Scalping: 5‌ ‌Best‌ ‌Profitable Crypto‌ ‌Scalp‌ ‌Trading‌ ‌Strategies‌

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Cryptocurrencies are generically possessed with a high level of volatility. But they offer traders numerous ways of making profitable returns. Those who don’t shy away from risky strategies and devote most of their time to monitoring price movements favor scalp trading or refers to scalping as one of the preferable options.

This article will discuss what scalp trading is, how it works, and highlight some of the scalp trading tips to help you build a strong crypto trading foundation for your benefit. 

What Is Scalp Trading in Crypto?

Scalp trading or scalping is a short-term trading strategy that a trader adopts to make frequent small profits from small price movement each day. With small profits from each trade adds up, it can generate a substantial amount over time.

Scalping is also a popular trading strategy in the cryptocurrency market due to its highly volatile nature. Scalpers often uses leverage to open more trades along with tight stop losses to manage risk.

Forex or crypto traders utilize this strategy through a quick response to market movements. As opposed to holding a position for some hours, days, or weeks, a scalper tends to react within minutes and sometimes even seconds. Consistency and speed are the main factors that determine the results.

Scalping requires high volatility of the chosen currency pair. Significant movements in price facilitate generating profits, though scalpers more often utilize short-term bursts of volatility. When comparing scalp trading with day trading or swing trading, scalp trading involves relatively low risks and provides yields on the spot. But the results highly dependant on a trader’s perseverance, self-discipline, and large capital amounts to gain substantial success.

How Does Crypto Scalping Generate Profits?

Each trader formulates a personal trading system to receive the highest possible profit, but some basic trading principles are shared and used to some extent by any traders. The scalping method derives based on real-time technical analysis as the trader minimal time for fundamental market analysis.

On average, scalpers open positions approximately once every 5-10 minutes. While the M5 timeframe is considered the most preferable as it works with most strategies and is amenable to analysis, thereby increasing the predictability chance.

There are entirely two different approaches to crypto scalp trading— manual and automated. To fully comprehend manual crypto trading, a trader must focus on the market movement diligently and continuously monitor the trades. To profit from an exchange, traders need to track the market movements to open and close the positions in time. 

On the contrary, an automated trading system implies that scalpers create a unique program to support their defined strategies. This program is designed to mitigate risks and perform the trades while traders are away from their desks.

In most cases, a scalper has to make a trading decision on a specific asset without having time to think about the transaction. At this moment, intuition is the only adviser. Such an approach is called intuitive scalping, and it requires profound experience in trading, analytical abilities, and an excellent understanding of the market.

fiat and crypto scalp trading exchanges

Crypto Scalping vs. Forex Scalping

Similarities

The concepts of forex and crypto trading possess similarities in which both of these trading types shared a parallel operation with a kind of currency. Their primary features seem to be similar as well. Here’s the overview:

  • Supply and demand: The price of any currency, either crypto or fiat, is determined by the supply and demand factor, making both markets thrive. 
  • Digital Platforms: Both markets provide electronic trading via the Internet, making it possible to trade numerous currencies on various digital platforms.
  • Bots: Automated trading is plausible and manageable with the right tools. By utilizing the online auto-bots (robots) combined with artificial intelligence, traders can scalp on the go.

Differences

Any novice traders would assume forex and crypto are nearly identical. However, the truth tells that they boast disparate purpose and intend. In contrast to cryptocurrency, the forex market is older, and it is accepted and recognized universally.

While the crypto market is relatively new, volatile, and the price fluctuations are considerably tense. Hence, this led to a more pronounced discrepancy in their performance:

  • Volatility: Cryptocurrencies tend to be much more volatile than fiat money. A proficient scalper tends to quickly seize the opportunity to generate greater profits with the crypto market.
  • Intermediaries: Forex trading usually requires an intermediary in which leads to higher costs and fees. Crypto trading, on the other hand, evades the use of middlemen. So, the transactional costs will be significantly reduced.
  • Time: The cryptocurrency market is available within 24 hours on any day of the year, making it possible for any person to start trading at any moment. However, the forex exchange markets are accessible only five days a week within business hours.
  • Regulation: The forex market trades are legally regulated, and centralized governments back the traded fiat. Cryptocurrencies are only recognized in certain countries. Hence, the crypto market is much riskier and more unpredictable.

Types of Crypto Scalping Strategies

Every scalper needs to thoroughly understand their scalping activities. That’s why it’s best to hold onto a specific strategy, avoiding unnecessary decisions and breakdowns. There are five well-known scalp trading strategies that any beginner to advanced crypto trading can implement right away.

Crypto Range Trading

The term “range” means a price movement between two consistent price levels, high and low, within a certain period of time. When crypto traders are range trading, they tend to go in both long and short at different times, depending on the price’s position within the range.

When a trader identifies the ideal range to trade, they’ll attempt to enter positions manually by buying at support and selling at resistance. Alternatively, scalpers can deploy limit orders to long (buy-in) crypto. This is best done at a lower entry price within the range in a favorable direction, and once the market reaches the support level. Scalpers can trade ranges when markets are flat.

Bid-Ask Spread

The bid-ask spread is the difference between the asking price and the bid price. Its primary purpose is to allow scalpers to open a position at the bid or ask price, and then close the position fast — a few points lower or higher — in order to reap a profit. However, in scalp trading, the bid-ask spread can happen in two scenarios:

i) Wide Bid-Ask Spread:

When this happens, the asking price will be higher, and the bid price is significantly lower than usual. The probable cause of this scenario is that there are more buyers than sellers. Naturally, prices will surge, causing crypto scalpers to sell. 

ii) Narrow Bid-Ask Spread:

When buyers outnumber sellers, the asking price will be lower, and the bid will be higher than usual. Scalpers deploy this strategy to expedite the buy-in frequency, hence balancing out the selling pressure. 

Arbitrage

Arbitrage is effective when applied to crypto trading because of the market’s inherent volatility. This type of trading occurs when a trader gets their profits from the difference in the same asset prices by buying and selling it in different markets. An arbitrage scalper does both nearly simultaneously. 

When it comes to crypto arbitrage trading, you can trade on either spatial arbitrage or pairing arbitrage.  A spatial arbitrage trader can open a long position and a short position at different exchanges simultaneously. In this way, the trader hedges against fluctuations of various trends. Pairing arbitrage, on the other hand, is suitable for only one platform. Traders capitalize on a trading pair’s changes, for instance shorting the main crypto of the USD/BTC pair to mitigate risks.

Price Action

This method is based on a study of the asset’s price movement. A trader needs to see it and interpret it. Scalping the markets with price action doesn’t differ much from trading with other price action strategies.

Margin Trading

Margin trading uses a third party’s funds instead of your own to enhance potential gains. This allows traders to operate with higher amounts and to obtain greater profits as a result. On the other hand, some traders invest using margin trading in the cryptocurrency market. Some cryptocurrency exchanges also offer margin funds to their customers. This can improve a scalper’s results because scalping requires large capital for success.

Some of these strategies are riskier than others. Try implementing each of them to find which one works best for you.

Best Time Frame for Scalping

The scalping time frame is how you achieve “trading velocity,” or the number of trades made. Ideally, the best time frame for scalping should range between 5- to 30-minute charts. The smaller the time frame, the greater the number of possible trade setups. Note that this should depend entirely on the strategy you choose for scalping.

Here’s an example using BTC/USD. We’ve used a 5-minute chart with the moving average (MA) indicator as our trend indicator and the stochastic oscillator for momentum.

In this example, a scalper has six potentially profitable trades in about 7 hours, with each trade lasting no more than 30 minutes.

And that’s the beauty of scalping in crypto! You can collect several profitable trades within the day in which cumulative profits are significant. 

Although scalping can be a profitable trading strategy, it comes with its fair share of drawbacks, the largest one being transaction cost. Crypto trading is notorious for its high trading fees, which can significantly reduce overall profits. 

Scalpers need mental toughness to cope with the fast-paced and high-pressure crypto scalping routine. Ultimately, this both requires and ensures that they stick to their strategy and keep their emotions out of their trading.

Scalping Strategies Overview

For day traders, scalping can be fast-paced, exciting and confusing — all at the same time. We’re going to break down crypto scalping in the simplest way possible. 

At its core, scalping involves trades that are usually only held for a few seconds to a maximum of a few minutes. Naturally, the goal of any trading strategy is to make as much profit as possible. However, the primary objective of scalping is to make the most profit from the shortest price fluctuations. And thanks to the volatile nature of cryptocurrencies, scalping has proven to be one of the best trading strategies. 

A good crypto scalper needs to respond instantly to price fluctuations in order to make sustainable profits. For this reason, scalping revolves around three critical elements:

  • Consistency 
  • Velocity 
  • Chart reading skills

Typically, scalpers don’t concern themselves with fundamental analyses, instead of relying heavily on identifying short-term support and resistance levels. They read crypto price charts, combined with technical analysis — thorough technical analysis. If you aren’t well versed in TA, scalping might not be for you. On the brighter side, you can hone your technical analysis skills within a short time. 

Keep in mind that the objective of scalping is to get as much profit as possible in a short time. That means perfect timing of entries and exits is key. You have to get into a trade at the beginning of a trend, and exit when that trend weakens. The ideal setup for crypto scalping is often a combination of technical and momentum indicators. These enable you to identify the direction (trend) of the crypto pair and the magnitude of the observed trend. This is how you achieve consistency.

While you might understandably be tempted to use several of these indicators, your trading accuracy isn’t bound to improve. Rather, you’re guaranteed to have analysis paralysis from the conflicting signals.

Moving Average (MA)

The Moving Average indicator demonstrates the average value of the asset calculated over a specific period. As a result, a scalper gets an idea of where the asset price is moving.

Relative Strength Index (RSI)

This technical indicator determines the strength of the price trends and the possibility for their change. Signals are generated by finding divergences and failure swings. RSI is a great tool to identify the general trend.

Support and Resistance Levels

The concept is based on extreme price points. The support is the point where the price stops falling and begins to move up, and the resistance is the point where the price stops rising and begins to move down.

Trading Indicators

In addition to the analysis tools described above, a trader can obtain information from the price movements themselves displayed on the candlestick graphs.

If you look at the candles, you may see some obvious patterns repeatedly in some parts of the graph. These are regular and repeated combinations of data on prices, amounts, or indicators. They can build an understanding of trends and predict further price movements. The most popular patterns are Head and Shoulders, Triangle, and Cup and Handle chart patterns. They are the most recognized and often used so that they can facilitate your trading decisions.

How to Set up a Crypto Scalping Trading Strategy?

If you are a newbie in crypto scalping, don’t be afraid and have a try. You can achieve success if you follow some simple rules.

  1. Choose the trading pairs for scalping. There are a few thousand various assets traded on the crypto market. They differ in their prices, trading volumes, popularity, and capitalization. To choose wisely, mind the asset liquidity and volatility.
  2. Find a suitable trading platform. The selected platform should support your trading pairs. Its reputation is crucial, and nothing beats comprehensive reviews of the interface, trading experience, and post-trading feedback. Pay attention to the fees and additional services.
  3. Consider a trading bot. Scalp trading is based on speed. So those who trade using programs are always in pole position. Though manually managing the portfolio and information is often possible, they are usually very time-consuming, and the chances for errors are high. 
  4. Mind the trading fees. You will make a large number of trades, and many exchanges charge trading fees for each transaction. Use each opportunity to reduce them.
  5. Try various strategies to choose the best one. Don’t be obsessed with a single method; bet small amounts to check which strategies work best in your case.
  6. Start scalping!

Best Tools to Scalp Trade Crypto

There are a lot of useful tools that are indispensable to successful trades. They can be either free or paid, though the paid ones are more functional and more helpful overall. Among the tools that you can make the best use of are the following.

Crypto Trading Bots

Trading bots are the most popular type of software designed for traders. This is a program that performs automated trading on predefined criteria through thoroughly set instructions. A trader can trade continuously, even benign, while the chances for success enhance and the possibility of errors minimizes. 3Сommas and Haasbot are popular bots for crypto trading that support scalping.

Crypto API tools

APIs ensure your interaction with trading platforms and other blockchain-based projects. They provide users with an extensive range of functions like wallet integration, transaction support, market prices tracking, and more.

Crypto Trading Charts

It is impossible to scalp without analyzing the trading charts. Price and volume charts give all the necessary information, and it is impossible to set up a strategy without it. In addition to trading charts, relying on the tools like a stop-loss is ideal to help you make a logical decision.

The Pros and Cons of Crypto Scalping

Any trading has its advantages and disadvantages, and scalping is not an exception. Look at the pros and cons list before you start scalping.

Pros

Crypto scalp trading style involves low risks as smaller positions size are engaged in the process. It is easier to achieve success as small price movements occur more often. Also, scalp trading can be easily automated as it is usually based on technical criteria that can be calculated.

Cons

This type of trading requires the fastest possible reaction; any delay is crucial. In general, scalp trading can be demanding and aggressive; crypto scalping especially can be exhausting for unprepared minds. The profit for each trade is too low, so a more considerable capital is needed to achieve substantial results. Finally, trading costs are higher as the trades are numerous, and it is necessary to pay trading fees every time.

Is Crypto Scalp Trading for Everyone?

Of course, it is not. If you are a beginner who just dipped the toe in the crypto industry, it’s best for you to try something less risky. Perhaps, we recommend investing in cryptocurrencies in the mid to long term. However, if you’re feeling confident and ready to embrace the trades of art, crypto scalp trading is a good start. 

Disclaimer

This article is intended for and only to be used for reference purposes only. No such information provided through Bybit constitutes advice or a recommendation that any investment or trading strategy is suitable for any specific person. These forecasts are based on industry trends, circumstances involving clients, and other factors, and they involve risks, variables, and uncertainties. There is no guarantee presented or implied as to the accuracy of specific forecasts, projections, or predictive statements contained herein. Users of this article agree that Bybit does not take responsibility for any of your investment decisions. Please seek professional advice before trading.

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