Can Scalping Bots Really Make Money? Pros, Cons, and Strategies

Due to some misconceptions and invalid interpretations of some financial operations performed by experienced investors, some people still perceive scalping as something bad or even fraudulent despite it being a legitimate strategy often employed by financial institutions. Scalpers are trying to extract value from price gaps that occur both naturally and artificially.

Since it often require multiple small-scale trades to work well, many use a high-frequency trading approach when building a scalping bot for cryptocurrencies. The strategy is quite successful and can be employed by individual traders if they understand market specifics and use correct settings to take advantage of price discrepancies formed during massive asset movements.

How do scalping bots work?

A scalper is a trader who sees a momentary difference between bid and ask prices in the market and fills it with orders to buy low and sell high simultaneously. Scalpers often provide liquidity and increase the intensity of trading since spreads (gaps between bid and ask) usually happen when the market sentiment freezes with many investors not sure what to do.

Using scalping bot strategies can be risky as retail traders may miscalculate the value of any given spread, place orders slowly, or otherwise compromise the success of their automated trading system. You have to be attentive, informed, and well-adjusted psychologically to make even the best scalping bots of 2024 work.

In essence, a scalping bot is quite similar to a market-making bot. Both fulfill the same purpose and fill the gap between buyers and sellers to ensure that assets are changing hands quickly. It is a very important job that has to be done by someone. However, individual scalping bots usually work on a much smaller scale, make profit by closing trades quickly, and can be launched by a single retail trader.

Note that some requirements must be met for this strategy to work:

• The liquidity must be high naturally. Scalpers won’t be able to work successfully with an obscure token that does not enjoy any interest from the community. The market must have both eager buyers and enthusiastic sellers pitted against each other so that spreads occur naturally. All mainstream tokens and many lesser known cryptocurrencies work well as target assets for scalpers.
• An investor who plans to earn money on spreads must have a large portfolio. Running profitable scalping bot strategies capable of making money is a costly operation as it requires an investor to be ready to simultaneously buy and sell massive amounts of assets. Spreads are rarely large enough to produce a sizeable profit from a single trade.
• You must use a reliable automation vendor. Scalpers rely on quick trades and great timing. Even a tiny delay can turn a potentially profitable trade into a loss. Using platforms like WunderTrading is quite important since you want your trading automation provider to have stable servers, instant execution of algorithms, and interface updated in real time.

Can scalping bots work for day trading?

Scalpers usually operate within short trading sessions. Keeping market positions open for a long time is not a good idea when spreads are small. You don’t want to buy an asset and hold it until the price is right. Instead, you want to capitalize on the difference that exists right now. Day traders who prefer closing all their positions within a single trading session often employ scalping strategies to make money consistently.

On the other hand, you cannot rely on technical analysis methods that are often employed by day traders. An experienced scalper always attempts to predict periods when the market may enter a period of stagnation or intense competition between bears and bulls. During such moments, spreads are usually bigger and remain for longer while investors are deciding what to do next.

Using highly specialized methods of forecasting the market is quite important. Scalpers often track trading volumes, price dynamics, and other metrics to identify favorable periods for high-frequency trading and market making. Day trading technical analysis methods often fall flat when trying to evaluate spreads and predicting gaps between bid and ask prices.

Can scalping bots make money?

If you plan to use automated trading software that will attempt to make money on spreads, it is a good idea to focus on using the best scalping bots for crypto. In general, the strategy is safe and produces small profits consistently with risks minimized if you trade inside a spread. However, the success of your automated trading system depends on multiple factors.

Here are some of them:

• The stability of trading software. If your service provider experiences a downtime, it may cause your bots to miss a perfect entry and sell or buy for an incorrect price causing you to either miss out on profits or even lose money.
• The portion of your portfolio you are willing to use for scalping. Since this method of trading is low risk/low reward, it is not a wise decision to focus solely on scalping bot strategies for income. It will be enough only if you use a massive capital and extract solid profits from a single trading session.
• Settings of your trading system. You have to pay extra attention to the parameters of short-term market positions created by your automated scalping bots. Even the best scalping bots for crypto (from the technological standpoint) will underperform if you fail to choose the right settings.

All in all, scalping bots are capable of producing solid returns when used with correct parameters, large capital, and without any technical issues. If you can afford investing a sufficient amount of assets in a scalable market making operation while working with a reliable automation provider such as WunderTrading, it is a good idea to try building scalping bots.

However, you should not forget about other viable options like DCA and Grid bots as well as advanced AI-assisted statistical arbitrage systems that are available to retail traders and can make a better source of passive income for investors with smaller portfolios and less technical knowhow.