What is scalping?

Of all of the strategies discussed, scalping takes place across the smallest time frames. Scalpers attempt to game small fluctuations
in price, often entering and exiting positions within minutes (or even seconds). In most cases, they’ll use technical analysis to try and predict price movements and exploit bid-ask spread and other inefficiencies to make a profit. Due to the short time frames, scalping trades often give a small percentage of profits — usually lower than 1%. But scalping is a numbers game, so repeated small profits can add up over time.

Scalping is by no means a beginner’s strategy. An in-depth understanding of the markets, the platforms you’re trading on, and technical analysis are vital to success. That said, for traders that know what they’re doing, identifying the right patterns and taking
advantage of short-term fluctuations can be highly profitable.

What is asset allocation and diversification?
Asset allocation and diversification are terms that tend to be used interchangeably. You might know the principles from the saying don’t keep all your eggs in one basket. Keeping all of your eggs in one basket creates a central point of failure — the same holds true for your wealth. Investing your life savings into one asset exposes you to the same kind of risk. If the asset in question was the stock of a particular company and that company then imploded, you’d lose your money in one swift movement.

This isn’t just true of single assets, but of asset classes. In the case of a financial crisis, you’d expect all of the stock you hold to lose value. This is because they’re heavily correlated, meaning that all tend to follow the same trend.

Good diversification isn’t simply filling your portfolio with hundreds of different digital currencies. Consider an event where the world
governments ban cryptocurrencies, or quantum computers break the public-key cryptography schemes we use in them. Either of these occurrences would have a profound impact on all digital assets. Like stocks, they make up a single asset class.

Ideally, you want to spread your wealth across multiple classes. That way, if one is performing poorly, it has no knock-on effect on the rest of your portfolio. Nobel Prize winner Harry Markowitz introduced this idea with the Modern Portfolio Theory (MPT). In essence, the theory makes the case for reducing the volatility and risk associated with investments in a portfolio by combining uncorrelated asset