They also have tight spreads, which refer to the difference between the bid and ask price.
Why is this important? Well, high liquidity means there’s always a market for your trades, as being a scalper means you’ll be opening and closing many orders in a short amount of time. While the smaller the spread, the less you have to worry about slippage, which is when you get filled at a price different from what you were expecting, and it can eat into your profits.
6. Use The Right Timeframes
The timeframe you use will greatly affect your success as a scalper. If you use timeframes that are too long, you might miss out on potential profits. On the other hand, using too-short timeframes might result in too many false signals. For many scalpers, the best timeframes for scalping are the one-minute, five-minute, and 15-minute charts.
Scalping is great for those who want quick profits, but it’s not without its risks. Before you start scalping, it’s important to understand the ins and outs of this trading strategy. Armed with the right knowledge, you can be well on your way to becoming a successful scalper.