Steem/USDT Scalping – Mastering Short-Term Trading Strategies
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Just like trading in our daily markets has different traders such as wholesalers, retailers, fairly used goods sellers, etc so does the financial trading marketplace, thus in this week's lesson we are to learn about the different traders of the financial market, so ready your pen and papers as we go into the lesson fully.
Understanding Scalping in Steem/USDT |
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Explain the fundamentals of scalping and how it differs from other trading strategies like day trading and swing trading. Discuss why Steem/USDT is a suitable (or unsuitable) pair for scalping.
I'm believing that we've all been to a busy market place in life, am I right? Hence, the financial market is indeed more of a very busy where a lot of transactions is going on in various sizes. Now, this busy and bustling market place is made of different types of trades such as:
SCALPING: Scalping in the financial market is like trying to find a bargain, buying it, and then immediately selling it to someone else for a tiny profit in a few minutes maximum, over and over again. In this case, the trader is not looking to hold onto the item for long, but just to make quick, small gains. Think of it as buying a coffee mug for $2 and selling it for $2.50, repeating that process over and over again.
DAY TRADING: This on the other hand is likened to spending the whole day at the market, but finding good deals and selling them at a higher price later in the day. In this case, the trader is looking for bigger profits than those scalping. However he or she still needs to sell everything before the market closes that same day. A good example will be buying a vintage record player for $10 and selling it for $20 before the market closes.
SWING TRADING: can be likened to buying something at the market, something which you believe will increase in value over a few days or weeks. This means that, you are holding onto it for a longer period while also hoping to make a larger profit than those scalping and day trading. An example will be finding a rare antique for $50 and selling it for $100 a week later.
Here's a table to make it even clearer:
| Strategy | Timeframe | Profit Goal |
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| Scalping | Seconds to minutes | Tiny, frequent profits |
| Day Trading | Minutes to hours | Moderate profits |
| Swing Trading | Days to weeks | Larger profits |
However, scalping is considered to be very risky because it relies on small price movements, but then it can also be very profitable if done correctly. But then, like scalping, day trading and swing trading also have different risk profiles and require different skills.
Since we now know that scalping is all about buying something cheap and selling it immediately for a small profit. Hence, to do that, we need something that moves a lot i.e., something that is volatile, so tell me, what's more volatile than the crypto market?
Now the Steem/USDT is a pairing of Steem, a cryptocurrency, and USDT, a stablecoin and as we know by now, stablecoins are designed to hold a stable value, like a dollar. This means Steem's price is the main driver of the pair's movement whereas the USDT is a means to hold our profits from the volatility.
Therefore as Steem price fluctuates frequently, even by small amounts, it makes it a suitable pair for scalping. Because with these fluctuations, we can buy Steem when it dips slightly and sells it when it rises slightly, making tiny profits each time which is what scalping is all about in the first place, small profits.
However, if Steem price is stable or moves too wildly, it might not be suitable for scalping as a stable price wouldn't give us enough opportunities to make those small, quick profits while wild swings could make it hard to time our entries and exits.
Best Indicators for Scalping Steem/USDT |
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Analyze technical indicators that are useful for scalping Steem/USDT. Provide examples of how RSI, MACD, Bollinger Bands, or Moving Averages can help traders make informed scalping decisions.
Since Scalping involves catching or making small profits over a busy market, we can say it is like trying to catch a small wave on a surfboard right? To do this, we will need to know when the wave is about to break and when it's about to crest, isn't it? This is where Technical indicators come in, as they are like our surf-spotting tools to help us find those tiny price movements that can make or break our scalp. These indicators include;
RSI (Relative Strength Index): This indicator tells us if the price of an item is being overbought or oversold. So let's think of it like a gauge on our surfboard signaling when the wave is about to crest (overbought) or break (oversold).
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How do we know this? Well, when the RSI value is high (usually 70 and above), it means the price is likely to fall soon (overbought), just like a wave about to crest and if the RSI value is low (usually 30 and below), it means the price is likely to rise (oversold), like a wave about to break.
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MACD (Moving Average Convergence Divergence): This indicator shows us the relationship between two moving averages, like two surfboards with different speeds known as the MACD and Signal lines.
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Therefore, we can think of it as our compass while surfing the market. But then, how can we make use of this indicator? well, if the MACD line crosses above its signal line, it means the price is likely to rise and vice versa.
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Bollinger Bands: The Bollinger bands show us the typical price range. Hence, we are to think of them as our buoys.
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So if the price touches the upper (sell) band, it's a signal that the price is likely to fall back down and if the price touches the lower (buy) band, vice versa i.e., it's likely to bounce back up.
Moving Averages: These are simply averages of past prices, so we are to see them as our tide chart.
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How do we use them in our favor? Well, if the price closes above a moving average, it means the price is likely to continue rising and vice versa.
Now knowing how we can use the various indicators mentioned above, let's say we're looking at the Steem/USDT chart and we see that the RSI is very high (e.g 90). This might be a sign that the price is about to fall hence we might want to sell our Steem or wait for the price to drop before buying.
Or, let's say we see that the MACD has crossed above its signal line. This might be a sign that the price is about to rise, therefore we might want to buy Steem and sell it when the price goes up a little bit.
These are just a few examples of how technical indicators can be used for scalping. But then, we need to remember that no indicator is perfect, and it's important to use them in conjunction with other analysis and our personal judgment.
Developing a Scalping Strategy |
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Design a step-by-step scalping strategy for Steem/USDT, detailing entry and exit points, position sizing, and stop-loss placement. Illustrate how traders can efficiently execute multiple trades.
Step 1: Identify the Trend:
To scalp successfully, first we need to look at the overall direction of the Steem/USDT price in a higher timeframe to see if it is trending up, down, or sideways. This way, we can trade with the trend, not against it. Think of it as surfing with the current, not fighting against it.
Step 2: Find the Entry Point:
Look for a clear entry signal in the lower timeframe (e.g. 1 minute), like a price bounce off a support level, a break of a resistance level, or a bullish crossover on the MACD.
Step 3: Set a Stop-Loss:
We are to place our stop-loss order just below the entry point for a long trade, or just above for a short trade. We can also do this using our ATR value of the timeframe as our difference.
Step 4: Determine Position Size:
It is always advisable that we use a small position size, like 1-2% of our trading capital.
Step 5: Exit Points:
Since Scalping is all about making small profits over time, our profit target should be like a few pips above or below our entry point. However for better profit we can also use indicators like the RSI or Bollinger Bands to help us determine our exit point.
Step 6: Multiple Trades:
Once we've exited our first trade, we look for another entry signal, then rinse and repeat the whole process again.
Example:
I see the Steem/USDT price is trending up in the higher timeframe, let's say the day or weekly timeframe.
Then I noticed the price is bouncing off a support level, and the MACD is crossing above its signal line serving as a signal for me to enter trade.
I entered a long trade at $0.1500.
Then have my stop-loss set at $0.1490.
I also set my profit target at $0.1510 (a 10 pip profit) because scalping is all about the small movements.
This way, I exit the trade once the price hits my profit target or my stop loss if the trade goes against me.
At this point, I then look for another entry signal and repeat the process again.
Risk Management in Scalping |
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Discuss the risks associated with scalping and explain how traders can mitigate losses, manage leverage, and avoid liquidation risks when scalping Steem/USDT.
Scalping which we've come to know as a quick-in-quick-out trading style can be a risky strategy, but then, with proper risk management and solid understanding of the market we can increase our success chances. Therefore, here are some of the risks that come with scalping and how we can manage these risks.
Volatility:
As we have seen in the crypto market, Steem/USDT can be very volatile hence swinging up and down quickly, so if we are not quick, we might get caught if price moves against us.
Slippage:
The price we see might not always be the price we get and this happens when the market moves very fast causing our order to be filled at a slightly different price.
High Frequency Trading:
The big traders can bring about sudden movements in the market, hence making it hard for scalping traders to predict price movements.
Trading Fees:
Each trade costs a little, and with multiple trades, those fees can add up.
Tight Stop-Loss:
To avoid being caught in the volatile market, we need to set our stop-loss orders close to our entry point to help us minimize our losses if the trade moves against us.
Small Position Size:
We need to learn how to not risk too much on each trade. Therefore, we should learn to start small and increase our position size as we gain confidence.
Manage Leverage:
Leverage as we know can boast our profits, same also our losses. Therefore, we should apply caution when using leverage and use only when we are comfortable with the risk.
Liquidation:
Liquidation occurs when our losses exceed our margin leading to an automatic closure of our position. Therefore, to avoid this, we need to keep a close eye on our margin level and manage our risk accordingly.
Avoid Overtrading:
Scalping requires a lot of focus and energy. Therefore, we shouldn't trade more than we can handle.
Real-World Scalping Case Study |
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Analyze a real or hypothetical scalping scenario involving Steem/USDT. What were the key takeaways? How did the trader adjust to market conditions to optimize performance?
For this section, I will be going with the hypothetical scalping example. let's assume I am a scalp trader, so to make I trade, I watched the Steem/USDT chart in higher timeframe to know the overall trend and marked out major support and resistance levels and in doing that, I see that the price of Steem is around a support level of let's say $0.20. So seeing this as a good spot to catch a quick profit, I also checked with my RSI indicator to back my prediction, then I placed a buy order just above the support with the hope of taking profit at $0.25.
Then the following Occurred:
Point of entry: I bought Steem at $0.21.
My target: I set my profit target price at $0.25, aiming for a $0.04 profit.
My Stop-Loss: To mitigate my losses, I have set my stop-loss at $0.195, just below the support level.
Market Movement: The price jumps to $0.235, but then suddenly dips back down to $0.205. Seeing this, I get nervous and close my position, taking a small loss in doing so.
What are the key takeaways of this trade actions? They are;
Volatility: The market moved quickly in both directions making it difficult for me to predict the next move.
Stop-Loss Importance: The stop-loss was put in place to save me from a loss. However, even with that, emotions got the best of me so I closed the trade.
Emotional Control: The fear of missing out (FOMO) caused me to exit early, resulting in a loss.
What those likely adjustments I can consider? Well, I can;
Take Smaller Target: I realized that aiming for a smaller profit target, like $0.02, might be more realistic in such a volatile market.
Place a Tighter Stop-Loss: I might as well adjust my stop-loss to $0.205, closer to my entry price, to minimize potential losses.
Increased Focus: I will need to be more focused on the chart and react quickly to market changes.
DISCLAIMER: Everything on this publication is not in any way a trading advice but just a piece of my understanding for learning purposes.
I wish to invite @bossj23, @ngoenyi, and @ruthjoe.
Thank You for your Time
NOTE: Always have a smile on your face, as you are never fully dressed without one.
