Scalping

Scalping in crypto refers to the practice of executing a large number of trades over a short period to profit from small price movements. Traders who engage in scalping aim to exploit even the smallest fluctuations in price to generate quick profits. They often use leverage and advanced trading strategies to maximize their gains. Scalping requires close monitoring of market trends and rapid execution of trades.

Example:

Trader A notices that the price of Bitcoin has been fluctuating between $50,000 and $50,500 over the past hour. They decide to scalp by placing multiple buy orders at $50,000 and sell orders at $50,500. Within minutes, the price of Bitcoin briefly dips to $50,000, allowing Trader A to execute their buy orders. Shortly after, the price rises to $50,500, and Trader A sells their Bitcoin, making a small profit on each trade.

Case:

Trader B employs scalping strategies on an exchange with low trading fees and high liquidity. They leverage automated trading bots programmed to execute hundreds of trades per hour based on predefined criteria. Despite the small profit margins per trade, Trader B's cumulative gains from scalping add up significantly over time. However, scalping comes with risks, including market volatility and the potential for losses if trades are not executed swiftly or if the market moves against the trader's position.