There are countless combinations of trading methods, structures, and strategies available to traders. Typically, each trader will evolve and choose the best approach that suits them. Some may hold positions for weeks, while others may close their positions within a few seconds, and some may fall somewhere in between. It's possible for two traders who trade in the same market to have opposite styles, ideas, and setups, yet both can be profitable within the same timeframe. Traders have the opportunity to choose from various styles, including technical, quantitative, fundamental, and more.
Your trading mechanism will be defined by your style, which includes factors such as how long you plan to hold positions, what would trigger you to buy or sell, and more. When choosing your trading strategy, it's important to consider your personality, personal style, and psychological tendencies. Your strategy may also depend on your account size, how much effort you plan to put in, and most importantly, your risk appetite. One crucial aspect of trading strategies is the timeframe, with traders generally distinguishing between four major styles.
1. Positional trading – Opening positions for several weeks, months even years (Not to be confused with Investing),
2. Swing trading – Holding from several days to weeks,
3. Day trading – Capitalizing within a few hours or a day,
4. Scalping – Opening and closing positions within seconds, up to minutes.
In today’s article, we will focus on Scalping, as one of the most trending methods among cryptocurrency traders.
Scalping
Scalping is a popular trading style in cryptocurrencies that involves capitalizing on small price movements in the underlying asset. Scalpers typically hold positions for a few seconds or minutes and rely heavily on price action analysis, technical analysis, and candlestick patterns to identify good opportunities. This strategy requires a lot of time, energy, and constant market monitoring and analysis, making it challenging for part-time traders. Scalpers often use high leverage to maximize their profits, and they seek extremely liquid assets and assets with strong trends.
During a trading session, a scalper may take multiple positions to find the best opportunities. The idea is to open a trade and exit it as soon as the market goes in their favor, making a small but frequent profit. If executed consistently, this strategy can exponentially grow an account. However, the high transaction costs associated with multiple transactions can be a significant downside of scalping. Therefore, finding a cheap yet safe and secure broker is essential for success. At Osiris, we are continually developing tools to help scalpers identify and capitalize on good opportunities efficiently.
High-frequency trading with robots is a serious competition for Scalpers.
Scalpers face tough competition from high-frequency trading bots that can execute hundreds or even thousands of transactions in a single trading session. Some people blame scalpers for manipulating the market, but it's not surprising that bots sponsored by large hedge funds or organizations have the power to manipulate prices. In the world of cryptocurrencies, scalping is mostly dominated by bots, and they can even influence price movements on lower timeframes. Therefore, it's crucial to be extremely cautious when you identify a bot trader in the same market as you. In future articles, we will discuss trading bots and how you can detect them on order books.
Stay tuned!