The market situation in June
In June, the crypto market cap didn't manage to reach the $2 trillion mark and fluctuated between $1.2 and $1.7 trillion. The most significant decline was observed during the last days of the month. It was caused mainly by the Bitcoin mining crackdown in China. Trading volumes dropped by 56% compared to May. During the whole month, trader activity was significantly lower than in the previous month. After 11th June, daily trading volumes failed to reach $100 billion, except for three days. This slight increase was observed amid MicroStrategy's announcement about the purchase of more bitcoins. During almost the whole month, the crypto market was either in the "Extreme Fear" or "Fear" zone. The most optimistic sentiment was observed in the middle of the month, simultaneously with the lowest trading volumes and the most significant drop in market capitalisation. By the end of the month, there was a slight increase in the index values and market cap growth. At the same time, there was no change in trading volumes.
It would seem that the market situation is far from ideal. Low amplitude of fluctuations, the absence of a pronounced trend and mainly sideways movement in a narrow range are just what is needed for scalping. So, now is the perfect time to catch small movements on bounces from the boundaries of the range and capitalise on them.
For those who are not familiar with this trading style, let me start with a few theoretical facts. There are many different strategies in cryptocurrency trading. One of them is scalping, which involves the execution of many transactions during the day.
In this case, instruments for a trader are a minute or tick chart, an order book and a tape of deals.
During the day, a trader opens and closes positions many times - with a frequency of 1 to 15 minutes. Each trade (in an ideal world) brings him a small profit, or winning trades is higher than losing ones (in the real world). A trader can be guided by the news background, technical analysis or the order book.
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With the news, everything is clear - Musk's tweets or a ban on bitcoin in one of the countries will almost 100% push the rate up or down.
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Scalping based on technical analysis means following the patterns on the chart. Let's say a trader sees that the rate is approaching the resistance level from which the cryptocurrency has repeatedly rebounded. Accordingly, he assumes that the rate will go down and begin to place short orders.
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As for the order book as a source of information, it is essential to keep track of the number of buyers and sellers and the volume of limit orders placed at specific price levels. If there are more "sell" orders than "buy" orders, then the rate will go down. If there are many orders with a serious volume at a certain price level in the order book, there is a possibility of a rebound from this level. Additionally, you can evaluate the price behaviour based on the history of the chart in the area of this level and get an additional supporting point in favour of making a deal
Scalping profitability depends on the number of transactions, their volume and efficiency. Sometimes you can earn + 15% to the invested funds per day of trading.
I want to note that trading in short-term timeframes takes the whole day of a trader and is accompanied by a very high psychological load. Therefore, we do not recommend that beginners trade on short-term timeframes. Incorrect work with time frames can lead to losses since it often seems to traders that it is easier to make money on a short-term timeframe, as the chart moves quickly there. In fact, the higher the timeframe, the better the graphical analysis works since there is less market noise on the medium and long-term timeframes.
If you do decide to choose this strategy, be sure to minimise the risks:
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Control the number of coins in a trade or position (for margin trading)
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Choose the amount based on the risk per transaction from the size of the deposit,
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Strictly control risks and the situation on the chart: if a coin breaks through some critical support or resistance level and goes out of the range, you need to switch to a trend-following strategy.
*The information contained in the article is solely for informational purposes. No information contained in the report should be considered as direct legal, financial, investment or tax advice. We remind you that cryptocurrency investments are high-rewarding but also involve high risk. Remember that each trader is personally responsible when carrying out trades or choosing a project for investment. We do not guarantee any particular outcome.
(EXMO's Chief Business Development Officer Maria Stankevich on the best trading strategy during the sideways trend.)