Day trading is the process of speculating on financial products and assets for a single day. Day traders will often buy and sell any number of financial instruments in several hours, or less, and profit from speculating on short-term price movements. Day traders stay up-to-date on what moves markets in the short term and can place hundreds of orders in a single day to profit in the long run.
Day trading presents an opportunity for those who put in the time and effort to understand the market in which they are trading. This is no different for cryptocurrencies. Even more so, this new industry has brought with it a significant opportunity for day traders to profit from price discrepancies and movements that don’t exist in other, more mature markets.
The high volatility nature of Bitcoin and other cryptocurrencies has made the crypto market the perfect environment for day trading, because during the day, there is enough up and downswings to make a decent profit.
Speaking of profit, Bitcoin trader app is a good resource that can be used to trade cryptocurrency automatically, as well as manually. If you are overwhelmed by the complexity of the crypto market, I recommend this app.
Moving forward, we are going to teach you what you need to look out for to Day trade cryptocurrency and we are going to share some day trading tips and strategies.
Day Trading Cryptocurrencies:
In the cryptocurrency market, bitcoin has become the standard of the industry.
The digital asset has grown not just in popularity, but in its technology as well. Bitcoin is designed as a form of decentralized digital currency that is usable worldwide without the fear of censorship resistance. There is a fixed supply of Bitcoin, which amounts to 21 million, and it can never be mined. It remains the biggest cryptocurrency on the market till date, with a valuation close to $200 billion.
More than half of the overall trading activities occur in bitcoin, with billions of dollars in daily turnover.
Thanks to its ample liquidity, Bitcoin is one of the most popular choices for those looking to day trade crypto.
Any cryptocurrency outside of bitcoin is referred to as an altcoin. Cryptocurrencies placed in this category have various technological differences and uses, from building decentralized applications (dApps) to creating a world of decentralized finance, and beyond. The most valuable alt coin and second in value to Bitcoin, is Ethereum; a programmable open source blockchain. Many other alt coins take the form of ERC-20 tokens, which means they are built on Ethereum protocol. These include EOS and TRON.
There category of cryptocurrency has become increasingly important for traders and investors. Stablecoins are cryptocurrencies that are relatively price-stable, generally by pegging themselves to fiat currency. The largest stablecoin is Tether (USDT), whose price is pegged to the US Dollar. Tether is a great trading pair for bitcoin and alt coin traders, as it allows for easy trading within cryptocurrencies without having to off-load capital to fiat currency and back into the market.
Many exchanges avoid using USD because of regulatory reasons but listing coins against USDT allows them to quote against the world’s primary reserve currency without actually touching it directly.
Best Day Trading Tips and Strategies
The whole point of day trading crypto is to look for trading opportunities that offer you the potential to make a quick profit.
Hence, we have compiled essential tips and strategies to help you effectively day trade cryptocurrency. Let’s dive in.
Determine the Liquidity of the Cryptocurrency You Wish to Trade.
A lot of the cryptocurrencies and crypto exchanges are very illiquid and don’t have the liquidity to offer instant execution that you might find when trading Forex currencies.
It is important to check how liquid the cryptocurrency you wish to trade is, before day trading Bitcoin or any other altcoins. To do this, simply verify the 24-hour volume of the crypto trade.
A good free resource to read and gauge the market volume of any particular coin is CoinMarketCap.
Never forget that; not having enough liquidity could lead to substantial slippage and bigger losses.
Minimize Trading Risks
As stated above, day trading crypto does not require trading every single day. We should only day trade cryptocurrencies when all the conditions align in our favor. In addition, avoid trading on weekends and limit trading only on the highest-volume days
Pick up Coins with High Volatility and High Liquidity
As previously discussed, the number one choice you need to make is to pick coins that have high volatility and high liquidity. Bitcoin is the most liquid coin out there, it’s prudent to day trade using Bitcoin, but should you like to use the altcoins for day trading, then carry out adequate research to pick those coins that have good liquidity and volatility; Ethereum is a good example.
Day trading cryptocurrency is a lot easier thanks to the high volatility nature of the crypto market. High volatility suits day trading very well, so you have the right environment to succeed.
News and Sentiment Analysis
While it’s less popular among short-term traders, looking at headlines and overall market sentiment can also be used in Bitcoin Day-trading. Sometimes, big news items can move crypto markets quickly.
Day Trading Smaller Cryptocurrencies
With more than 1600 coins on the market and growing, day trading smaller cryptocurrencies has increasingly become a very lucrative business. There are higher risks involved because crypto prices can crash just as fast as they have risen.
That is why it’s advised to trade with only the top cryptocurrencies as a beginner.
It goes without saying that day trading smaller cryptocurrency is quite risky; so a very good understanding of the crypto market is needed to survive in this trade (pun intended).
Day trading crypto can be a great way to grow your portfolio and it is a very lucrative alternative to the holding mentality that is crippling the crypto community.