Of the many strategies that a novice trade may encounter beginning your journey through trading the markets, Scalping is probably going to be among the first. Simple on the surface, an assumption that Is often fueled by a flood of videos looking to bait unsuspecting viewers with ” a simple scalping strategy that anyone can follow”. However, there are some harsh truths that a trader will have to face if they plan to traverse the treacherous terrain of the crypto markets – or any market for that matter – using this route.
What is Scalping?
When it comes to trading markets, scalping is high tempo work – usually done on the smaller time frames like, the 1-minute and the 3-minute. The aim of a “scalper” is to execute many trades that span over a short time horizon, in order to gain small profits that add up to a bigger overall gain due to the high volume of trades made.
One would not be too far off the mark if they considered scalping a form of day trading done at full throttle. And that’s where the issue starts, nobody – yourself included – bothers to remind you of the dangers associated with moving at high speeds. There are limits to human response times and the down side of this little fact tends to prove itself very quickly in the digital assets market.
The truth about Scalping
Scalping limits the number of markets a trader can specialise in
This is just another one of the limitations that come with being human. Scalping 20 markets would be considered more than an accomplishment, that’s because the human brain simply lacks the bandwidth to do it.
Trying to get an intricate understanding of the dynamics of multiple markets, while trading them on the smaller minute timeframes, will limit a trader or 4 or 5 markets at best.
Transaction costs could cost you
Not paying attention to the micro-margins made on a trade versus the fee of execution of the trade could leave a trader with a minor loss instead – too many of those will also add up.
This, once again, could also be attributed to being human. Setting stop losses and price targets on time might prove impossible to many traders in the crypto space. This means market orders are the safest bet.
Its high stress the whole way
Trading is already a frustrating endeavour when done with bigger time frames, increasing the pace will only really increase the pressure that the trader is put under. So it is not very likely to better your chances if you weren’t getting it right on the longer trades.
Never forget that you are the prey
As the cryptocurrency market has grown, an influx of new professional traders proliferated the use of trading bots for High-Frequency Trading – not that it wasn’t there before. This further complicates things for a human trader looking to start scalping their chosen market. Being human means not being able to open and monitor hundreds of trades every minute, leaving the human scalper at a clear disadvantage.
