Scalping is a trading style for adrenaline junkies. Do you find yourself staring at 1-minute charts? Do you like to get in and out of trades faster than an investor can open an earnings report? Scalping might be the strategy to consider.
Scalp traders aim to harvest profits from small price moves. Their goal isn’t to make a lot of profit with each trade, but small profits over and over again. If they do it well, they’ll grow their trading account over time. Scalp traders often use leverage and tight stop-losses.
Do you want to learn how scalp traders practice their craft? Read on.
- What is scalping?
- How do scalpers make money?
- Scalping trading strategies
- Should I start scalp trading?
- Closing thoughts
Let’s go through what you need to know about scalping cryptocurrency and learn about some of the most common scalping strategies.
What is scalping?
As such, scalp traders may place many trades over short periods, looking for small price moves and market inefficiencies. The idea is that by stacking and compounding these small gains, the profits will add up over time to a significant amount.
How do scalpers make money?
Scalping is about finding small opportunities in the market and exploiting them. As these strategies can easily become unprofitable once known by the general public, scalp traders can be quite secretive about their individual trading suite. This is why it’s important to create and test your own strategy.
As we’ve discussed, scalpers will typically trade lower time frames. These are intraday charts, which may be the 1-hour, 15-minute, 5-minute, or even the 1-minute chart. Some scalp traders may even look at time frames of less than a minute.
Here’s something else to consider. We know that high timeframe signals and levels are generally more reliable than lower time frame signals. This is why most scalpers will still look at the high time frame market structure first. Why? They outline the important high time frame levels first and then zoom in to look for the scalp trading setups. This shows that having a high time frame view of the market structure can be very helpful, even when it comes to shorter-term trades.
Scalping trading strategies
Discretionary traders make trading decisions “on the spot,” as the market unfolds before them. They may or may not have a specific set of requirements for when to enter or exit, but their decisions are based on the conditions at hand. In other words, discretionary traders may consider many different factors, but the rules are less rigid, and they rely more on intuition and gut feeling.
Systematic traders take a different approach. They have a well-defined trading system that essentially triggers entry and exit points for them. If certain conditions of their ruleset are met, they enter or exit a trade. Systematic trading is a much more data-driven approach than discretionary trading. Systematic traders rely less on intuition and more on data and algorithms.
In fact, this classification could apply to other types of traders as well. However, the distinction is more clear when it comes to short-term strategies. After all, discretionary trading may not work as consistently on higher time frames.
Should I start scalp trading?
That entirely depends on what style of trading works for you. Some traders don’t like to leave any position open when they’re asleep, so they choose short-term strategies. Day traders and other short-term traders may fall into this category.