Best Crypto Scalping Strategies and Tools for Beginners

Share this:
Editorial Note: While we adhere to strict Editorial Integrity, this post may contain references to products from our partners. Here's an explanation for How We Make Money. None of the data and information on this webpage constitutes investment advice according to our Disclaimer.

Crypto Scalping Guide for Beginners:

It's important to learn and master the process of efficient order execution;

As a new scalper, you have to take note of the costs while making trades;

Scalpers need to have an eye for trends and momentum;

Beginners need to have understood the basics of technical analysis to compete in the intra-day world;

The scalping strategy requires that you make entry and exit trades within a short time frame.

NOTE!

If you are planning to trade cryptocurrencies, and not just keep your savings in crypto wallets, we recommend that you choose one of the top brokers with reliable regulation and access to trading crypto CFDs. This type of trading will help you avoid holding your cryptocurrency in e-wallets of exchanges, which quite regularly get hacked. Also, availability of leverage will allow you to trade crypto CFDs for amounts much higher than your deposit.

Traders Union experts recommend considering Top 3 companies from our rating:

Start Trading with RoboForex
Your capital is at risk.
Editorial Note: While we adhere to strict Editorial Integrity, this post may contain references to products from our partners. Here's an explanation for How We Make Money. We are unable to verify the validity of reviews and publish all reviews, both positive and negative, in accordance with the Users Reviews Policy.

In this article, we review scalping in cryptocurrencies. We cover the best scalping strategies and indicators. This article also compares crypto scalping with other trading strategies like day trading and swing trading. Finally, we compare the difference between human and bot trading while describing the top tips on scalping crypto.

Start Scalping Crypto Now With ByBit!

What is Scalping in Crypto Trading?

Scalping or scalp trading is a short-term trading strategy that enables a trader to make small profits from daily, small movements in the price of an asset. By adding up these small profits from each trade, the trader can generate a significant amount over time. Due to the cryptocurrency market's volatility, scalping is a common strategy as scalpers usually use leverage to place more trades and tight stop losses to manage their risks.

In scalping, the main factors that determine success are speed and consistency. Crypto traders use this strategy through quick responses to market movements. Instead of holding a position for days, weeks, or even hours, scalpers tend to make their decision within minutes or seconds. To use the scalping strategy, the currency pair needs to be highly volatile because, through short bursts of volatility, there are significant movements in price, and scalpers use these price changes to generate profits.

How to Make Money with a Crypto Scalping Strategy

Each trader forms their trading system to make money from crypto scalping to receive the highest possible profit. However, some traders share their trading principles. The scalping strategy only works when there is real-time technical analysis.

Averagely, scalpers open positions every 5 or 10 minutes. Still, the M5 timeframe is the most preferable because it works with other strategies and is open to analysis, increasing its predictability chance. Scalpers open dozens or hundreds of trades daily.

There are two approaches to crypto scalp trading, manual and automated, further discussed in this article.

Timeframes in Crypto Scalping

Through the scalping timeframe, a trader can achieve trading velocity or the number of trades made. Typically, the most preferred timeframe for scalping ranges between 5 to 30-minute charts. The greater the number of possible trade setups, the smaller the timeframe, but this wholly depends on the strategy you choose for scalping.

In crypto scalping, you can collect various profitable trades within the day, with significant culminated profits.

Pros and Cons

There are many advantages of scalping, and there are a few disadvantages of scalping; they are

Pros

If executed precisely with a strict strategy, scalping can be very profitable. As a trader, you have to implement a strict strategy to stay profitable.

In scalping, there are numerous opportunities to leverage small changes in the price of a crypto asset. Sometimes, these small changes may not reflect the overall trend of the assets price for the day.

Since scalpers don't play a significant role in dealing with a short timeframe, they don't have to follow the fundamentals. This ensures that traders don't need to know much about crypto before trading in it.

In scalping, minimal market risk is involved.

Another advantage of scalping is that it is designed to reduce the losses from one crypto by making tight stop loss points and leverage.

Because scalping is non-directional, markets only need to move up and down and not move in a particular direction.

Also, various scalping strategies can be easily automated because they are based on technical criteria.

Cons

Compared to other strategies, scalping requires opening a maximum number of trades.

Also, because you have to pay commission on each trade, opening many trades increases transaction costs.

In scalping, you can only make significant profits if you open a high amount of trades. This is a challenge for some traders because the risk of earning small profits is not worth it.

Scalping involves traders making dozens or hundreds of trades per day. This tends to be very time-consuming and requires a high level of concentration.

Crypto Scalping Vs. other crypto strategies

Scalping Day Trading Swing Trading

Trading instruments

Stochastic Oscillator, the MACD indicator, and the RSI

MACD and RSI, and price action

Candlestick charts, momentum indicators, price range tools

Timeframe

A few seconds to minutes.

Several hours but not more than a day

A few days to weeks or even months

Suitability

Suitable for experienced traders

Suitable for all.

Suitable for all.

Profit Target

Small and multiple

Varies between small and large profit.

Few but large

Best Crypto Scalping Strategies

There are scalping trading strategies for technical analysts. Also, as a scalper, you can earn either on a trend or counter-trend movement and in a flat or inside a channel. Here are some scalping strategies.

Range Trading

Range trading is a scalping strategy where a trader identifies a range within which to buy or sell over a short period. For example, if a crypto asset has a current price of $20 and you believe it will increase to $25, you will trade in the range between $20 and $25 over the next few weeks. You can buy the crypto asset at $20 and then sell it when it rises to $25. With this strategy, you will repeat the process of buying low and selling high until the crypto no longer trades in this range.

The most important feature of range trading is the risk associated. It requires precise market timing, which means knowing when and the duration a crypto asset might trade between 2 prices. If the crypto price does not move in the direction you expect, there could be losses. Range trading involves identifying significant price levels. The technical analysis strategies used with range trading include volume trends, moving averages, and support and resistance.

Arbitrage

This is the process of making profits from the price difference between related or identical crypto assets. In arbitrage, the profit margin typically depends on the mispricing of the market inefficiency, which also means more traders will be eager to get on it. This influx of traders will usually reduce the potential to make a profit and adjust the asset back into its aligned price.

To deduce an arbitrage opportunity, a trader needs to compare two assets. If two similar assets have different prices without justification, this will present an arbitrage opportunity. Suppose two assets often move in the same direction and fashion but suddenly diverge. In that case, this is also an opportunity for arbitrage because it is expected that the assets will eventually start moving in the same direction again.

There are three types of crypto arbitrage: statistical arbitrage, triangular arbitrage, and retail arbitrage. Also, there are different arbitrage strategies for trading: risk arbitrage trading, fixed income arbitrage and covered interest arbitrage.

Bid-Ask Spread

The bid-ask spread is the difference between the bid and asking prices. The bid-ask spread allows scalpers to open a position at the ask or bid price and then close the position quickly and a few points higher or lower to make a profit. In scalp trading, the bid-ask spread can happen either of two ways;

Wide Bid-Ask Spread: This happens when the asking price is higher and the bid price lower than normal. This is typically caused when there are more buyers than sellers, leading to surges in prices and causing scalpers to sell.

Narrow Bid-Ask Spread: The narrow bid-ask spread happens when the number of sellers outnumbers the buyers. In this case, the bid will be higher, while the asking price will be lower. Scalpers usually use this strategy to fast-track the buy-in frequency to even out the selling pressure.

Crypto Scalping Indicators and Tools

Many tools are important for making successful trades. Some of these tools are free, and others paid, although the paid tools are considered more helpful and functional. Here are some of the tools

Technical analysis indicators

Analysing trading charts are important for every scalp trader. Volume and price charts give vital information, and it would be impossible to develop a strategy without it. Also, aside from trading charts, tools like stop-loss help traders make logical decisions.

Crypto API tools

APIs make sure that you're able to interact with trading platforms and other blockchain-based projects. APIS provides a range of functions like transaction support, market price tracking, wallet integration, and more.

Bots

Trading bots are the most common software developed for traders. A trading bot is a predefined set of instructions that performs automated trading decisions. Human traders can't take advantage of every opportunity in the market where technology comes in. Algorithmic trading now plays a huge part in the crypto markets.

Once you configure crypto trading bots, they take over most of the work and seize opportunities as they are made available in the highly volatile world of cryptocurrency trading. Trading bots are beneficial because they eliminate emotions, are highly efficient, disciplined, and don't go off.

The limitations of trading bots include that they may not make you money, depending on the configuration settings. Also, it could take testing a bot many times for it to be effective. Again, depending on the popularity and availability of the strategies and signals used, it may be difficult for the bot to turn a profit as more people have access to these strategies and signals. Another limitation is that each bot requires new algorithms and trading configurations to beat the market.

Scalping is a trading strategy based on fundamental analysis.

Manual Trading vs. Trading Bots

Human trading involves a trader deciding whether to sell, buy or trade an asset and then making the trades themselves through pending or market orders. Usually, the human trader scans multiple markets to find an opportunity before deciding. In human trading, most of the work is done by the trader, which makes their output directly proportional to their input. For human traders, discipline is a major hindrance when trading. Humans have emotions, so sometimes, those emotions can affect their ability to make objective decisions.

Some of the advantages of human trading include taking unexpected fundamentals like hurricanes, wars, etc. Also, a human trader can notice the market moving slowly or desperately erratic and decide to either increase their position or sell their trades. A human trader can decide when their profit is enough and if the momentum will continue in their favor. Being a human trader is not a disadvantage as it has its upsides. However, trading bots are growing to be the preferred trading method. Bots are exact, incapable of mistakes, and perfectly programmed to execute instructions.

Trading bots, also known as automated trading or algorithmic trading, involve a preprogrammed algorithm that makes the buy and sell decisions based on the instructions written on its code. A robot is thoroughly disciplined and sticks to the plan you set up. The difference between being a profitable trader and an unprofitable trader is the ability to stick to the plan.

Robots don't make a buy when they should take a sell; neither will they enter the wrong lot size, and they won't misplace the stop loss or the take profit. Also, robots can take in and analyze more data than human traders, which guarantees that you can apply a strategy to as many charts as you'd like to monitor with an automated system. The robot won't miss a signal. The most impressive advantage robots have is that they can plug away at the markets 24 hours a day which is about 3 or 4 times the ability of the human trader.

It is not a surprise that trading robots are getting more popular with these advantages. They are more effective and better executors than human traders.

Margin Trading in Scalping With Crypto

Margin trading involves using a third party's funds instead of yours to improve potential gains. Using intraday leverage while scalping allows traders to magnify their returns. In a proper scalping strategy, positions aren’t held overnight. So most brokers enable talented scalpers to use high leverages up to 10:1 or sometimes even higher. Traders typically invest more capital and place more trades during the day.

In margin trading, most traders earn or lose incrementally much more than they invest, which justifies the risk because, with leverages like 1000:1, their chances of earning are high.

How to Scalp Crypto - Top Tips

It's important to learn and master the process of efficient order execution. When there is a delayed or bad order, there is the risk of losing the profit earned. Also, the order execution needs to be accurate since the profit margin per trade is limited.

As a new scalper, you have to take note of the costs while making trades. In scalping, you have to make as many as 100 trades per session, and the frequent buying and selling of assets can be costly in terms of commissions, which can reduce profit. This makes it imperative to choose brokers with competitive commissions.

Scalpers need to have an eye for trends and momentum because you can enter and exit briefly. With an understanding of the market pulse, a scalper can use trend and momentum trading to achieve more profitable trades.

Although most beginners are comfortable making trades on the buy side, it is essential to stick to that side until you have proficiency in handling the sell/short side. However, you will need to balance your expertise on both sides.

In today's world dominated by high-frequency trading and where trading takes place in dark pools that don't have real-time reports, beginners need to have understood the basics of technical analysis to compete in the intra-day world.

The scalping strategy requires that you make entry and exit trades within a short time frame. This strategy needs high-volume trades for maximum profits.

Discipline is important in scalping because, as a rule, you are supposed to close all trades during the day's trading session. Scalpers are not supposed to break this rule of holding assets for a short time.

Is Crypto Scalping good for me?

Crypto scalp trading is not suitable for everyone. If you're a beginner and recently got into crypto, it is advisable to try a less risky trading strategy. Also, it might be preferable to invest in the cryptocurrency market in the mid to long term.

In scalp trading, not only do you need the extensive resources to buy multiple positions, but you also need to be psychologically ready for all outcomes. Also, scalp trading requires a lot of emotional control, and very few new traders have that. However, if you feel you have all these plus the needed computer skills, then, by all means, get started.

Cryptocurrency Scalping Risks

There are risks associated with scalp trading, and they are

Fees - Considering that you will be making a large number of trades daily, which translates to substantial fees, it is important to ensure that you consider the costs of scalping before venturing into this strategy.

Leverage - For traders who prefer margin trading, scalping requires you to use a lot of leverage which is extremely risky, and more so for inexperienced traders. Using leverage like these can result in substantial losses.

Competition with bots - Using trading bots for scalp trading can be highly beneficial, but this also means that you are trading in a market that is saturated with intelligent bots. You have to compete with all of them.

Speed, patience, and commitment - Scalp trading not only requires real-time decisions but also, you have to be proactive, patient, and fast when making these decisions. This is why scalping is a high-risk trading strategy.

Best Crypto Scalping Platforms

To pick a good cryptocurrency platform for scalping, you have to choose the trading pairs, mind the trading fees and check if the platform allows for scalping.

You can trade cryptocurrencies on cryptocurrency exchanges and with the help of brokers. Here are the top two crypto scalping platforms;

ByBit - Best For Crypto Derivatives

Open an Account
Your capital is at risk.
ByBit

ByBit

Bybit is a cryptocurrency exchange that is popular for its crypto derivatives. On Bybit, traders can access up to 100x leverage on crypto, which means a trader can trade a position of $20,000 from a $200 investment. With this high leverage, traders can profit from magnified potential rewards.

The exchange has a variety of advanced tools that are supported by impressive technology. Also, on Bybit, there is a risk-free environment for new traders to experiment and learn. The exchange also has a wide range of educational resources.

Binance - Best Crypto Spot Liquidity

Open an Account
Your capital is at risk.
Binance

Binance

Binance is a cryptocurrency exchange designed and developed for experienced crypto investors. The platform has over 365 tradable cryptocurrencies and is well-known for having the best crypto spot liquidity. The crypto platform offers a versatile and secure way to trade and invest in cryptocurrencies.

Among all the other advantages of Binance, it offers some of the lowest fees compared to other cryptocurrency exchanges. This means traders have the opportunity to keep more of their earnings and investments. On Binance, there is a wide range of trading options, including spot trading, margin trading, and peer-to-peer trading. Also, Binance has various order types like trailing stop order, limit order, stop-limit order, market order, post only order, among others.

Summary

Cryptocurrencies are highly volatile assets, and they offer various ways of making profits. In this article, we discussed the definition of scalp trading or scalping. We did a deep dive into the best scalping strategies, ways to make money through scalping, timeframes in crypto scalping, the advantages and disadvantages of scalping.

We also explained the best crypto scalping strategies and indicators. In scalp trading, you can have human traders of trading bots. We compared both types while explaining why bots are increasingly popular. Finally, for the traders looking to adopt the scalping strategy, we explain the top tips on scalping crypto.

FAQs

Is crypto good for scalping?

Yes, crypto is good for scalping. However, the best cryptocurrency for scalping will depend on your risk profile and trading style.

What is the best indicator for scalping?

The EMA is the best indicator for scalping because it responds to real-time price changes.

What are some risks associated with scalping?

Scalping involves paying huge fees, using high leverage, competing with bots, and possessing speed, patience, and commitment.

Which crypto exchange is good for crypto scalping?

You can use Binance for the best spot trading liquidity and Bybit for the best crypto derivatives.

Team that worked on the article

Ivan Andriyenko
Author at Traders Union

Ivan Andriyenko is a financial expert and analyst. He specializes in trading in the Forex, stock and cryptocurrency markets. His preferred trading style is conservative strategies with low or medium risk, medium and long-term investments. He has 7 years of experience in the financial markets. Ivan is involved in preparation of articles for novice traders, and also of the reviews and evaluation of brokers, analyzing their reliability, trading conditions and peculiarities.

Ivan continuously tests new strategies for various assets, choosing the most effective options. In addition, he believes that helping novice traders is an important aspect of work. He shares information that beginners require – educational materials, strategies.

Ivan’s motto: continuous studying and experimentation lead to success.

Dr. BJ Johnson
Dr. BJ Johnson
Developmental English Editor

Dr. BJ Johnson is a PhD in English Language and an editor with over 15 years of experience. He earned his degree in English Language in the U.S and the UK. In 2020, Dr. Johnson joined the Traders Union team. Since then, he has created over 100 exclusive articles and edited over 300 articles of other authors.

The topics he covers include trading signals, cryptocurrencies, Forex brokers, stock brokers, expert advisors, binary options. He has also worked on the ratings of brokers and many other materials.

Dr. BJ Johnson’s motto: It always seems impossible until it’s done. You can do it.

Mirjan Hipolito
Cryptocurrency and stock expert

Mirjan Hipolito is a journalist and news editor at Traders Union. She is an expert crypto writer with five years of experience in the financial markets. Her specialties are daily market news, price predictions, and Initial Coin Offerings (ICO). Mirjan is a cryptocurrency and stock trader. This deep understanding of the finance sector allows her to create informative and engaging content that helps readers easily navigate the complexities of the crypto world.