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As a trader, you have a range of trading tactics at your disposal. While some are excellent for short-term profit, others are more suited for long-term investment. However, if you’re looking for low-risk, quick results, you should explore day trading. Day trading is not a novel notion in and of itself. The concept has existed for decades.
More significantly, day trading is diverse in that it allows you to trade a variety of assets, including stocks, FX, and cryptocurrencies. However, day trading cryptocurrency is not as straightforward as it seems. Examining many factors before beginning your bitcoin day trading hobby or business is essential. Liquid hopes that this handy guide will assist readers in comprehending the fundamentals of day trading in the context of cryptocurrency trading.
A primer on day trading
It is not difficult to understand day trading. It is just what the name implies. It is a kind of trading that occurs just throughout the day and during a single day. That is, you would have to purchase and sell the assets within a single day (for profit). Day trading is sometimes referred to as intraday trading due to this attribute.
In contrast to long-term trading, day trading requires the trader to concentrate on modest price swings. You cannot hold the item overnight and expect it to appreciate the next day. Similarly, day trading will operate solely on business days. Like other forms of trading, intraday trading demands a thorough grasp of the market. And it’s a talent that can be honed with practice.
Day traders examine the following factors.
Day traders consider a variety of criteria, depending on the market and the item they are trading.
Availability of liquid assets
A liquid asset is easily convertible to cash or vice versa. In the context of day trading, this refers to the ease with which you may sell a stock and earn money. If a stock is readily sellable, it is considered highly liquid. If not, the stock is not very liquid.
Volatility is a term that relates to the frequency and magnitude of an asset’s price changes. If the value of an asset varies often, it is highly volatile. On the other hand, if it maintains its value over a lengthy period, it is considered non-volatile.
Apart from these two elements, various traders apply various alternative strategies. For instance, some traders may do Fundamental Analysis to understand the asset they are trading thoroughly. Nevertheless, some traders rely on Technical Analysis, which involves examining past data and trends to forecast how an asset will perform in the future.
Day trading tactics that are widely used
This trading method will concentrate on the minor price variations of a market asset. As a consequence, scalping demands the trader to sell the stocks immediately. It isn’t easy to use the scalping trading method if you do not access real-time market data. Because scalping is very volume-dependent, traders may need to leverage their earnings.
Trading in Ranges
This active investing method necessitates that the trader establishes a price range inside the market structure. The deal will occur only inside this range, and the trader must repeat the operation until the asset exits the range. To get the greatest results from range trading, the trader must have a firm grasp of candlestick charts and momentum indicators.
Trading at a High Frequency
HFT, or high-frequency trading, is a trading approach that uses algorithms. HFT traders will create algorithms and trading bots to monitor the market and buy/sell assets. Because the transactions occur in milliseconds, HFT offers a higher probability of profit. Nonetheless, developing trading bots and algorithms takes programming skills and market understanding.
What Are Day Trading Cryptocurrencies?
Cryptocurrency day trading is essentially identical to conventional day trading. However, intraday trading must also evolve inside the crypto ecosystem. For example, although you may concentrate on minute changes in the value of an item, business hours do not limit your activities. At any moment in time, you may effortlessly swap crypto assets.
You may, however, choose to pay the associated network and transaction costs. As a result, choosing a cryptocurrency trading platform compatible with your operating system becomes critical. If the transaction cost exceeds the total profit generated by the coin’s volatility, there is virtually no incentive to trade crypto assets in the first place.
Why and How to Day Trade Cryptocurrencies
We already said that liquidity and volatility are the most important factors in intraday trading. These traits have been defining the properties of cryptocurrencies since their inception. The volatility of cryptocurrency values is so great that even within 24 hours, a crypto token’s value might fluctuate significantly.
While these trends are less predictable than typical trading trends, a clever intraday trader may benefit significantly by concentrating on this value shift. In terms of liquidity, bitcoin assets may be sold in various ways.
Trading cryptocurrencies has never been easier, and you now have a few basic alternatives. The most convenient way is to use a reputable crypto trading platform that enables you to buy and sell various crypto assets at your leisure.
Additionally, you may do these services using a variety of payment options. Certain trading platforms also provide margin trading, which allows you to acquire crypto assets using borrowed funds to boost your earnings.
Is it possible to earn a livelihood day trading cryptocurrency?
Anyone can earn a livelihood trading cryptocurrencies daily. However, because of the greater volatility of crypto assets, you must spend more time monitoring market activities. Unlike conventional equities, crypto assets’ prices may fluctuate within minutes or even seconds. For example, the value of Bitcoin (BTC) may plummet in a matter of seconds if a government prohibits its usage.
Similarly, even minute changes in the market may significantly impact the value of your assets. If you are willing to accept this volatility and instability, you may pursue bitcoin day trading as a full-time career