A Review of Scalp Trading as the Most Effective Trading Style in a Bearish Market
Trading in a bearish market comes with a lot of work and the payment of attention to details. Crypto prices may keep nosediving with very tiny margins for bullish price surges. With this uncertainty, a lot of cryptocurrency traders stay off the exchanges keeping true to the notion that they would rather retain their current balance than lose it through trading.
Trading crypto comes with lots of analysis and forecasting, the philosophy adopted between both differ from one trader to the other, whichever way to go, the deployment of analysis and forecasting when trading in a bearish market requires much more precision backed up with adequate and current market information. Most traders adopt Scalp Trading when the market is generally bearish.
Understanding Scalp Trading
Scalping trading in cryptocurrency is a trading strategy geared toward making many profits on minor price changes. Most cryptocurrency investors/traders who adopts this strategy place anywhere from 10 to about a hundred trades in a single day with the belief that small changes in crypto price are easier to catch than the large ones.
Many small profits can easily compound into large gains if a strict exit strategy is used to prevent large losses. Traders who implement this strategy are known as scalpers.
Crypto scalpers usually adopt a very good entry and exit strategy and they are able to shun any sentiment that would make them renege on their adopted strategy. The precision timing and execution of scalp trading makes it a fast-paced strategy that typically lasts a couple of minutes (1-5) and in very few occasions, it may take hours.
To be a successful scalper, you must be abreast of the market price fluctuations, this is made feasible with the deployment of technically analysis tools such Relative Strength Index, Moving Average Convergence Divergence, Exponentially Moving Averages etc. It is not uncommon for scalpers to use to use trading platforms that makes placing buy and sell orders easy with stop loss feature to minimize losses.
Downside of Scalp Trading
While scalp traders take profit from small price changes in the market, their activities are high risk ventures. Scalp trading involves a huge amount of capital which affords the scalp trader the opportunity to place several trades on different exchanges at the same time. Except for someone trading full time, the possibilities of doing this and succeeding as a part time scalper is low.
In other words, Scalp trading may not work for every category of trader. Without a good exit strategy as has been said, a scalp trader may lose his money from a big loss in one single trade thus making all smaller accumulated profits come to naught. Scalp trading in cryptocurrency may take time to master.
Should I Scalp Trade
There is a general statistic that failure rate in trading is between 90 to 95% with success rate just under 5%. True as this seems, there are still some people who records good success in trading cryptocurrencies. The question whether to engage in scalp trading is a personal decision that every trader must make.
Scalp trading can be very profitable because of the high number of transactions carried out daily but involvement requires a strict adherence your personal trading rule shunning greed and impatience because both are a big factor that has caused huge losses for most scalpers and traders alike and characterize traits exhibited by failed traders.
Scalp trading remains an important trading strategy in a bearish market. I have a principle according to Martin Shwartz
“A lot of people get so enmeshed in the markets that they lose their perspective. Working longer does not necessarily equate with working smarter. In fact, sometimes is the other way around”.
This is the fulcrum upon which scalp trading hangs, to trader smarter/ shorter rather than losing one’s perspective by trading longer.
Disclaimer: This article on scalp trading is not a financial advice, it is a personal opinion of the writer and should be treated as such