It may not seem important to many people, but determining the level of volatility in the market is a crucial factor for scalp traders, who rely on market volatility to make money. In this post, we will look at how to determine if volatility is sufficient for profitable scalp trading.
1. Check the Bitcoin chart
The price of Bitcoin is a good indicator of overall confidence in the cryptocurrency market. The higher the price of Bitcoin, the more money is invested in the market, and the lower the price of Bitcoin, the less investment. Therefore, when the price of Bitcoin rises or falls sharply, the price and volatility of altcoins also increase.
You can check whether there is a sharp rise or fall by looking at the size of the candlesticks on the chart. Let's take the following chart as an example.
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| Bitcoin weekly chart on Jan 14, 2023 |
In the chart above, you can see that the candlesticks in section A are very large compared to the size of the candlesticks in section B. In fact, during section B, I hardly traded. This is because it is not easy to rebound when entering a trade in a sideways market.
2. Check trading volume
Another factor that determines market volatility is trading volume. Even if there are large candlesticks on the chart, there may be cases where the trading volume is not large. If you trade during these times, you may have a hard time making a profit.
I recommend starting to trade when the trading volume per coin is as follows:
- Bitcoin: above 20,000m$
- Ethereum: above 10,000m$
- Other Altcoins: Over 2,000m$
It is recommended that you start scalp trading when both of the above conditions are satisfied.
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