4 Best Scalping Strategies to Trade Crypto Futures
Cryptocurrencies are inherently volatile but do simultaneously present traders with multiple opportunities for profitable returns. Scalp trading, a favoured strategy among those who are comfortable with risk and can afford to dedicate significant time to monitoring price movements, is one such option.
This guide aims to provide a comprehensive insight into scalp trading, including its mechanics and associated tips. By exploring the intricacies of scalp trading, you can better establish a solid foundation for your crypto futures trading and improve trading success.
What is Scalping in Crypto Futures Trading?
Generally, Scalping is a focused technique that involves making a minuscule trade to generate profits within a short period of time. This method of trading the crypto futures market works off high probability trades which have extremely small risk stops and predefined profit objectives.
Typically, there are different types of traders: Position traders, Day traders and Scalpers. A Position trader would engage in trades that are intended to last for multiple days or months with huge pips targets of hundreds to thousands. A Day trader would typically engage in trades that might last for less than a day aiming for certain price targets. But to another level, a Scalper often engages in trades that might last for only a few minutes.
The main aim of crypto scalping is to make a small but tidy profit yet simultaneously ensure that the risk to the trading account is kept to a minimal level. Scalping thrives on currency pairs with high volatility. It leverages short-term spikes in prices to generate profits quickly. Compared to day trading or swing trading, scalp trading carries lower risks and offers immediate returns. However, success in this strategy largely hinges on a trader’s tenacity, self-discipline, and the availability of significant capital to achieve substantial gains.
How Do Crypto Futures Scalping Works?
Scalpers primarily depend on price actions to make trading decisions. But in addition, certain strategies, such as range trading and moving averages, can also be leveraged to better trade on markets. Therefore, each trader develops a unique system that suits their preferences and trading style. Trades are executed frequently, taking only 5–10 minutes to make a move.
Scalping can be executed manually or with automated systems and programs. Manual traders typically use charting tools such as TradingView to analyze market volatility before making a move.
Best Scalping Trading Strategy
To be a successful scalp trader, it is crucial to have a deep understanding of some scalping strategies. Let’s explore the four of the most effective tools.
Moving averages
One of the most widely used methods of analyzing price fluctuations in scalp tradin is the use of moving averages. These are built as indicator packages that can provide clear chart structures for the scalping trader. The idea behind using them is simply to be better prepared before taking a step into the market. Planning and setting short-term goals in accordance with moving averages help a trader better mark out his or her interests in the market and thus invest accordingly.
In addition, this particular method repeated over a few times will help highlight market trends — whether an upward trend or a downward trend regardless. The intersection of these plotted points form lines of data that can determine the appropriate entry and exit times in the market. Essentially , the interpretation of such moving averages provida scalp traders with market trends and price fluctuations which they can then utilize to maximize profits.
Crypto Range Trading
Range trading is a scalping strategy that involves purchasing a cryptocurrency when its price is at the lower support levels and then selling it when the price reaches the upper resistance levels. This strategy is based on the assumption that most of the time, market movements happen without showing any particular trend or direction.
To execute this strategy, a trader identifies a range within which to buy or sell over a short period. For instance, if a cryptocurrency has a current price of $30 and you anticipate that it will rise to $35, you would trade within the range of $30 and $35 over the next few weeks. You would purchase the cryptocurrency at $30 and sell it when it reaches $35, repeating the process of buying low and selling high until the cryptocurrency no longer trades in this range.
Arbitrage Trading
Crypto futures arbitrage trading is a scalping strategy employed by trading markets to profit from market inefficiencies that exist for a brief period. This type of trading is complex, particularly for beginners, and often involves high leverage to realize substantial gains.
Crypto arbitrage trading encompasses two primary types: spatial arbitrage and pairing arbitrage. In spatial arbitrage, a trader opens a long and short position simultaneously on different exchanges to hedge against various trends’ fluctuations. Pairing arbitrage, on the other hand, is suitable for one platform only, where traders leverage changes in trading pairs. For example, traders may shorten the base cryptocurrency in a USD/BTC pair to mitigate risks.
Price Action
Basically, price action is the movement of prices on your charts over a certain time period. In the simplest form, traders look for price patterns that repeat time and again, giving them a strong insight into what might happen in the future. A more advanced way to look at it is as price movements essentially “reading” the state of mind of big traders moving the market… which can give traders an insight into which direction the market will move in.
Wrapping Up
Crypto futures scalp trading essentially capitalizes on smaller position sizes. The strategy is easier to execute successfully because small price movements happen frequently. Additionally, scalp trading can be automated since it relies on technical criteria that can be calculated.
If you are a beginner who is just getting started in the crypto industry, it may be best to try less risky strategies, such as investing in cryptocurrencies for the mid to long term.
Disclaimer: The opinions expressed in this blog are solely those of the writer and not of this platform.
