Investors familiar with the cryptocurrency market know how volatile it can be. But it is precisely this volatility that makes the cryptocurrency market in one of the favorites to make scalping strategies.
Do you want to know the different scalping strategies with cryptocurrencies? Then read on and don’t miss a thing!
What is scalping?
The scalping is a way of trading short-term and its objective is to obtain small profits from a large number of operations.
Scalping with cryptocurrencies basically involves applying this investment methodology of multiple operations in search of fast returns in short periods of timebut using any of the available cryptocurrencies as a product, such as Bitcoin.
Forex or cryptocurrency traders use this strategy by responding quickly to market movements. Unlike holding a position for a few hours, days or weeks, a scalper tends to react in minutes and sometimes even in seconds. The constancy and the speed are the main factors that determine the results.
It is interesting to know which ones have the characteristics that a scalper investor must have when deciding on this type of operation:
- Investors who like action and fast trading.
- In addition, they have weather to watch the charts for hours.
- They rule out long-term operations.
- They think and act fast.
On the contrary, it is not advisable to carry out this type of trading and avoid scalping if:
- The rapid movements of the market can generate you stress.
- you don’t have time to pay attention to the graphics.
- you like to perform few operations with great benefits each.
- You like to take your time when analyzing the market to determine the general trend.
Crypto Scalping or Forex Scalping?
The scalping method is also attractive in the foreign exchange market. In this case, the strategy is to make operations (buy and sell) with currencies quickly obtaining small profits.
Forex and cryptocurrency scalping methods have similar characteristics:
- Offer and demand: The price of any currency, be it cryptocurrency or currency, is determined by supply and demand and allows both markets to thrive.
- digital platforms: Both markets offer electronic trading over the Internet, making it possible to trade multiple currencies on various digital platforms.
People unfamiliar with the world of financial markets may think that forex and cryptocurrencies are the same. However, it is not so. The foreign exchange market is recognized and regulated worldwide, which is not the case with the cryptocurrency marketwhich is relatively new and highly volatile and lacks centralized regulation.
In short, the differences between one market and the other are concentrated in:
- Volatility: Cryptocurrencies tend to be much more volatile than currencies. An experienced investor will tend to quickly seize the opportunity to generate higher profits from the cryptocurrency market.
- intermediaries: Forex trading usually requires a broker, which leads to higher costs and commissions. Cryptocurrency trading, on the other hand, avoids the use of intermediaries. Therefore, transaction costs are significantly reduced.
- Deadlines: The cryptocurrency market is available 24 hours every day of the year, so anyone can start trading at any time. However, the forex markets are accessible only from Monday to Friday, within a schedule.
- Regulation: Forex market operations are regulated by law and centralized governments back these currencies. Cryptocurrencies are only recognized in certain countries and there is no government or central body that regulates and controls it. Therefore, the cryptocurrency market is much more risky and unpredictable.
Types of cryptocurrency scalping strategies
Every experienced investor needs to know the different cryptocurrency scalping strategies. In this way, you can choose the one that best suits your profile and your needs.
Here are some of the most popular cryptocurrency scalping strategies among investors that you can put into practice, right away:
1. Bid-Ask Spread Method
Also known as method of spread of supply and demand. The bid-ask spread is the difference between the ask price and the bid price.
The main objective is to allow investors open a position at the buy or sell price and then quickly close the position a few points lower or higher to make a profit.
In scalping operations, the following two situations can occur:
- A wide range of supply and demand: In these cases, the sale price is higher and the purchase price is considerably lower than usual. One likely cause for this scenario is that there are more buyers than sellers. Naturally, prices skyrocket and will cause crypto investors to sell.
- A narrow range of supply and demand: When sellers outnumber buyers, the selling price is lower and the bid is higher than usual. Investors will implement the strategy to accelerate the buying frequency and thus balance the selling pressure.
This cryptocurrency scalping strategy is also known as cryptocurrency range trading. Range means a price movement between two constant price levels, high and low, within a certain period of time. When trading in a range of cryptocurrencies, investors tend to go both long and short (at different times) depending on the position of the price within the range.
When an investor identifies the ideal range to trade, they will attempt to manually enter positions by buying at support and selling at resistance.
The terms “support” Y “endurance” mean the following: Support represents a low price level, indicating a buying opportunity. In turn, resistance represents a high price level, indicating that it should be sold. In other words, support marks an entry into the market, while resistance marks an exit from the market.
Alternatively, investors can place limit orders to buy cryptocurrencies at a lower entry price within the range in a favorable direction once the market reaches the support level.
Another possible scalping strategy with cryptocurrencies that we can carry out, based on price action. This strategy consists of marking the support and resistance levels on the chart and, once the resistance is overcome, going long with the objective of achieve extension of the previous movement.
It can also be given considering that, once the support has been surpassed downwards, it enters in a bearish way with said extension as a fall target.
If you want to know more about strategies in the world of trading with cryptocurrencies, we recommend that you first of all train yourself by doing a good cryptocurrency course.
Also from our trading school you can access our Free Webinar on Cryptocurrencies Sign up and we will solve your doubts!