Day trading is one of the most popular trading styles in the cryptocurrency industry and most traditional markets. Lately, traders are increasingly choosing to trade cryptocurrencies as it is one of the most profitable environments for day traders. With high volatility and 24/7 availability, cryptocurrencies once proved to be a strategic opportunity for traders to make quick profits.
In this article, we will discuss all the noteworthy aspects of day trading to help you decide if this style is right for you. Day trading has been borrowed from the traditional market and works the same with cryptocurrencies.
What is Day Trading?
Day trading is a trading strategy in which a person buys and sells assets during the trading hours of one trading day, taking profits from price movements. Day traders use a combination of strategies and analysis to predict market movements and make profits over hours, minutes, and even seconds, seeking to exploit arbitrage opportunities, price divergences, and volatility.
This trading style is quite challenging as traders must remain vigilant whenever they open positions. This is especially true since day trading in cryptocurrencies is much more volatile than the stock market. That is why the activity of this type of trading requires more time, on the other hand, stop orders/losses can perfectly automate the main processes.
There are many different tools and programs available to help day traders, but don't make it hard for yourself. You can only use the most essential tools suitable for analyzing price action and improving your trading decisions. Day trading usually relies on Technical Analysis to determine which assets to trade. Therefore, traders actively use charting patterns, indicators, and price action.
A good strategy can determine your profitability, so it’s crucial to choose one that suits your trading style. Here are some of the most popular day trading strategies and approaches:
For novice traders, the best trading style would be momentum trading, which is easy to use and very popular. The main rule of this strategy is to open positions based on the strength of the existing trend. In other words, if Bitcoin has been moving up for some time, a momentum trader will buy it based on the belief that if the current trend picks up momentum, then there is a chance that it will continue for some time.
Scalping is another popular day trading strategy, but it is more aimed at intermediate to advanced traders. Scalpers try to capitalize on minimal price changes that can last seconds or minutes. Scalpers are not interested in every trade, but in the total profit at the end of each session. An experienced scalping trader can open and close dozens of trades per session.
In range trading, traders identify overbought and oversold levels, highlighted by areas of resistance and support. The strategy is to buy an asset in the oversold zone and sell when it approaches the overbought zone. This style works well when the price is not trending.
Day trading tips
Day trading can bring both large profits and losses. If you want to profit, then remember that there is no such thing as “easy money”. It is necessary not only to follow all your tactics but also to remain stress-resistant and equanimous. Before starting trading, you should find which cryptocurrencies are showing high volatility. This will give you more opportunities to make deals, as a result of which you can earn more. Your chosen cryptocurrency for trading must be liquid. Verify this by checking data on the Coinmarketcap or Emirex.
Cryptocurrency day trading is quite profitable, but only if you are well versed in its concept and execution. What works for you may not apply to anyone else. The key is to practice and test which strategies are best suited to your particular trading style. As in any other business, success depends entirely on the qualities of a trader.