One of the most popular trading strategies is, without a doubt, crypto day trading. For many, it’s an extremely rewarding approach to earning crypto. But is it the right strategy for you? Today, we’ll delve into the concept of crypto day trading through a comprehensive review. Whether you are new to trading strategies as a whole or have experience behind your back, we’ll help you understand this concept.
How Does Crypto Day Trading Work?
Before we go into the nitty-gritty of day trading crypto, let’s explain what it is. As you can likely guess from the name, day trading involves buying and selling crypto within the same day. So instead of keeping the funds like HODLers do, investors try to profit from the daily price movements.
Sometimes day trading can involve buying and selling crypto several times within one day. The main idea is that by following crypto market volatility, you can benefit from the price swings and generate a profit. Of course, it’s not all about clicking buttons. It’s good for investors to learn about technical and fundamental analysis and use it in their trading to spot the best crypto opportunities.
- Technical analysis – This includes looking at the history of a certain coin or token and its performance. You likely should become familiar with price charts, too, so you can track the movement of a coin’s movement and different chart patterns.
- Fundamental analysis – Involves looking at the various factors that affect the coin’s price, for instance, demand, supply, and adoption. That way, by staying informed of its trends, you can have a better chance at forecasting a currency’s movements.
Of course, due to the nature of the crypto market, these analyses have their limitations. You should also consider various external events that may influence the price of a coin. For example, if people have traded large chunks of the asset, this can affect its overall price.
The Perks Behind Crypto Day Trading
Crypto-day trading has become widely popular for many reasons. Despite the volatility of the market, many traders continue to discover the appeal of day trading and its enticing perks:
- Fast profits: When you trade crypto daily, you can make fast profits in a small period. Of course, these profits are rarely anything substantial, as you reap the benefits of small price movements. But provided you have done your research correctly, you can sometimes experience higher price returns.
- No overnight risks: Considering the crypto market is open round the clock, you won’t be stuck in an overnight position, meaning you won’t have to wait for your trade to be moved for the next day. You are mitigating possible risks with price fluctuations, which is a great perk.
- Liquidity: Day trading, and crypto trading in general, allows you to enter and exit the crypto market any time you want and exchange your crypto assets for fiat currency in no time.
- Accessibility: Crypto day trading is an easy-to-grasp strategy, allowing anyone to start trading regardless of experience or capital.
Of course, let’s not forget that trading strategies can show a path to potential success, but they don’t guarantee it. You still need to remember that the crypto market is highly volatile. This is both a pro and a con – if this volatility did not exist, people wouldn’t be able to experiment with trading strategies like this one!
How To Start Crypto Day Trading
If crypto day trading sounds appealing to you, it’s important to understand the essential steps before you embark on your trading journey.
Step #1 – Research
Before opening an exchange account or visiting any trading platform, you should start doing your crypto research. Take a look at market trends and charting tools, and try to implement both technical and fundamental analysis.
Step #2 – Find a Broker/Exchange
Next, consider if you want to register with a crypto exchange or a crypto brokerage. If you are trying crypto day trading for the first time, we recommend opting for a broker, as they can help you learn the ropes. If you are looking for a reliable website where you can find capable crypto brokers, we recommend immediate-edge.io. It’s beginner friendly, intuitive, and free to register.
Alternatively, if you have some experience and aren’t intimidated by crypto exchanges, you can sign up at a platform like Coinbase. They also have an application, which is perfect for day trading crypto on the go.
Step #2 – Set a Budget
You should set up a budget for your crypto asset purchase at the start of your trading journey. Make sure to check the coin’s market cap and calculate how much you will get for the fiat currency you invest. Then enable stop/loss orders to avoid losing significant amounts of money. Alternatively, you can choose other risk management techniques to support your trading style.
Step #3 – Buy Crypto
Now that you have spotted a trading platform you like, it’s time to buy some crypto assets. Simply follow the website’s instructions. Next, select a crypto coin or token you wish to buy. It’s best to pick volatile coins with likely price swings. Day trading doesn’t always require you to buy and sell on the same day. Sometimes, you can buy crypto on a Monday and sell it on a Friday when you see a price peak.
Step #4 – Practice Demo Trading
Many brokerage platforms and exchanges offer the option to practice your trading strategy through a demo account. You simply receive some virtual funds you can play around with. Use this opportunity to refine your crypto strategy and get some hands-on experience. Once you are familiar with the software and have confidence you can make a profit, you can invest real money.
Step #5 – Start Small
Don’t rush into investing your entire budget straight away. It’s best to start small as a beginner and gradually increase your exposure. Once you see your crypto strategy is working, you can continue with bigger trading positions.
Finding the Effective Crypto Strategy for Day Trading
We spoke about testing a crypto strategy within day trading crypto. Yes, crypto trading strategies can have sub-strategies too. Day traders tend to have various styles, and their crypto day trading strategies differ. To provide a more detailed explanation, here are the most popular methods for successful day trading you can employ:
Scalping
Perhaps the most well-known day trading crypto strategy is scalping. It involves making various small trades during a single day to profit from the small price peaks. You may need to use certain tools, such as a Money Flow Index (MFI).
Additional reading: Check this scalping guide for detailed instructions on this crypto strategy.
Momentum Trading
This trading strategy involves buying a coin that has gained some price momentum. Remember when we talked about doing your research? That’s where it comes in handy. If you identify trends in the price surge of a specific coin or token, you can buy it and sell it once it reaches a higher position. This crypto strategy relies on finding assets with persisting price peaks.
Range Trading
Have you noticed low volatility recently? Perfect! Then you should try range trading. It is a little more advanced, as you will have to identify the market’s support and resistance levels. Once you know these parameters, you can trade in between these levels. If you want more info on range trading, check this helpful YouTube Guide to find out which mistakes you should avoid.
Breakout Trading
Another popular crypto strategy is breakout trading. Remember those support and resistance levels you identified in the range trading section? You can also use them for this strategy. It involves entering a trading position when the price breaks within these specific levels. Many day traders believe these price breakouts are significant and can lead to greater price movements, increasing your chances of earning a profit.
Final Thoughts
There you have it – our small guide to day trading crypto is complete. Now that you are familiar with this strategy and its variants, you can go ahead and test it yourself! We recommend checking out the additional YouTube video and web guide for detailed and specific instructions on day trading. Armed with this knowledge, you can now confidently set off on your crypto trading journey!
Frequently Asked Questions About Day Trading
Finally, we want to answer some popular questions regarding this crypto strategy. Check them out if you have additional queries:
Are Crypto Day Trading Strategies Risky?
Yes, this one is risky just like any other crypto trading strategy. You should be ready for potential losses, so make sure you only invest money you don’t mind losing.
Should I Trade Several Crypto Currencies at the Same Time?
You can certainly try, but most experts don’t recommend it. Day trading requires incredible focus, and splitting your attention into several coins and their price swings may decrease your chances of earning a profit.
Do I Need To Pay Tax on My Crypto Earnings?
Many people think crypto trading shouldn’t be taxed, but that is not always true. Depending on where you are based, there might be specific laws you need to comply with. Your best bet is to speak to an accountant to get an answer to this question.
How Can I Manage My FOMO While Day Trading?
Managing your trading psychology by accepting your emotions and focusing on your goals is important. Remember that making a profit takes time and is a trial-and-error process.
