What is Scalping and How It Is Being Used in Cryptocurrency Trading?

Forex scalping once was a heated topic among the investors. It might stay around for good as the trend somehow is boiling for the cryptocurrency. For a lot of fresh investors, the Cryptocurrency Scalping could be new, but it’s been lurking around since long.

Understanding Scalping

The term scalping is relatively used with intraday Trading. This style of investment suits those looking for marginal profits over a short period of time rather than long term risks. With scalping, a trader is making profits of 50–70 pips using technical analysis, the strategy could be due to their habit of spending hours analyzing the Forex trading market.

It works magically as the investor isn’t holding any sort of asset/share for a long period and is stopping-loss quickly to make small yet more frequent profits. The most important key to success here to stay laser focused and be very sharp to respond in an instant.

How one can get going with Cryptocurrency Scalp Trading?

The foremost thing here is to remember you need to have some sort of tool for the technical analysis of a currency. You need active candlestick charts/graphs that could display the currency price for every minute. The market is full of best Forex brokers for scalping trade in cryptocurrency that can get you started.

However, If you have learned the basics, you know when is the right time for the investment. Though you’re not supposed to hold on to that investment for long. Keep an eye on the growing trading volume, establish a stop-loss and move on with the small gains. Some experts go down with 100 trades in a single day with bigger collective earnings.

Apart from the trading basics, you need to learn using indicators for scalp trading. These methods are the very weapon you’ll be needing. Now, you ain’t gonna find these tools like

RSI (Relative Strength Index)

It is meant for one purpose alone, to measure the latest price change. The data then can be used to determine whether the currency is being overbought or oversold. A good means to know when exactly you should make the purchase and when to get out.

The tool uses a formula taking the data of average loss and profit incurred over a time period, specifically. It provides a numbered value of a particular asset, in this case any cryptocurrency.

As an investor, if you have ever used a tool with RSI indicator, you would know that if RSI value is near 70 or above it is a sign of the currency overbought. Meaning the currency is being traded at an inflated price and avoiding the purchase is the best step taken at the time.

S&R (Support and Resistance Metrics)

If you know the trend, this metrics concept comes next. You must of heard of the famous proverb in stock trading, battle of ‘bulls and bears.’ which can be referred to the support and resistance levels. Support is a term given to the point where demand is deduced to be stable and strong that it prevents further falling of the price. Resistance, on the other hand, is the prices of strong selling that it keeps prices from getting any higher.

Source: StockCharts.com

In the image, the bottom trendline advocates support level while the upper one shows the resistance. The arrows on the top and bottom lines point the price where it remained constrained until it went above the top line. Once it broke past the upper trendline, it changed into a new trend support level from resistance.

BB (Bollinger Bands)

It is a technique developed by John Bollinger which uses the moving average along with two trading bands, one at each end i.e. above and below. Here, the Bollinger Band doesn’t calculate the percentage, it simply calculates standard Deviation by adding and subtracting.

There are one center line and two price channels on each end. The price channels act as the standard deviation studying the stocks; The center line stays as an exponential moving average. Both the bands expand and contract to show the price action becoming volatile or is limited to a pattern where trading is tight.

Source: commodity.com

AO (Awesome Oscillator)

Awesome Oscillator is an indicator in use to evaluate the market momentum. It calculates the period gap between 34 to 5 Simple Moving Average. The used SMA are not calculated taking the closing prices but the midpoints of each bar.

When the bar is above the zero lines, it’s a signal to buy. It’s a situation of bar chart passing the negative value area to the positive side. Take a point, the signal to sell is similar to the buyer only in reverse. Here the value is passing to below the zero lines.

Traders are successfully using these technical analyses to make a significant difference in their portfolios. Each method comes with its pros and cons and requires a great deal of research before diving into it. That said, if you don’t mind earning small and more regular, it is worth giving scalp trading a try.