Scalping from A to Z

Scalping from A to Z

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Scalping or high-frequency trading is a popular and one of the most common trading tactics in financial markets, in particular in the cryptocurrency market, where assets are highly volatile. Professional scalpers open dozens of trades a day, earning both on an increase and a decrease in the asset price. The strategy is suitable for those who are ready to watch the market with concentration, spending hours trading, reacting to the slightest changes in the rate as quickly as possible.

What is scalping?

The essence of scalping is to profit from small price fluctuations, by 2-3 points. Reacting to a slight price change, the scalper opens a buy or sell trade, holds it for only a few minutes or even seconds, and closes it, fixing a small profit. The task of the trader is to open a large number of short-term positions during the trading day in order to get a good income in total.

Characteristic features of this type of trading:

  • The duration of the transaction is only a few minutes.

  • Trader’s earnings – a few points.

  • Opening ECN accounts to execute orders instantly with the lowest market spread.

  • Using timeframes, trading on short intervals.

  • High leverage for margin trading.

Important! The scalper can create a series of short-term orders in a row or set a grid of pending orders that will be opened at short intervals. To increase efficiency, many traders use trading bots to simplify and speed up the technical process of scalping.

Types of scalping

Scalping can be classified by the duration of the order execution. There are three types of this classification:

  • Pipsing – the position is held for no more than a minute, and the profit barely covers the spread (the difference between price and demand).

  • Medium-term – the transaction can be held up to 15 minutes.

  • Conservative – the order is executed from 15 minutes to half an hour.

If we divide scalping by trading method, we can distinguish the following types:

  • Market glass trading. The glass contains information about orders on the exchange, analyzing this data, a trader can make a short-term forecast and determine the entry point to the market.

  • impulse scalping. A trader uses fundamental analysis, reacting to external factors that affect the price of an asset. The impulse can be a sharp jump in the dollar, crises on major stock exchanges, political events – any news that can cause unrest in the financial markets.

  • Hybrid. This is a combination of the two previous types, using which the trader must make a short-term forecast, but also pay attention to external factors.

Pros and cons of scalping

Scalping is a popular trading style, chosen by both professionals and beginners. It has many advantages:

  • High frequency of signals and the possibility of opening dozens of transactions during a trading session.

  • Fast performance when opening a large number of short-term positions.

  • The effectiveness of trading on fundamental analysis, the ability to make a profit regardless of the trend.

  • Low entry threshold, the ability to start trading with a small deposit, the rapid growth of the deposit with the successful use of the strategy.

  • A good practice for beginners, a valuable experience that allows you to develop a reaction in a short time and learn how to analyze the market on your own.

Scalping also has disadvantages. One of them is a small profit from the transaction. One position does not bring tangible income, so scalpers tend to open as many orders as possible during the day. Also, the disadvantage of this type of trading is a high psychological burden. Not everyone can endure high-frequency trading by carefully observing exchange rate fluctuations.

Regardless of the chosen trading strategy, scalping is a difficult type of trading due to the need to open many trades during the session and quickly respond to price movements. To achieve success and reach a stable income, scalping needs to be learned. Take a trading course from Crypto Crew to see the first positive results in just a few weeks of training!