Day trading cryptocurrency is a short-term trading technique in which crypto assets are purchased and sold on the same day. This is a high-risk project made possible due to the distinct volatility and liquidity in cryptocurrency markets. Though day trading comes from traditional markets, you need to have a knowledge of crypto and blockchain technology. This is essential to find permanent success.
Recently, the crypto markets have developed into an ever more popular place for day traders. Comparing the traditional markets, the crypto markets never close. Crypto day trading doesn’t need a subscription to a margin account or brokerage, creating the ability to indulge in short-term trades further reachable than the stock markets.
In this day trading cryptocurrency write-up, you will learn what day trading is, how it works and how as a crypto investor you can benefit from it. You will also know how to start day trading cryptocurrency as a newbie. Since if you wish to trade Bitcoin and Ethereum with the lowest market fees, sign-up on Swissborg today. It is a piece of sincere advice to only invest after you prepare yourself to lose.
What Is Day Trading?
Day trading is a popular trading technique that is used across multiple financial markets including stocks, cryptocurrency, forex, and commodities. Day trading is a strategy in which the trader opens a position for only 24 hours. They enter and exit the trade on the same day and get profit only from the small fluctuations in the price.
This term day trader was introduced in the market for the first time. The market used to be open only on business days. Moreover, traders found it suitable to close their positions before the end of the day. Day trading is also referred to as intraday trading, as the traders are capitalizing on the intraday price moments.
Through Which Methods Day Traders Make Money?
A successful trader is well-aware of the crypto markets and also has good experience with technical analysis (TA). However, most day traders depend on technical analysis to create a new trade. They deduce entry and exit points for the position by analyzing:
- Trading Volume
- Price Action
- Chart Patterns
- Key Technical Indicators
Risk management is a critical part of day trading, and the trader needs to prepare themselves so, in the end, they do not lose too much if the trade does not work out.
Most probably, day traders are not concerned with the fundamentals of the crypto space. They know about the latest market trends, but they do not rely on fundamental analysis (FA) to make trades. Fundamental analysis is well-suited for long-term trades and can prove to be advantageous if done correctly.
But still, some day traders depend on fundamental analysis and use the news for their benefit. They usually prefer high-volume assets and try to make profits from temporary spikes. Day traders take advantage of the high volatility of the crypto markets. Because of volatility, day traders need to be careful about liquidity and volume. In case, if the liquidity is not enough the trader will face obstacles and will end up losing funds.
Slippage plays a vital role for day traders and can largely affect a trader’s trading account. This is the reason why traders prefer pairs that possess high trading volumes.
Which Are Some Day Trading Techniques?
Day trading crypto assets such as bitcoin will become easier and more successful for you if you follow the correct crypto day trading strategy. Below, we have shared three strong strategies that can assist you to increase your revenues from day trading in the market:
Scalping is a famous kind of day trading that involves getting benefits from price movements that happen in small time frames. These small price moments can be predicted and occur due to factors like the liquidity gap, market asks, or other various small factors.
The profits in scalping are mostly small, that is why more scalpers trade with future contracts or margin trading. This enables traders to use leverage so they can trade more assets that they can afford. While margin traders can trade Bitcoin and Ethereum with almost up to 100x leverage on any exchange.
Scalpers my trade using leverage but this does not mean that they do not assess the upcoming risk. They need to keep in mind the factors that affect the price in short term and then thread carefully. Your profits and losses multiply while you do margin trading that is why you need to be very careful. Scalping needs a great deal of knowledge and experience and is not something beginners can do easily.
Scalpers use the following techniques given below:
- Order Book Analysis
- Volume Heat Maps
- Technical Indicators
Range trading is a pretty straightforward technique, that depends on candlesticks chart analysis. In this technique, traders count on the support and resistance levels of an asset level and trade. As you can predict from the name, the entry and exit points for these trades are obtained from a specific range. Traders will pick an asset and will predict its support and resistance level.
Afterward, they will enter the trade when the price is near the support and exit immediately as soon as it hits the resistance level. For example, if bitcoin facing some resistance at $34K and has strong support at $32K, then the trader can enter the trade at $32K and can close the position when the price hits $34K. Even traders can repeat their trades various times, depending on the condition of the market.
Support zones and resistances are figured out with technical analysis and they worked well mostly. Entering a range trade does not involve risk because you can rely on support and resistance. Though range traders need to be careful when the price is touching the price levels frequently. There is a high chance of price breakout when it is regularly touching the level.
Range trading is the best strategy for new traders who are interested in day trading and want to gain benefits. What they need to learn is the simple candlestick chart patterns and how to determine the support and resistance level. This might involve momentum indicators like MACD or RSI.
HFT Or High-Frequency Trading
High-frequency trading is an advanced trading strategy that traders use totally depends on quantitative data. This includes the creation of advanced bots that can open and close positions based on data. Although, they usually target short time frames like scalping and are quick to enter or exit a trade.
These time frames can be as short as milliseconds and can facilitate you with an important advantage to a trading firm. This is mostly implemented on a large scale and is not suitable for small traders who deal with smaller margins.
High-frequency trading (HFT) is extremely advanced. This not only needs access to the latest technology and tools but also requires a deeper understanding of the markets and TA. Hence, if you are new to the crypto space, then this strategy will not work for you. So you should not try your hands on this strategy.
Benefits Of Day Trading Cryptocurrency
- Anyone who has access to a crypto exchange can freely trade it. There are no additional barriers to entry for retail investors or day traders to access, research, and interact with the crypto markets except for verifying your identity and funding your exchange account. On the other hand, those who want to own bitcoin but cannot make a $60K +investment can either buy and sell a fraction of any crypto.
- The best part is that crypto markets are open 24/7 all year around. Traders have the choice to buy and sell without limits as the crypto markets do not close. For the New York Stock Exchange or the Nasdaq, the market hours for trading are from 9:30 a.m. to 4 p.m. ET. A big benefit of 24/7 market access is that you can trade when it is suitable for you (rather than suitable for the market)
Shall I Start Day Trading Or Not?
Day trading is an amazing crypto trading strategy from which you can benefit, but it is not for everyone. Day trading is very demanding and you need to have skills like instant decision-making and carrying out actions quickly. Undoubtedly, you can make money from this strategy if you have a deep understanding of how the markets work and have sufficient time to set up traders.
Since you are planning to become a day-trader, you need to keep in mind that this is a full-time job that requires time. Also, you will learn a lot during day-trading before you reach the heights of success.