If it involves cryptocurrency, profits, and trade strategies, sign me up ASAP! And if you’re anything like me, I’m about to put you on cryptocurrency day trading.
This is one of the most popular trading techniques, and with the right approach, you’ll also seamlessly trade for profit quickly.
Whether you’re a beginner or a seasoned trader, there’s something for you to pick up in this guide. Ready to level up with cryptocurrency day trading? Let’s start with the basics.
What is Cryptocurrency Day trading? Going Back To The Basics
Day trading is not only applied to cryptocurrency. It is a concept prevalent even in traditional trading like stocks, forex, and other commodities. Day trading literally means entering and exiting the market on the same day.
Day trading came about from the stock market because trades were only open during business hours, so all transactions had to be completed within the day. You may hear “intraday trading” within this same context, but don’t worry; it is the same as day trading.
With that being said, cryptocurrency day trading is purchasing and selling crypto assets within the same day, pulling profits due to the market's volatility. It is one of the most lucrative crypto ventures.
Cryptocurrency day trading is one of the cases where the crypto market's volatile nature is used to maximum advantage. The rapid price fluctuations can be leveraged to raise profits for the traders — but it’s not a guessing game; that’s just gambling.
With cryptocurrency day trading, it is important to move with winning strategies, which we’ll explore in a bit.
The Steps To Day Trade Cryptocurrency: A Beginner’s Approach
- Know The Market
You can’t go into the market without a proper orientation. So, do the groundwork and educate yourself on cryptocurrencies, the technologies that drive them, and the factors that affect price fluctuations.
For example, a utility crypto is more prone to fluctuations than a crypto that powers a decentralised application (DApp). Follow the industry experts, join crypto communities, and read expansively on the subject before committing.
- Choose an exchange
You’ll need to choose an exchange where you can quickly move in and out of the market. Important considerations when choosing an exchange include the transaction fees, asset liquidity (i.e. how quickly you can convert to cash), and transaction processing time.
If you’re a trader in Nigeria or Ghana, you can use some of the popular exchanges like Binance and Coinbase to buy. However, to quickly exit the market and retain the crypto's value in cash, Breet is the best exchange to sell your crypto.
- Decide on a trading strategy.
Cryptocurrency day trading is not about vibes and feelings. It is a calculated and strategic profit-making venture. Successful day traders have precise strategies, including entry and exit marks, stop-loss tactics, and risk-management plans. They also use technical tools to help them make informed decisions and maximise their efficiency,
Here are the best strategies you can use to make profitable day trading
The Best Strategies for Cryptocurrency Day Trading
- High-Frequency Trading (HFT)
High-Frequency Trading is the use of trading bots to make lightning-fast trades. It involves algorithms running analysis on the market, spotting the trends, and executing your trades effectively for quick profits. The market moves extremely fast, but sophisticated bots can match its speed and catch trends that may appear and disappear in seconds.
Due to the advancement of tech tools, HFT has become a popular day trading strategy. HFT automates trading as it completes a trade when it meets the trader's set conditions.
HFT leverages arbitrage to make short-term profits. Arbitrage is buying a crypto asset on one platform and selling on another to leverage the slight price difference for extra gains.
High-frequency trading is a favourite because it keeps liquidity flowing in the market and connects buyers and sellers quickly, thus, ensuring stability. The algorithm on which HFT is built also allows traders to maximize their profits as transactions execute based on the pre-set price of the traders.
Scalping is used when traders dump a high volume of assets in the market but take advantage of the small price movements in the market rather than large jumps. The idea is to gather small profits over the course of the day for a significant return at the end of the day.
In scalping, the coin of interest usually has high market volume and liquidity, like Bitcoin, due to constant price movements. To maximise profit, scalpers create their own demand and supply by buying at a bid price but selling at the asking price.
Scalping favours technical analysis over fundamental techniques, so traders who rely on this method know the crypto ecosystem's inner workings and can thrive even under pressure.
Scalping can also be automated using trading bots to find trending and profitable trades. Additionally, due to the significant liquidity, a stop-loss order is non-negotiable. So, it is not recommended for beginners.
- Range Trading
Usually, crypto prices are always contained within a range. It goes from stable highs to stable lows, indicated on the support and resistance lines. Whenever it goes above or below that range, it is indicative of an abnormal change. Range traders use this method to determine the best time to buy or sell their assets.
On the support levels, the crypto’s price will be unable to break through to decrease. While on the resistance level, the crypto price will meet a barrier that stops it from increasing.
So, if a price is closer to the support level, that’s probably the best time to enter the market and exit when the price is inching closer to the resistance levels.
The Risks Of Cryptocurrency Day Trading
Cryptocurrency day trading may be lucrative. However, it comes with its own cautions, and the results may be dire if you don’t take note of these risks attached to crypto day trading.
The cryptocurrency market is notorious for its unstable and unpredictable price movements. One coin may be soaring one day and come crashing down the next day. So, if you’re a beginner in the crypto market, you may have a hard time dealing with this reality. But seasoned traders know how it is and can even use different strategies to play it to their advantage.
- Vague Assessment
The long-term performance of cryptocurrencies isn’t very defined. Unlike the stock market, which has business plans and defined financial progressions based on their performance in the market, crypto doesn’t have that.
Even coins with actual uses in the digital world still present the challenge of analyzing their long-term financial projections — making it difficult to predict their value. With the crypto market, what you see is what you get.
- No Defined Regulations
Some may praise crypto for this, while others are wary of crypto because of this. Clearly, this is a matter of perspective.
The lack of central authority does give people autonomy over their money and allows them to conduct business however they deem fit. In the same vein, it may be the playground for many malicious individuals who may go scot-free with no law demanding their prosecution.
But we’ve seen different developments in different countries figuring out how to regulate crypto. The US, for example, is actively attempting this with various policies, while countries like El Salvador have completely embraced Bitcoin as a legal tender.
So – it’s different strokes for different folks. But even as we continually see regulations in the crypto space, you’re ultimately in charge of your own security and asset management.
Cryptocurrency day trading is very lucrative and convenient, and with proper education on these strategies: High-Frequency Trading, Scalping, or Range Trading, you’ll record trading success.
Keep in mind that the crypto market moves very fast, so you have to move as fast as it does. And when it’s time to recover your profits, you can trust Breet for the best exchange rate without losing any value in cash. Crypto-to-cash with Breet is so seamless —you barely have to lift a finger with the Automatic Settlement feature, and that sends your cash straight to your bank account in Nigeria or Ghana!
Best of luck as you explore these crypto trade secrets for profit within the same day. Happy trading!