What is Crypto Scalp Trading? Does it Differ from Day Trading?

Paigambar Mohan Raj
Source: Binance Academy

Crypto is undoubtedly one of the most volatile assets to trade. Nonetheless, there is a lot of potential for aggressive monetary gains. Long-term investors who entered early into cryptocurrencies have turned into multi-millionaires. Day traders have also done well by themselves in dealing with crypto markets.

However, there is another type of trading that many investors practice- scalp trading. Let us take a look at what scalping is and how it works.

Scalp trading involves small profits by placing multiple trades over a short period. By making several transactions quickly, scalp traders aim for little profits, which results in a big yield from modest gains. Scalpers enter the market for highly liquid, high-volume assets that see an increase in demand as a result of the news.

Despite being a short-term trading strategy, crypto scalping tactics demand proper market understanding. Scalpers employ a spread, which is purchasing at the bid price and selling at the asking price, to take advantage of the difference between supply and demand. This strategy enables making a profit even when orders and sales are not changed, provided that traders are willing to accept market pricing.

Now many may think that this is very similar to day trading. However, there are differences between the two strategies. A scalping trader can often keep a deal going for two minutes and hold a financial asset for less than five minutes. Day traders, on the other hand, keep trades open for a number of hours. Additionally, crypto scalpers open dozens and hundreds of trades per day in order to make sizable profits. Day traders, on the other hand, are limited to a few trades per day. Additionally, while day traders occasionally use fundamental analysis, scalping calls for an understanding of technical analysis.

How does scalp trading work in crypto?

Scalping in crypto is achievable with the help of charting, quickness, and consistency. For instance, scalpers make use of numerous value gaps brought on by bid-ask spreads and request streams, as well as technical research.

Scalp traders in crypto use a host of tools to aid their game. Some of these tools are:

Leverage: Leverage refers to the number of money traders put up to boost their margin. This technique is employed by certain scalpers to enlarge their position.

Bid-ask spread: This tool helps scalpers profit from the significant price difference between the highest bid and lowest ask.

Arbitrage: Arbitrage scalpers might profit from the price difference by buying and selling the same item on separate marketplaces.

Range trading: Scalp traders that use range trading keep an eye out for trades to settle within pre-set price ranges. A stop-limit order, for instance, is used by some scalpers to execute trades at future market prices.

Now, this brings us to an important question.

How to set up a scalp trading strategy?

The first step in getting started with scalping is to choose a trading pair. Given the volatility in crypto markets, it is important to consider a pair that suits the risk return in a trader’s portfolio. Note that a trader must also choose a trading platform that offers the trading pairs chosen.

After a trading pair and platform have been chosen, traders should choose their scalping bots. Speed is the cornerstone of scalping, hence those who trade using the software are always ahead. Additionally, manual portfolio management takes a lot of effort and is prone to mistakes.

And there you have it, that is pretty much all a trader needs to get started with scalp trading. However, always remember to do thorough research before getting into any trade or position.