In this article we will take a closer look at crypto scalping, a specific trading technique where you open and close positions in a very short period of time with the aim of making as much profit as possible.
Scalping with crypto is not easy, especially if you are a beginner: without a proper strategy, you can quickly run into large losses.
At the same time, however, an experienced scalper with sufficient initial capital can make four-figure daily profits.
Let’s take a look at the most useful tips and tricks to get you started with this trading approach.
All the details below.
Summary
What is crypto scalping?
In the context of crypto trading, scalping refers to a specific technique in which you look for profit opportunities in the digital currency market by making quick trades that are opened and closed within a few hours/minutes.
Not to be confused with ‘day trading’, which refers to a trading approach that operates on a daily time horizon, scalping involves even more dynamic trading that must be executed even faster, sometimes within 5 minutes.
It is precisely because of the speed of this technique that the scalper usually observes a chart on 1-minute, 5-minute and 15-minute time frames. Rarely is the 1-hour time frame used, and then only to identify the main trend of a crypto with greater certainty.
Those working in this field have to make decisions very quickly, so it is important to be clear-headed and well rested before trading.
Scalping can be done either on the spot market or through leveraged derivatives: however, given the inherent volatility of the cryptocurrency world, many traders prefer to stay on the spot market.
In this context, technical analysis plays a more important role than fundamental analysis, which can only be applied to long-term or “value” investments.
Even a crypto with no utility can be traded by a scalper as long as the conditions are right for short-term profit.
Therefore, the maturity of a currency, its capitalisation and the presence or absence of a decentralised ecosystem are not important: what is crucial for a trader is to ensure that there is sufficient liquidity and affordable fees in the market to support trading.
In this respect, the choice of broker is crucial for scalpers: one must make sure that the platform of reference is secure, reliable, with fees not exceeding 0.15/0.20% per trade and free from manipulation to the detriment of users.
The most popular crypto exchanges chosen by scalpers are Binance, Bybit, Bitget, Okx and Kraken.
How to start crypto scalping?
After the initial premises, we can delve deeper into the world of crypto scalping.
A typical day for a trader working in this context starts early in the morning at 07:00 with the search for the best cryptocurrencies to trade, where there are the best profit opportunities to be exploited.
The search then tends to continue in the early afternoon, around 2pm to 3pm, when the US markets open: statistically, this is the time when the most important trades take place and volumes begin to enter the crypto trading pairs.
Monitoring can still be done at any time, but it is advisable to monitor times when there is likely to be more interest in the world of financial investment.
In order to find the best crypto to trade on, it is mainly necessary to observe the change in volume: usually when the 5 or 15 minute volume of a coin makes at least a x4/x5 compared to the previous candle, it means that whales are interested in moving its price.
Often when there are large volume changes in the short term, a crypto will see a large price movement where well-defined resistances are broken.
Let’s take a look at a fresh example from this morning: the crypto TVK, in a pair with USDT at 08:15, saw an upward movement of 6.7% (15-minute time frame), breaking through resistance at $0.028, with much higher volumes at support than in the previous candle. As a result, TVK gained a further +4.11% over the next 15 minutes.
We reiterate the importance of volume in this context: often in the crypto market we see scenarios where the price of a coin rises but there is no volume to support it. In these cases, it is better not to trade and wait.
Other indicators to look out for when scalping are: RSI, Stochastic, MACD and Bollinger Bands.
As far as moving averages are concerned, when trading on lower time frames, it is important to have at least three reference averages: one fast, one slow and one intermediate.
Every trader uses different averages that suit him or her best: I personally use 4 types of EMAs: 5, 10, 50 and 223 periods.
Usually, the crossing of a fast moving average with a slow one means that an upward trend is about to start. Conversely, the crossing of a slow average with a fast average means that a distribution phase is about to begin.
NO indicator is useful in isolation: each element must be integrated with all the indicators to get a clear overall picture of a crypto.
The best patterns to follow
In addition to the indicators we’ve just mentioned, crypto scalpers often look for specific patterns to trade that signal an impending up or down move in a currency.
Below are three bullish reversal patterns that signal the possibility of an upward movement in the price of an asset after a period of decline.
The most common graphical formation is the bullish engulfing pattern, which consists of two candlesticks, the first red and the second green.
The green bar makes a lower low than the red bar, but closes above the previous opening price.
It therefore makes a lower low and a higher high (relative to these two candlesticks) in one fell swoop.
Another common pattern in bullish reversals is the morning star: this is a configuration of three candlesticks, the first of which is strongly negative, the second positive but with a narrow body, and the third strongly positive.
The second candlestick is the one that defines the local minimum of the chart in question, but it closes in the positive and is followed by the third candlestick, which confirms the ongoing uptrend.
For the pattern to be valid and for the scalping to be successful, it is essential that the third candlestick closes above at least 50% of the body of the first candlestick.
Finally, the last bullish reversal pattern mentioned in this article is the bullish breakaway.
This is a chart consisting of 5 candles, the first of which is strongly negative, the next 3 negative and the last one extremely positive.
During a bearish trend, it is possible to observe the formation of a green candlestick that manages to close above the high of the third-to-last red candlestick: in this case, there is a chance that the next candlestick will form a bullish breakout.
Beware if the green bar is overly positive, to the point of breaking the fourth red bar.
In this case, the risk of immediate absorption is very high, so it is better to wait and see how the next candle closes.
Conclusion
It is important to emphasise that all the information given in this article is by no means financial advice, but at least an introduction to the basic concepts of crypto scalping.
Remember that before you try your hand at this activity, it is very important to practise with a demo account and perform various back tests of your strategies.
Patience and calmness are perhaps the most important weapons in this field: if you get anxious and don’t know how to manage your emotions, it may be best to stay away from scalping and trading in general.
We also recommend that you continue to read various books on technical analysis before you start practising in this area.
The most interesting book recommended by the author of this article is: “Technical Analysis of Financial Markets: Methodologies, Applications and Operational Strategies” by John J. Murphy.”
