Scalping is an investment technique that is performed in very short periods of time. Therefore, if what you want is to scalp with cryptocurrencies, it is important that you keep in mind that this type of investment is made at a fast pace, without holding positions for more than a few minutes at a time.
The main objective of this type of trading is to get small amounts of points or pips numerous times throughout the day. We explore the most relevant details of the scalping strategy with cryptocurrencies and some examples that will serve as a basis for you.
We define scalping as an investment methodology that is based on speculation through very short investment terms and whose objective is to obtain profits quickly through the purchase and / or an investment product.
Scalping with cryptocurrencies basically involves applying this multi-trade investment methodology in search of quick returns in short periods of time, but using as an underlying product any of the available cryptocurrencies, such as Bitcoin.
To know if this type of trading is really compatible with your profile, it is important that you know what are the characteristics that an investor should have and when to discard this type of operation. Features that a scalper should have:
It is not advisable to be a scalper if:
- You suffer emotional stress from rapid market movements.
- You can’t pay several hours of attention to graphics.
- You would like to perform few operations with great benefits each.
- You like to take your time when it comes to performing market analysis to determine the overall trend.
Advantages and disadvantages of scalping:
- Possible smaller losses. However, the profits will also have a lower volume.
- Multiple opportunities to get benefits every day.
- It is necessary to be very clear about when to enter and exit an operation.
Without the right profile, this investment system may not work as one would like, and may affect or be affected by emotions. You can learn how emotions interfere in trading by learning more about how psychology works in trading.
Cryptocurrency trading can be carried out in two ways:
- Through a virtual simulator that allows you to create test positions without using real money. This can be done through the demo account.
- To start investing with real money, profits and potential risk you can do it directly by opening a free real account.
If you finally opt for this type of strategy in your trading plan, it is important that you know what spreads are. This concept indicates that you will begin to make a profit in a trade once the price has gone in your favor in a number equivalent to or greater than the number of points of difference between the bid price and the offer price. From that moment on, the differential between the purchase price and the sale price (the commission charged by the broker) will have been overcome and profit will begin to be obtained.
You can scalp in practically all cryptocurrencies, but this time we are going to comment on the main ones.
- Bitcoin: was the first cryptocurrency that was created and, being the most important of all, it is the currency that has the greatest dominance within the market and remains the main means of exchange in the “Exchanges” towards FIAT currencies. Its money supply is 21 million and is the protagonist of between 3 and 6 transactions per second. The minimum contract to trade is 0.01 USD of profit or loss for each point that moves.
- Ether: it is a different currency than Bitcoin, since it is a programmable currency through which decentralized applications are developed. It has no money supply limit and is characterized by the development of smart contracts, in which virtual robots automatically execute a previously established contract. 15 transactions are made per second and the minimum contract, as in the case of Bitcoin, is 0.01 USD of profit or loss for each point that moves.
- Ripple: it is a currency that, unlike the previous two, does not use Blockchain, so it is a centralized cryptocurrency. Created for sending money between banks, it can perform up to 1500 transactions per second at really reduced costs. While it is true that the fact of being centralized makes it more vulnerable to possible hacker attacks, it has a money supply of almost 100 billion and the minimum trading contract is 1 USD of profit or loss for each point that the contract moves.
- Bitcoin Cash: arises from a fork of Bitcoin, so it uses the same algorithm, although it allows a greater number of transactions than Bitcoin and faster, because it has a block capacity of 8 MB when Bitcoin only has 1 MB. Its money supply is 21 million and its minimum contract is 0.5 USD of profit or loss for each point that the contract moves.
- EOS: cryptocurrency similar to Ether, but faster and more scalable. Users can create decentralized applications more efficiently through open source software. It allows millions of transactions to be made per second and its minimum contract is 1 USD profit or loss for each point that the contract moves.
- Stellar: arises from the separation of the founders of Ripple, so it is similar. In this case they differ in that Ripple focuses on providing solutions to banks, while Stellar facilitates payments between people. Your token fulfills the anti-spam function and is a bridge between different currencies. Cryptocurrency uses the Stellar Consensus Protocol (SCP). It has a money supply of 100 billion and its minimum contract is 1 USD of profit or loss for each point that the contract moves.
- Litecoin: arises from an inspiration in Bitcoin, but with a greater money supply, 84 million instead of 21 and with blocks four times faster than those of Bitcoin, with much cheaper transactions. Your minimum contract is 0.5 USD profit or loss for each point the contract moves.
- NEO: are smart contracts that are stored in the Blockchain. It is executed exactly on the basis of the terms of the trade agreement. It allows to digitize any real asset, which can be divided and distributed in turn among the owners as if it were a clearing house. Its money supply is unlimited and its minimum contract is 1 USD of profit or loss for each point that the contract moves.
- Bitcoin Gold: is another fork of Bitcoin, although in this case it changes the algorithm with the aim of decentralizing mining and creating a fully decentralized network. The capacity of the block is the same as that of Bitcoin, of 1 MB and its money supply is also the same, of 21 million. Your minimum contract is 1 USD profit or loss for each point the contract moves.
You can learn more about cryptocurrencies in other articles such as the most promising cryptocurrencies. All these currencies are available to trade through the online platform, which includes Pro Real Time.Examples of scalping strategies in cryptocurrencies
- Breaking triangles
First of all, we can use the triangle breaking strategy. A triangle is a very common figure in technical analysis. This figure gives us a bullish signal that usually has a high probability that it is composed of a zigzag zone in which rising lows are formed and whose maximums remain in the same price zone, which are forming a resistance simultaneously.
The operation would consist of waiting for a surpass after the closing of a candlestick (for scalping strategies short periods of time) and once overcome enter in favor of the trend. The output target of the profit trade is calculated by measuring the height of the triangle and extending it above the overcome resistance.
- Price action