Cryptocurrency

How to Day Trade Crypto?

The crypto industry keeps developing regardless of the huge collapse that happened in the spring of 2022. Even though many people experience frustration in this field, experienced investors know for sure – the present bear tendency is the right time to look for up-and-coming cryptocurrency to buy.

Nobody can give a correct answer on what assets will reach the moon during the next bull trend, for cryptos are increasingly risky. The industry is still very young and unstable. It changes from the slightest news background change, moving crypto rates up and down.

Best Crypto Day Trading Strategies

Crypto trading is not about luck – it’s about long and tedious research, learning charts, analyzing historical indicators, and investigating external factors that may push the price up or down. All the information gathered about a crypto project and its asset’s behavior is analyzed and used in different trading styles.

Cryptocurrency trading brings fruit if it is performed according to a strategy. Why does a strategy matter? Here are some reasons:

  • Since the market is incredibly volatile, traders often face unexpected situations when the price goes in the opposite direction to what a trader supposed it to move. In this case, there must be a Plan “B” that secures the investor from hasty actions. If one follows the strategy, he has a ready-made plan for any possible scenario. After all, having a plan is always a good idea, and it refers not only to crypto investments.
  • Consistency is the key. Relying on a strategy is the way to success. Having a strategy, you know the patterns to follow, and this helps you stay focused on your purpose regardless of where the market moves.
  • Strategic crypto trading teaches how not to let emotions guide you, even though the news background is overwhelming, spurring you to spontaneous actions.
  • Intuition is not what you should rely on when trading crypto. Of course, sometimes it really helps to pick and buy cryptocurrency that brings a fortune in the future, but that only happens by chance, and on your next try, your intuition may play a bad joke on you. There are no reasons to think that you can receive a profit consistently relying on intuition only.

Here are the most common trading styles, which probably every crypto investor knows:

  1. Scalping
  2. Day trading
  3. Swing trading.
  4. Buy and hold.
  5. Arbitrage.

These trading methods differentiate by the dynamics of opening and closing trading orders and the duration of holding the position. Thus, they are ranked from the shortest trades that may take a couple of minutes (scalping) to long-term holding assets (position trading). In this case, swing trading is something middle between the shortest and longest possible position.

Arbitrage is a trading method where an investor uses several exchanges at once, buying crypto on one exchange and selling it on another one, taking a profit from the difference in rates. As is known, prices on crypto exchanges are never the same. Depending on the local level of supply and demand, they may vary. Let’s talk about the advantages of the daily trade style and its essence.

Pros and Cons of Day Trading Cryptocurrency

Cryptocurrency trading is certainly one of the most profitable yet riskiest types of earnings. In order to get real profit, you need to learn and keep abreast of the industry’s news constantly. Otherwise, trading will bring nothing but losses and frustration.

Advantages of crypto trading:

  • Unlimited earnings. An experienced crypto trader can earn millions of dollars even in a day.
  • The possibility to work from a computer or even a smartphone anywhere in the world. All the necessary tools are usually built into the cryptocurrency exchange, so there is no need to purchase additional equipment or software to engage in trading.
  • The cryptocurrency market operates 24 hours a day. The traditional market is open only during working hours on weekdays. Cryptocurrencies do not have days off or break – you can trade on any day of the month and any time of the day and night.
  • A small entry threshold – you can start with $10. With a skillful approach, a small initial investment can be multiplied in a relatively short period. And the larger the trading deposit, the higher the potential profit.
  • A variety of financial instruments. Cryptocurrency traders have access to all the tools that allow them to apply all existing trading strategies.

Some disadvantages of crypto trading:

  • Increased risks. Since cryptocurrencies are highly volatile, an inexperienced trader can quickly lose all his money.
  • Inaccuracy of fundamental analysis. Due to the fact that the digital coin market is not regulated by any financial institutions, it is difficult to rely on fundamental analysis, especially in the short and medium term.
  • A large number of scammers. As mentioned above, the crypto market is not regulated, so it still remains a very comfortable habitat for intruders.

What Is Day Trading?

From the name of the strategy, it becomes clear that this style of trading involves being completed within one day. Day traders aim to profit from the crypto price movements that occur within 24 hours. The essence is to take as much profit as possible from even the slightest price fluctuation during the day.

Day traders look for the best time of the day to open the position. That is an important factor because there are hours when the market is “sleeping”, which is connected with time zones in Europe and America, and there are active hours when people from the whole world trade actively (during their business hours).

And the period when the business hours in America, Europe, Australia, and Azia coincide is the period for market growth (because there is increased demand and people trade actively).

So the best time to enter would be just before those business hours start when the market is still “sleeping”, demand is low, thus, prices are the lowest. Day traders analyze these factors thoroughly to enter the market at a lower price.

Let’s talk about the methods the day trading strategy involves. The bigger time frame strategy, day trading, includes:

Yes, in some classifications, scalping belongs to the day trading strategy for it is also performed in the range of 24 hours.

High-Frequency Trading

That is the most dynamic and intensive trading style, implying dozens of orders opened and closed within a few seconds or even a fraction of a second, taking advantage of every tiny market trend change. It is obvious that such a dynamic trading technique is impossible for humans – they simply cannot perform so fast.

So this method fully relies on trading bots – programs that perform trades for you by your configurations (you set the price level when the bot needs to sell or buy cryptocurrencies without your participation).

Scalping

This is a less dynamic trading style, where trades take a couple of seconds to 30 minutes. It also involves opening positions many times daily and making a profit from every deal. This technique is based on high coin liquidity that can be quickly bought and sold over a short period.

Range Trading

This trading method is based on the assumption that the value of a crypto asset will fluctuate within the range the trader sets. That is, you set the maximum and minimum price level acceptable for your deal, and if the rate crosses those levels, it is time to exit the trade, for the price can move down further, making the situation more complicated.

Technical Analysis

Investors analyze price charts and find indicators and patterns which help to understand how this or that asset behaves during different market fluctuations. It is believed, that these patterns help to forecast the future asset’s behavior in similar conditions.

Research of Sentiment and News

While technical research is based on technical indicators of the asset, its price chart, sentiment analysis comes from the research of investors reaction to those market trends. That helps to suppose how demand will change in the future based on the past analysis. Also, this research includes analyzing how people react to different market news to understand how they will act during the next trends changes. Social networks are the source for such analysis.

Where Can I Practice Crypto Day Trading Strategies?

Successful trading has two main components:

  • Analysis and research of internal and external factors that affect the market;
  • Practice.

Theoretical knowledge is never enough – a trader needs to try different strategies on his own to understand which is better. Also, people’s character must be taken into account. Not all people are able to take risks – many tend to use a less stressful trading style, which implies a longer period of holding assets.

You never know which trading method suits you until you try it. Where to practice trading without fear of losing money? The answer is a crypto platform with demo tokens. Coinbase and WhiteBIT support this option.

The demo trading account on WhiteBIT has the same interface as the regular account. So you may practice all the same trading tools. Demo tokens cannot be cashed out, and you cannot lose them because they are artificially developed for the purpose of training. While practicing, you will clearly understand which strategy is not your cup of tea.

For example, psychologically, you are not ready for high-intense trading because it requires quick decision-making, which increases the level of stress and anxiety. On the contrary, you feel that range trading suits you better, for you know what ranges you will not cross, for you set it for yourself. Over time, once you are ready, you will maybe want to try more challenging strategies.

Wrapping Up

So, crypto trading is a tool that allows one to earn huge amounts of money in the shortest terms by having minimum initial investments. It is only possible with the right approach and thorough trading strategy selection.

Many experts advise beginners who do not know how to buy cryptocurrency to start trading strategies that work within one day. A large number of transactions and a small deposit will allow you to get a hand relatively quickly and not lose a lot of money.

The most common intraday strategy is scalping. It involves making dozens or even hundreds of transactions within one trading day. Each order brings a slight profit or a meager loss. That is the perfect environment for fast learning of cryptocurrency trading art.

The most important rule of a trader is discipline, thorough financial management, and having a contingency plan. It is strictly forbidden to trade cryptocurrencies in a state of emotional excitement, for example, after a significant loss or enormous profit. Such trading ceases to be an analytical activity but develops into a game of chance.

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About the author

Vidya Menon

Vidya is an online content developer for Justwebworld. She has a BA in English Language and Literature and an MA in Current Linguistics. She is a passionate reader, writer and researcher with a background in academic writing.