Dec 26, 2021
How to scalp trade for beginners
The moment when the price of an altcoin rises is a beautiful sight. We are talking about 20–50% gain in 24 hours or less. Seeing major news move coins by that amount and even 100–200% in weeks or less is inspiring for investors.
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Table of contents
- How can I find crypto scalping opportunities?
- Price spikes create scalping opportunities
- Catch price fluctuations, make profits!
- Factor market cap in predicting spike potential.
How can I find crypto scalping opportunities?
We will try to explain how you can analyze these low-risk day trade cryptocurrency opportunities with our 7 quick tips below. We also suggest that you familiarize yourself with Fibonacci retracement and Elliot wave theory. These two trading methods will give you a better understanding of how support/resistance levels form so that you can accurately identify trading ranges and play accordingly.
Price spikes create scaling opportunities
There is a reason for when & why price spikes occur
The problem is that price doesn’t move up in a linear fashion unless big news comes out. The price remains subdued until the market is technically strong enough to test a higher range. Impulsive price increases come from good news, but only truly amazing press will push coins near new highs. When it happens, buy the news if the trade meets this condition: no significant price increase in the last 1–3 weeks.
You now know that any buying pressure will only drive the price up. When the market maker realizes that everyone is suddenly buying, the sell orders are withdrawn. Suddenly, the price continues to bubble upward at an unpredictable pace.
Catch price fluctuations, make profits!
Hang on and watch how high the pump goes. In most cases, the first resistance will be broken and the price will spike from there. This level becomes a support on the leg up during the third Elliot wave. If you buy in before the breakout, your position can have an incredible risk to reward proposition if you take advantage of a tight stop.
Use profits to make further gains
Assuming you know how to chart resistance, treat them as sell-off points. If the news is amazing, be a little greedy because you know the market will try to find support at a higher price than the last few days. However, if the price literally skyrockets within minutes and you know it will still be higher in the next few days, sell and buy a pullback to add 10–20% to your stock.
Roll your investment — it’s a winning strategy
Rolling your investment is a great tactic. You profit on the way up and buy lower. If the price keeps falling, you initially lose your profit from the initial trade. So you can withstand more downward pressure, and the likelihood of the price going much lower is low because it has already fallen from recent highs. You can wait it out… If the price rallies back to the new high, it can easily shoot past it and bring you even bigger profits.
Don’t close quickly if you’re chasing
If you do lose something, it will be from your gains before you invest in your initial investment. Think of it as a way to roll your money if you know the trend will lead to an aggressive upward price move. Sell near the top of the channel and buy at the bottom until the price confirms down; when you get a confirmed push up, watch out for the juicy profits!
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Understand how news affects trading action
Remember that the market moves irrationally when unexpected news is released. Be on the ball if you want to trade crypto actively. These moves are simple 5–10% increases in your bankroll. The key is to sell off early when the pump is not growing legs. Don’t buy in after the price has risen 10% in minutes unless the news is literally insane (e.g., if Verge’s PornHub announcement was a surprise).
Market cap factor in predicting spike potential
One last thing to watch is the market cap of the coin going up in price. If it is a low market cap coin with good news, the volatility and upside potential is much greater. If it is a high market cap coin, even great news can provide minimal price support. In fact, some large coin holders treat these moments as a time to sell their holdings to mid-cap whales, which can prevent/suppress a price increase.
Buy the news before the spike comes
You don’t have to believe that news will drive the price up forever. The moment the news breaks a coin, there is typically immediate buying pressure. It’s a matter of whether the whales support the price with some buying volume and real, large buy orders.
Even if the big players plan to push the price down… The market initially trends up to see how many people are buying the hype. If you are focused and trading crypto many hours a day, you will hear these stories a few times a week. Buy immediately if it seems good enough, especially if you trade on Binance or another low-fee crypto exchange. Even if the news won’t hold the pump, if you get in early, it’s a quick 3–4% profit.
For these scalps, it is almost always safer to trade coins with a sustained market cap of $75 million to $150 million or higher. A coin with a lower market cap is pumped faster with any real volume and does not always have real buy support, which is a worse risk to reward.
Arbitrage news-based price spikes
Let’s say you have funds on Bittrex and monitor the action on Binance throughout the day. The moment a coin is pumped on Binance, you can check the price on Bittrex. Imagine, and this happens quite often, you find that the coin is 10–20% cheaper on one exchange while the other is leading the pump. You can buy lower and hold through a dip when it happens, or ride a strong wave up as the price pumps more and the exchange prices begin to synchronize.
You can play these by feel, but keep your stops in place so you don’t suffer a real loss. Either you gain 5–10% on the scalp or you ride it to 30% or higher. A scalp of less than 5% doesn’t seem worth it because of the expected reward and the relative risk behind the trade.
Track price spikes in real time
You can use the “price radar” tool at philiprooker.com to track recent price movements. Look out for double-digit price changes in the last hour. Especially if you catch them in the first 10–20 minutes, these particular arbitrage moments are very profitable.
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