This scalping strategy is actually one that I used when I was broken for clients who wanted to work large orders throughout the day. I was tasked to get a good price for them in comparison to the rest of the market. So, I’m going to take this strategy and then put it over to trading crypto on our own P l, taking risk trying to go long and short in different areas and really taking advantage of the short-term price movements. Other people’s orders, so there’s some benefits to this, mainly the one is that we don’t really care too much about the longer term trends which is trading momentum intraday there’s some downsides as well.
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ByBit Setup
For sure, this is very difficult to do as a trading strategy and you’re going to win some and lose some. But, the most important thing is to put your risk mitigation in place. So, that when you lose it small and when you win you take those profits first thing we’re going to do is we need a trading system. I’m going to use buybit for this one mainly because their fees are extremely low and when you’re scalping and trading. Often you need very low fees by restricting their platform to some countries where the regulations are very different. So, if you can’t access ByBit, some people use a VPN.I can’t recommend that obviously, but binance and ftx are pretty good as well, for ftx you can get five percent as a fee discount.
We’re gonna get right into it though. So, I’m in my derivatives account here. I put some money in there. I’m gonna go over to bitcoin USDT. I would suggest using bitcoin really only, maybe Ethereum as well because it’s very liquid. The other coins are just not suitable for this; you need a very large liquid uh trading pair. So, for me bitcoin USdollar really really is the one. So, what we’re going to do is really set up the BuyBit trading system with all of the metrics that we need. You can definitely complicate things a lot when using metrics. But, I like to keep things very simple and just use the basics of what I need and the other stuff comes. Maybe, if you want to do a lot more research outside of when you actually trade we’re going to go on to the five-minute chart right here. This is a five-minute scalping strategy that takes away all of the longer term trends and really gives us an intraday kind of move. We’re going to come to indicators and we’re going to search for EMA. That’s the exponential moving average, click it twice because we’re going to want to put two on there and then we’re going to change these.
Indicators
So, we’re going to go to the settings and we’re going to put a 50 period moving average. Obviously just change the style as you want 50 right there and then on this one. We’re going to put in 100 periods. The reason I’m doing this is because what that does is essentially the 50 period. moving average is a plot of the 50 previous time zones. So, for the 5 minute chart that’s 5 minutes 50 times and plots a line. As you can see here which is obviously of those 50 times and it’s exponential. So, it gives more weight to the more recent price movements as compared to previous price movements. Obviously, the 100 is a hundred period so what this is giving us very simply is the short-term price movement versus the term price movement when the lines cross over. You can’t really see them here. I’ll change them in a second. But, when these lines cross over that gives us a signal and that trading signal is something we use to then go ahead and trade after putting the emails on you’re going to need to put the MACD. On the MACD or the moving average convergence divergence. As it’s known is a momentum oscillator what that means very simply is that. It tells us where the momentum is and when it’s changing. That’s really important for us because what we’re essentially doing with a scalping strategy is trading the momentum of trades.
Long/Short Signals
We don’t care about the fundamentals or anything else. We are just looking to basically ride a move in momentum. So, that’s what we need here you can see the macd right here you can come and change this as well. So, what I would say is you actually don’t need the MACD and signal lines. You can just use a histogram. But, we’re going to keep it all on there just to kind of show you again what you can do is just change this to make sure that you can see it properly. But, the MACD and I’ll change this in a second. The MACD is just simply telling us at which point the momentum is changing up and down. You can use this both long and short as well. It gives us essentially a guide to say ‘okay’. The momentum is changing and you can ride this momentum up and trade it. That’s what we’re going to trade on. What I’m also going to do is change the MACD input settings as well because what we want the MACD to do is give us an even shorter time frame than the chart. So, come to the settings, go to inputs and basically halve this so the fast length goes to six and the slow length. You can go to 13. signal length also changes this. You can change this to 4.4 and a half. It’s all right so that gives us a different set of data uh what we’re also going to do with this style you can actually just take these off.. You don’t really need these lines, you can just have a look at the histogram and this is going to tell you. So, the MACD is telling us where the very short term momentum is changing. That’s going to be the signal that we use to then go and trade on the chart which is essentially giving us the five minute price.
Trade
Also these moving averages that also confirm some signals for us. So, this is the setup that with the MACD and the EMAs now when it comes to trading signals. I’m going to try and keep this simple as well. There’s actually a few different ones and you can use them depending on where the chart is. Essentially what we’re looking for is what’s known as a crossover that can be a bullish crossover which is to the upside or a bearish crossover to the downside. You can go long and short here. Obviously, I’m trading futures. You cannot do this in the spot market you need to trade futures. They’re more liquid, they’re cheaper to trade and of course you can go short with them. So what, I mean by bullish crossovers this can happen in a few different ways. The first way is if we look at the EMA. So, we can look at the 50 ema which is in yellow and then that crosses through the 50 EMA and that is the 100 right the 100 ema sorry which is blue right. So, when the yellow crosses the blue to the upside that is a short term bullish crossover what it’s telling me is that the short term price movement is moving up through the longer term price movement so shorter term. We’re getting a bump up in prices. People are buying right, people are bidding up when that happens we can use that signal to say. Let’s go in and write your order. There’s obviously more buyers in the market than they’re going to have to pay up.
Let’s ride on their coattails and trade this. So, that’s the first thing. The other thing is essentially when the price chart, so you can see the candles here basically come back down to either the 50 or 100 period EMA, if the 50 is above the blue. So, the 50 is above the 100. Then what we can see is when the price chart moves down to the 50 as long as the 50 is above the 100, we would expect this to bounce also to the upside. The reason being is that buyers have come in, they stopped a little bit and then it looks like we could possibly be moving back up to the upside, this is a bounce during a bullish move. So, this doesn’t work every time which is why you put your stop loss in place and basically trade this. Another tip that I would have is always try and trade the move when the first crossover happens. So, when the yellow crosses the blue for the first time you can see it actually got rejected here kind of moved through and got rejected here.
So, if you went in here you actually would have lost. But, you set your stop loss and you move on and then what we can see here is that. The second time it moves through it actually confirms this moves up and then you can come in here. Essentially, you would have ridden that very well. If you’re trading super short term, you actually could have possibly traded. This pullback to the line as well and traded that and that would have been a very good move. You wouldn’t have actually made this money because with this strategy you actually cut your profits as well. You can change that if you want but for me having a specific strategy of stop loss and take profit is the best way. But, that’s how we would use that kind of bullish crossover. The second thing is to look at the MACD. So, we know what bullish crossover is when the price when the short-term price movement is moving up through.
This article is a transcription of a video made by MoneyZG
Original video: https://youtu.be/eHObwB44zUA
