Chapter 3: Understanding Timeframe In Cryptocurrency Trading-- Scalping

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Good day fam,

It is your humble friend again @mato445 and I hope everyone is doing fine.

I am here today to continue the Interesting topic I started some days back on timeframe in crypto trading.

To access my yesterday content, you can visit this link and today we will be learning more.

How Traders Use Different Timeframes

The different available timeframes explained in the previous posts have different ways in which they are applied by different traders.

We shall be examining some of these strategies used by traders on these timeframes.

• SCALPING:

Scalping which is known as scalp trading can be explained to be a short term trading strategies used in different financial markets.

This trading strategy focuses on making little profit by taking advantage of minor movements of price.

Scalp trading is not like a long term investment, which often involves holding of an asset for a long period of time, rather, in centralizes on quick frequent trades, that only lasts for few minutes.

The main purpose of scalp trading is to capitalize on small price flunctuation for immediate gain.

This trading strategy often involves quick decision making and scalpers have to be well disciplined to profit in this market.

Characteristics Of Scalping

There are interesting characteristics of scalping and here we shall be discussing just a few.

• Short Holding Period:

Scalpers stay in a trade for very short periods, ranging from seconds to minutes.

Its aim is to exploit minor price flunctuations and reduce exposure to market volatility.

• Small Profit Margins:

Scalping is dependent on the accumulation of little profits from various trades.

Each of this profit may be little in themselves but when accumulated, it may be seen as a huge profit.

• High Trading Frequencies:

To be profitable, scalpers initiate a lot of trades within a single trading session.

This trading strategy is highly dependent on the number of trades you take, the more trades you win, the more profitable you become.

• Technical Analysis:

Scalping is highly dependent on technical analysis, making use of Indicators, charts and patterns for the identification of short term trends and entry alongside exit positions.

Scalpers mostly make use of stochastic indicator, moving average, Bollinger bands and support and resistance levels for chart analysis.

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• Leverage:

In order to amplify their position, scalpers tend to make use of leverage, and this not only amplify their gains but also amplify their losses.

Making use of this approach requires scalpers to be very careful as any little mistake could lead to a significant loss.

• Low Transaction Cost:

Scalpers prefer trading in platform with very low transaction cost, and this is as a result of the number of trades they tend to carry out per trading session.

• Market Liquidity:

Scalping can be done most effectively in highly liquid market.

In highly liquid market, it becomes very easy to catch these minor changes in price movement.

And the presence of liquidity in a market enhances quick market execution and also eliminating slippage.

CONCLUSION

Scalping is a very good trading strategy if one can learn about it very well.

When next we discussed about scalping, we shall learn about the advantages and dis-advantages of scalping.