Ten Main Principles of Scalping for Beginners

In the world of cryptocurrency trading, traders can apply various strategies based on their capital, experience, and available time. Scalping is one of the most popular methods among both beginners and experienced market participants. It allows for profits to be made in a short time and maximizes the use of market fluctuations.

In this article, we will take a detailed look at the key aspects of scalping, analyze its advantages and disadvantages, and compare it with long-term trading strategies.

The Essence of Scalping in Trading

Scalping is a widely used trading tactic in the digital asset market, characterized by high frequency and short-term operations. A scalper profits from minor price fluctuations, multiplying financial results through the number of trades and intense activity.

With this approach, positions are usually opened for several seconds or minutes, and small profits gradually accumulate, resulting in a noticeable total. Moreover, the risks of short-term positions associated with fundamental market indicators or exceptional events are generally lower.

Key Features of Scalping

As a trading method, scalping has a number of features that define its essence and distinguish it from other trading approaches.

Small profit and short-term operations

The main idea of scalping is to extract profit even from minimal price movements – enough for the potential income to cover the price spread and exchange fees.

Such fluctuations in the cryptocurrency market usually occur every few minutes or even seconds, requiring constant position management and price chart monitoring.

Volatility of the traded asset

When choosing a trading instrument, a trader focuses on its volatility to achieve sufficient price fluctuations over short time intervals. It is important to find a balance, as an excessively volatile token can lead to losses due to unpredictable dynamics.

Active price movements are one of the key reasons for the popularity of scalping among crypto traders. Not all traditional markets can provide the necessary volatility for manual high-frequency trading.

The significance of the time factor

Scalping requires active position management to not miss the most favorable moment for entering and exiting a trade. In some cases, even a second can directly affect the actual profit, so a scalper must be able to analyze the situation and make decisions in the shortest possible time.

Essentially, this is a continuous and high-intensity mental activity that is not suitable for everyone and is especially challenging for newcomers without trading experience.

Technical Analysis

When evaluating a potential deal, a trader usually relies on a set of technical analysis tools, since fundamental factors are less significant over short time intervals.

The arsenal of tools for technical analysis includes the order book, moving averages, RSI, and other indicators.

Liquidity

Liquidity is a characteristic of an asset that indicates how quickly it can be bought or sold at market price without significantly affecting the quotes. In scalping, liquidity is extremely important, as it affects the timeliness of order execution and actual profit – short-term trades have minimal returns, so even a small price slippage can make them unprofitable.

Comparison of Scalping and Long-term Strategy

Scalping differs from trading on longer time horizons in terms of the conditions for opening a position, the period for holding it, potential profitability, as well as asset requirements and other parameters. The main criteria for traders are:

Time Costs

Scalping is a high-frequency trading strategy that requires constant monitoring of price dynamics to find optimal entry and exit points. Long-term trading, in general, requires less time for position management, but it involves more thorough and prolonged preliminary analysis at both technical and fundamental levels.

Yield

A scalper takes profits significantly more often than a long-term trader, but in smaller volumes. On one hand, this allows avoiding long-term blocking of funds and tedious waiting, while on the other hand, it practically eliminates the possibility of a sharp increase in capital from one or several trades. Scalping is about small steps towards a big goal, while successful long-term positions allow you to achieve the desired financial result right away.

Market Analysis Difficulty

The main tools for market analysis in scalping, as mentioned earlier, are order books, oscillators, and indicators. These provide the trader with almost all the necessary information to make decisions about entering or exiting a position.

When trading on long time frames, it is necessary to consider many more factors, including the macroeconomic situation, trends, possible token unlocks, and other aspects. It is precisely because of the relative simplicity and template nature of the analysis that scalping is often used by beginners or traders resorting to trade automation.