In today’s educational content, we will deep dive into the world of Scalp trading. One of the most lucrative forms of day-trading that will help traders make money on both side of the moves: Long & Short.
Scalp trading involves High Risk:High Reward and Intermediate level of charting knowledge. This is not the kind of trading where you leave money in a position and forget about it, Scalping is a highly risk form of trade, so use cautious with proper risk management and position sizing. We will be referring to BTC/BUSD chart from CoinDCX throughout the article…
Unlike Swing Trading that depends on longer time-frames and confirmation patterns, Scalping requires quick calls and multiple position open-close through the intraday trading session.
Scalping is best done for Crypto on the 15min chart due to the volatile nature of the market. Anything below 15 min chart will create and destroy patterns, making your positions a loss making proposition.
The 15min chart attached above of BTC/BUSD clearly shows multiple candle sticks and other information that we will explore further down.
Relative Strength Index (RSI)
RSI is a scalpers best friend. The yellow graph on the chart above represents the RSI of BTC with every corresponding candle.
The RSI indicator when selected on the chart is by default on 14, but the best setting ideally should be between 2–10, I have mapped the above RSI to 8 length with a 70:30 ratio.
To scalp with this indicator, just keep a simple trade condition in mind. The graph when it crosses 70 on the upper boundary, it means the asset is Overbought and a cool off is imminent. Likewise, when the graph falls below 30 to the bottom edge of box, then we say the asset is Oversold and a bounce is imminent.
Caution: be careful of market conditions, in a Bull Market, RSI can remain overbought for an extended period of time and vice versa. The trend in your friend.
A little more advanced, but as a trader it will be of huge help if you can start to identify Supply:Demand areas.
- Supply area is where price visits and sellers step-in to book profit
- Demand area is where price visits and buyers start longing
In the chart attached above, the Red box represents the Supply area. If you see closely, price kept trying to break that range and was ultimately rejected to the downside. So a Short position from that area would have been a profitable position.
Below we can see the Demand area represented by the green box. This can also be called a support area and price bounced from here on two occasions. A Long from here would be a profitable position.
In the above attached chart we can see a clear Double Bottom pattern formed on the 15 min time-frame. A Double-Bottom pattern can be confirmed when price bounces from a particular level (S1) and then after an uptrend again finds support on the same S1 level. This confluence confirms a Double-Bottom play.
In the above chart we can clearly see how price made a V-shape reversal on confirming bottom the second time.
This was just an example of a technical pattern. Many more trading patterns, both bullish and bearish can be used while building your scalping strategy.
Moving averages can also be a very strong indicator of Support:Resistance, especially when trading on the lower time-frames, where plotting key level of support and resistance becomes a tough task.
In the chart attached above, you can clearly see how price reacted in confluence with the Moving Averages. The above chart has the 20 & 50 MA. Every-time price went below the MAs, the price went down as long as the MA remained as resistance. Similarly as soon as price broke above the MAs, we see price catch an uptrend as long as the MAs remained below price.
These were just 5 ways you can start scalp trading and taking advantage of short momentum moves that the market gives you. Scalp trading is highly risky, but also highly rewarding if done right and you attach the above indicators with your own strategy
Start your own Scalp Trading journey with CoinDCX in 3 easy steps:
- Signup with your Name, Email and mobile number
- Accept the CoinDCX’s terms of service
- Complete your KYC verification and add your bank account details
- Once approved, deposit Fiat through your approved bank account or transfer crypto from your other crypto wallet and you are done.