Day Trading Crypto: Everything you need to know

Day trading is a popular option for traders who trade in traditional markets such as stocks, commodities and forex. In the past, this type of trading was only available to financial institutions. However, anyone can become an aspiring day trader. Day trading crypto is possible thanks to cryptocurrencies gaining popularity, leading to increased daily trading volumes on exchanges.

Day trading in cryptocurrency can be very profitable if it is done correctly, but it can also prove challenging for novice traders.

What is day trading?

Day traders aim to profit from price fluctuations in financial instruments by using intraday trading strategies.

Day trading is a term that originated in the stock market. Trading is only open during business hours. Day traders do not leave positions open overnight because they want to profit from intraday price movements.

How do day traders make money?

Day traders often use technical analysis to generate trade ideas. To identify entry points and exit points, day traders will often use technical indicators, such as volume, price action and chart patterns. Day trading is like any other trading strategy. Risk management is crucial for your success.

Day traders might not be concerned with fundamental analysis because fundamental events can take time to unfold. Some day traders base their strategy on “trading news,” however. This means finding assets that have high volumes thanks to recent announcements or pieces of news and then taking advantage of the temporary spikes in trading activity.

Day traders seek to make money from market volatility. Day trading is dependent on liquidity and volume. Day traders require liquidity to be able to execute fast trades. This is especially true when exiting a position.

Day trading crypto has many advantages

To maximize their day trading gains, traders can use a variety of unique features offered by the crypto market.

Market is open 24 hours a day

The best thing about cryptocurrency trading is its availability 24 hours a days and seven days a week. We are fortunate to have the opportunity to profit from all the opportunities offered by a market that is never closed.

High Volatility

You should be aware of the volatility in cryptocurrency markets. Bitcoin can begin the day at $44,000, and within a matter of hours the price is down to $40,000; veteran traders won’t even blink. As there are many opportunities to profit, volatility can prove to be very profitable.

Unregulated

Stock market regulation is strict in the United States. These regulations include rules about how trades can be made and when they are allowed to occur. The majority of cryptocurrency trading is not subject to the same strict regulations as the stock market. In many cases, you can trade regardless of your experience level, account size, or age. This means that if you want to trade day, the barrier is much lower than for other asset classes.

Markets are Immature

It is easy to trade on the cryptocurrency market. Because there are so many novice traders, one who has a bit more knowledge will have an advantage and be able to get into positions faster or react quickly to situations. This can help avoid losing.

Strategies for Crypto Day Trading

Scalping

Scalping is the act of taking advantage small price movements that occur in short time frames. These could be liquidity gaps, bid-ask spreads, or other market inefficiencies.

To increase their leverage, scalers will trade margin on futures contracts or trade margin. Because the percentage price targets are usually smaller, larger positions make more sense.

Scalpers might use strategies like volume heatmaps and order book analysis to determine their entry and exit points for specific trades.

Scalping is a high-risk strategy that involves a lot of leverage. A few bad trades could quickly wipe out a trading account.

Range trading in crypto

Range traders search for price ranges in the market structure to create trade ideas. A range trader might buy the support level and then sell the resistance level if the price fluctuates between the two levels. They could also shorten the resistance level to exit at the support level.

The higher the probability that the support or resistance level is broken, the longer the price stays at it. Range traders will set a stop-loss level at which the breakout of the range is certain to prepare for possible market breaks.

High-frequency trading

High-frequency trading, a type algorithmic trading strategy that is commonly used by quantitative traders, is one example. This involves the development of algorithms and trading robots that can quickly enter or exit multiple positions in a short time span (within milliseconds).

High frequency trading isn’t accessible to the general population or novice traders. Instead, it is used to implement complex strategies by financial institutions and hedge funds.

Crypto Arbitrage

Arbitrage is buying and selling cryptocurrency in one market, but in another market. The spread is the difference between the sell and buy price of an asset. Crypto can be created by anyone as it is not regulated. Due to differences in trading volume and asset liquidity, this can cause significant spread differences. Arbitrage traders should consider the fees associated with trading. Trading fees on an exchange can wipe out any gains from the spread.

How to Start Day Trading Cryptocurrency

Here’s a quick guide to how to trade.

  1. Decide whether you want to invest in the cryptocurrency or speculate on price movements without actually owning the token. This will decide if you trade on a cryptocurrency exchange, or a CFD trading platform.
  2. Once you’ve decided what type of trading you want, fund your account. Next, select a broker or platform where you’ll deposit the money to get started trading.
  3. You can buy the Cryptocurrency that you like or trade it at its price.

How to select an exchange or broker for trading crypto

The choice of cryptocurrency platform to trade on is one the most crucial decisions you will make. You will use the exchange as your digital wallet to store your cryptocurrencies. Make sure you consider these factors before you make your decision.

Some brokers specialize in crypto trades while others are less skilled. Some brokers specialize in specific products. Plus500, for instance, offers traditional crypto trading via Forex and CFDs. They also offer cryptocurrency multipliers. These products offer greater leverage and, therefore, higher risk and reward. These innovative products could make a difference in opening a cryptocurrency trading account.

Mobile Trading Apps

Day traders must be alert and on the ball. Even if you react a few seconds late to major news events, it could mean the difference between making a profit or losing money. Many brokers offer mobile apps that allow you to keep up with cryptocurrency news, whether you are on the train or at home.

You will spend a lot of time on the cryptocurrency trading platform that you sign up for. Make sure you choose one that is right for you. To ensure that the exchange has all the technical tools and resources needed, it is worth opening a demo account.

Exchange Security

To ensure that the cryptocurrency exchange is safe, always check out reviews. Your digital currency will be lost forever if your account is compromised or stolen. The trading software will win the rest of the battle.

Exchange fees

Every exchange has different fees and commission rates. A small difference in commission rates and fees can make a significant impact on profits for day traders who trade a lot. Three main fees are available to compare:

  • Exchange fees – These are the charges you will pay to use their cryptocurrency software. The rate can be affected by the currency and coins that you trade.
  • Trade fees – These are the charges you will pay to trade between currencies using their exchange. A marker fee is the cost to make an offer to buy. A taker fee is the cost to accept an offer from someone.
  • Withdrawal and Deposit fees – These are the charges you will be charged to withdraw or deposit money on an exchange. It’s often cheaper to deposit your money. Keep in mind that not all exchanges allow credit cards. A 3.99% fee will be charged for debit/credit, while a bank account will typically incur a 1.5% fee.

Conclusion: Day trading cryptocurrency

Day trading is an equally popular strategy for trading stock and cryptocurrency. Day traders employ intraday trading strategies to profit from volatility in the market. They will usually not stay in positions longer than one day. Day traders can choose to trade on crypto exchanges and own the underlying asset. Or, they can trade on crypto CFDs on the price of that asset. These intraday trades can be executed by traders using trading robots.

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