Steemit Crypto Academy Season2-Week5 | The Scalp trading style
There are different trading styles that traders and Investors use in their Crypto trading venture. Each trading style depends on someone’s trading personality. If you are the type of trader who likes keeping track of the price movements while seeking to make those small profits in the shorter time frames for instance in seconds, 1 minute, 2 minutes, 10minutes, 30 minutes etc then you are a scalper. The maximum time they look at is 1 hour as they make their technical analysis of the different asset pairs in the Crypto trade market.
Personally, I started out trading using the Scalping style though it’s not recommended for beginners. I opted for the scalping style because I liked the highly active price action in the lower time frame where you do not even want to blink an eye otherwise you might miss out on a profitable trade opportunity. Well, I am a bit of an impatient person who likes obtaining immediate results of what I am doing. That’s partly why I became a scalper as far as trading is concerned.
What is Scalping?
This is a trading style that involves investing money in Crypto asset pairs with the purpose of gaining smaller profits from the shorter price movements of a particular Crypto asset in the market. Scalpers take advantage of any short time buying and selling opportunities in the Crypto market. They collect any small profits from any profitable trades they make within the day.
Merits of Scalping
Lower risk of losing funds
Since they don’t hold trades for a long time they have low exposure to the Crypto market volatility. They do this by ensuring tight stop losses for all the trades they execute. In other words, they jump into a trade and quickly jump out when they anticipate that the trade may start going against them.
More trades and profit opportunities
These execute a huge number of trades in a day which can also imply more profitable opportunities in the Crypto market.
The hundreds of trades that scalpers make in a day can mean to be so tiresome. Keeping track of every running trade, making quick entry and exist trade decisions for every trade can really strain your brain and eyes, making the scalping style a very tiresome style.
The high commissions and charges which end up eating up their small profits
Different brokers charge different commission fees from the trades. Due to the many trade positions, scalpers open up, they end up with a bigger commission fee to pay to the broker which ends up eating up their small profits gained from the small profitable trades made. For every trade opened up, it normally begins in negative and if it’s a big lot size used then it may long for that trade to get into profits or if it gets into profits, the profits will most likely be too small which may also be covering up the loss of some other bad trades of the day.
Missing out on certain profitable trades
Jumping out of profitable trades so early makes a scalper to miss out on the profits that he/she would have made from some particularly profitable trades.
The difference between scalping and other trading styles.
Scalping is done in shorter time frames whereas other trading styles like Swing trading are long term trading styles. A scalper can hold a trade for just seconds and minutes whereas a swing trader will hold a trade for a few days and weeks.
Scalp trading style eliminates greediness since it involves holding trades for a very short time whereas Swing traders are caught up in greediness since they seek to maximize all the profit potential of certain trades.
Scalping involves taking quick decisions since the trade execution is just done in seconds and minutes. There is no time to think too much about a particular trade whereas, with Swing trading, traders take their time in making trade decisions through the use of the different technical analysis tools, fundamental analysis and other trading strategies as a basis for their trading decisions.
Screenshot: ETHUSD 5 minutes chart - taken from my MT5 PC trading application. Showcasing 2 moving averages 8 and 34 that used in the fingure-trap scalp trading strategy.
Requirements for scalp trading.
Shorter time frame
Scalpers need shorter time frames for their trading. As a scalper, the maximum time you are to look at is 1 hour in order for you to establish a major trend for the asset pair that you seek scalp trade in the shorter time frames.
A scalp trading strategy
There are many Scalp trading strategies that are perfectly fit for the scalp trading style and one of them is the finger-trap strategy that involves the use of moving averages such as the 8 EMA and 34 EMA coupled with other trade management elements including setting up a tight stop loss.
Quick decision making
Scalping requires quick decision making since a trader is seeking to make profits in just seconds and minutes following the quick price movements in the shorter timeframes. With scalping, you have to train your mind to think quickly, enter trades when you see an opportunity and exit at once in order to minimize the losses that might eat up the small profits made from other trades.
A scalper needs higher leverage which enables him to open up a good number of trade positions at the same time. Though the higher the leverage, the higher the exposure to the risk of losing more funds if most of the opened trade positions go against you.
Automated trading robots
Using the finger-trap Scalp trading strategy, practically demonstrate the scalp trading style on at least 2 crypto asset pairs such as BTCUSD, ETHUSD, etc
Use a demo account for this exercise. You will need to create one using FXTM or any other trading broker of your choice. You may use an MT5, MT4 or trading view to execute your trades.
I expect you to explain the finger-trap trading strategy as you practically demonstrate all its vital elements on at least 2 crypto assets with clear screenshots.
Rules and Guidelines
- Post your homework article in the steemit Crypto Academy
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- This homework task runs till 15th/05/2021 (Saturday), Time: 11:59 pm UTC.