What is scalping in crypto, and how does scalp trading work?

Scalping focuses on making money off of slight price swings. Crypto scalpers use this method to reap quick gains from reselling assets.

Although cryptocurrencies are known for their volatility, they give traders various opportunities to pocket and reinvest the gains. Scalp trading is a crypto strategy that helps scalpers to take risks and make the most of frequent price fluctuations by observing price movements.

This article will discuss scalping, how it works in cryptocurrency, the advantages and disadvantages of scalp trading in crypto, whether it is complicated and how much money you need to engage in it.

What is scalp trading?

Crypto scalp traders target small profits by placing multiple trades over a short period, leading to a considerable yield generated from small gains. Scalpers step in for highly liquid and significant volume assets that result in greater interest owing to the news.

Scalping strategies require knowledge of the market even though it is a short-term trading strategy. To capture the difference between supply and demand, scalpers use a spread, which involves buying at the bid price and selling at the asking price. If traders are prepared to accept market prices, this approach permits making a profit even when orders and sales are not changed.

How does scalp trading work?

Charting, speed and consistency are the critical elements that make scalping possible. For instance, scalpers use technical analysis and various value gaps caused by bid-ask spreads and request streams.

Critical elements that make scalping possible

Scalpers generally operate by creating a spread, or buying at the bid price and selling at the asking price, so that value distinguishes between the two value centers. Crypto scalpers try to hold their positions for a brief time, reducing the risk associated with the tactic.

Additionally, traders that utilize scalp trading techniques must respond quickly to capitalize on the minutes — or even seconds — of short-term volatility. In this manner, scalpers can reap benefits over time continuously. But how do crypto scalpers make money?

The different scalp trading tools used by crypto scalpers to reap gains include leverage, range trading, and the bid-ask spread, as explained below:

Leverage: Leverage describes how much traders contribute from their pockets to increase their margin. Some scalpers use this method to increase the size of their position.
Range trading: Scalp traders who engage in range trading watch for trades to close inside predetermined price ranges. For instance, some scalpers utilize a stop-limit order, which executes the trade at future market values.
Bid-ask spread: By employing this strategy, scalpers can take advantage of the significant price discrepancy between the highest bid and lowest ask.
Arbitrage: By purchasing and selling the same asset in different marketplaces, arbitrage scalpers can benefit from the price difference.

Types of cryptocurrency arbitrage trading strategies

How to set up a crypto scalping trading strategy?

To set up a crypto scalp trading strategy, follow the simple steps below:

Choose the trading pairs: Considering the volatility and liquidity of crypto assets, choose a trading pair that suits your risk-return investment profile.
Select a trading platform: While selecting a trading platform that offers your chosen trading pair, consider various aspects like trading fees, interface, customer service, etc.
Choose scalper bots: The foundation of scalping is speed; therefore, those who trade utilizing software are constantly in the lead. Also, the manual management of an investment portfolio is typically time-consuming and error-prone.
Try various trading strategies: Before scalping, ensure you understand your strategy well by trying different trading techniques, as mentioned in the section above.

Advantages and disadvantages of scalp trading

All trading strategies have pros and cons, and scalping is no exception. For instance, the risk in scalping is low due to the smaller position sizes involved. Moreover, crypto scalpers do not try to take advantage of significant price moves. Instead, they struggle to take advantage of small moves that occur frequently.

However, because the rewards from each trade are so little, scalpers search for additional liquid marketplaces to increase the frequency of their trades. According to economists, being optimistic about scalping may not be beneficial. For example, there isn't a single tested method that ensures success in at least 90% of scalp trading situations. Similarly, if something seems too good to be true, it probably is—especially in crypto trading.

Furthermore, scalping frequently requires advanced analytical skills, although traders do not necessarily need to be patient with consistent price fluctuations. In addition, please bear in mind trading fees, which may be high, depending upon your trading volume.

Scalp trading vs. day trading

In contrast to long-term hodling, day trading encourages the trader to concentrate on minute price changes. So, how is day trading different from scalp trading?

A scalping trader holds a financial asset for less than 5 minutes and can typically maintain a deal for 2 minutes. On the other hand, day traders hold trades for several hours.

Moreover, crypto scalpers open 10s or 100s of trades daily to reap significant gains. In contrast, day traders are limited to a small number of daily trades. In addition, day traders occasionally rely on fundamental analysis, whereas scalping requires knowledge of technical analysis.

Scalp trading is also different from swing trading as scalpers hold trades for a few seconds to minutes, whereas swing traders typically maintain their positions for a few days to weeks, even months.

Additionally, swing trading involves reasonable monitoring and current knowledge of news and business events, whereas scalping necessitates constant monitoring throughout the trading session.

Is crypto scalp trading worth it?

Developing your ability to interpret charts and expanding your understanding of various crypto trading tactics are the keys to becoming a good crypto scalper.

In general, scalp trading can be aggressive and demanding and may be highly draining for untrained brains. Because the return from each trade is too small, more substantial capital is required to produce meaningful outcomes.

And, of course, as there is a "no one size fits all" crypto trading strategy, one should utilize the techniques that best fit their risk-return portfolio. A lack of confidence in one's abilities while dealing with risky assets may prove unproductive in the long run.

The most crucial lesson for scalpers to learn is likely risk management. Compared to choosing entry and exit points, choosing how to manage risk can have a much more significant impact on the financial performance of the investment portfolio.

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NFT utility to remedy ticketing dilemmas? Experts weigh-in

Black Market

The biggest pain points in events ticketing could prove to be a flagship use case of blockchain-based nonfungible tokens, according to industry leaders.

The 2022 Champions League final will have a checkered position in the competition’s history book. Real Madrid emerged victorious over Liverpool inside the Stade de France, but the pandemonium outside the stadium before kick-off highlights the need for innovative solutions to events ticketing.

Counterfeit tickets played a massive role in the chaotic scenes that played out in the French capital in June 2022, as fans broke into the stadium precinct while authorities rebuffed many. French authorities estimated that 35,000 people had arrived at France’s national stadium with fake tickets or none at all, in addition to the 75,000 fans that had legitimate tickets for the grand final.

Black market ticket sales and touting have been part and parcel of the sporting and events world for decades, but the advent of blockchain-powered ticketing looks to be a promising solution. Nonfungible tokens (NFTs) are multi-faceted in that they ensure the credibility of tickets and enable Internet-of-Things (IoT) functionality while also serving as a unique digital collectible to commemorate an event.

The NFL has already tested the waters with NFT ticketing, having distributed around 250,000 NFT tickets after launch in November 2021. Fans that attended the NFL’s Super Bowl LVI were also eligible for commemorative NFT tickets — all at no cost. How that NFT ticket looks and what it incorporates are up to the creators. The NFL’s NFT tickets are minted on the Polygon blockchain and feature different animated visual elements.

The French envoy for the 2024 Paris Olympics has also suggested the use of NFT ticketing solutions to manage attendance for the events, as well as a trial run at the 2024 Rugby World Cup, which will also be hosted in the country.

NFTs are multi-faceted in that they ensure the credibility of tickets and enable IoT functionality while also serving as a unique digital collectible to commemorate an event. How that NFT ticket looks and what it incorporates are up to the creators. The NFL’s NFT tickets are minted on the Polygon blockchain and feature different animated visual elements.

Cointelegraph reached out to a handful of industry participants that already make use of blockchain-based NFT ticketing to gauge the impact of the technology.

Amsterdam-based event technology firm GET Protocol issues tickets that are minted as NFTs on the Polygon blockchain when a user buys a ticket in their mobile app. Tickets are tied to mobile numbers, which is a key part of eliminating ticket touting.

Users can claim the actual NFT when they scan the ticket QR code at the given event, which links to their GET Protocol wallet. This is where digital collectibles and other exclusive benefits can be extended to users.

Colby Mort, who heads up NFT strategy at the company, told Cointelegraph that NFT tickets help add transparency to what is traditionally a “blackbox” industry. All tickets are transparently viewable in real time, which helps prove ticket authenticity, given the immutability of the underlying system

The secondary sale market is also formalized. Tickets can only be resold within the system, giving organizers control of tickets, revenue, data and direct contact with holders. Tickets are also given extended life cycles, both pre- and post-events, with GET Protocol exploring decentralized event financing for an upcoming Lewis Capaldi art show in Iceland. This explores fundraising initiatives with technology that could benefit smaller artists and creatives.

Digital collectibility is a major feature of post-event NFT utility but Mort also pointed to its potential as a community-building tool for artists and event hosts.

“NFT Ticketing for a lot of mainstream audiences is the 'light bulb moment' of understanding the underlying utility of an NFT combined with the familiarity of the collectible side of NFTs as all NFT Tickets can include a digital collectible.”

Josh Katz, CEO of NFT marketplace YellowHeart, told Cointelegraph the ticket industry is plagued by issues around authenticity and scalping which are mainly driven by the ease of forging or replicating paper tickets with modern hardware.

The finite element and exclusivity of tickets also results in mass reselling at inflated prices. Katz noted that the online ticketing market is expected to be valued at $68 billion by 2025, while secondary sales could generate $15 billion in sales of which organizers and artists forgo their rightful share:

“NFTs, on the other hand, can help solve most — if not all — of these issues. For one, the open and transparent nature of blockchains makes it extremely easy to verify the provenance and authenticity of NFT tickets, so it’s substantially harder for scammers to fool people.”

Kats also highlighted the freely programmable nature of the smart contracts powering NFTs, bringing dynamic benefits to holders and issuers. This also addresses secondary market sales, where NFTs can be programmed to deliver a percentage of sales to the artist or event organizer.

Mort insists that a focus on form and function has been important for their ticketing solution’s success to date. Ticket buyers use fiat currency to purchase tickets linked to bank accounts or cards and access and interact with their NFTs through an app.

“Since our inception in 2016, we've prioritised abstracting away the complexity of blockchain and NFT technology, but over the last year we've seen a huge demand from ticketing companies and event organisers to explore the Web3 side of their ticketing with post-event NFT claiming.”

GET Protocol was built to be blockchain agnostic, given that customers and clients will use the event and ticketing marketplace without having to understand the underlying technology.

Striking a balance that ensures ease of access for new users while harnessing the programmability, utility and immutability of blockchain technology is a key theme highlighted by both Mort and Katz in the adoption of NFT ticketing.

scalping