Brief overview
Traditional financial markets are used to guide cryptocurrency day trading. Intraday crypto trading in stocks, commodities, and other financial assets is a common and effective strategy because individuals and institutional investors can make profits quickly by opening and closing trade positions within a day.
By entering and exiting a position on the same trading day in the cryptocurrency market space, day traders can take advantage of the volatility of crypto assets. A crypto day trading strategy is used to earn massive profits, and its primary purpose is to avoid the volatility of cryptocurrencies. A 10% or 15% jump in the price of stocks or commodities is extremely rare. Cryptocurrencies, however, often experience this scenario daily.
Exactly what is day trading?
When day trading crypto, the idea is to identify a crypto asset whose price will most likely increase within the next few hours. Usually, day trading involves speculating on the crypto asset’s price on the same day. In this case, traders hold the asset until it reaches a predetermined price, then sell it off and close the trade.
The process may seem simple to beginners, but it requires much crypto knowledge, discipline, and a proper day trading strategy. Traders need to understand the market and the cryptocurrency they are investing in if they are going to make huge profits. Otherwise, traders could end up losing a lot of money.
What is the best way to start trading crypto day?
The following points will assist you in implementing a structured day trading crypto strategy:
High-volatility, high-liquidity cryptocurrencies are best:
While day trading crypto, choosing coins with high volatility and high liquidity rate is important, even though Bitcoin is the most liquid cryptocurrency. However, if you don’t want to choose Bitcoin, you can consider some of the altcoins available, such as Tether (USDT) or Bitcoin cash (BCH), to name a few. Trading smaller cryptocurrencies can be lucrative, but a high risk is involved. Coin prices can crash just as quickly as they rise.
Use the money flow index (MFI) as follows:
Traders and investors use the money flow index to track the activity of smart money and gauge when institutions are buying and selling cryptocurrencies.
Await the money flow index (MFI) to reach 100:
When the money flow index represents a level of 100, this means that the big sharks or the prominent investors have now entered the cryptocurrency market space. The money flow index, or MFI, is an easy way to analyze their activity. The money flow index can be used to identify their activities. Because the technical indicators are not 100% accurate, traders and investors wait for at least two MFI readings to reach 100 before investing. Day trading crypto requires this strategy to avoid massive losses. The price should hold up during the first and the second MFI reading. If the price drops during the second reading, it indicates upcoming losses.
Protect your stop loss by hiding it:
Place your protective stop loss below the day’s low. It’s good to exit the position if you break below it. A break below it signals a shift in market sentiment, and it’s wise to exit the trade.
Crypto day trading strategies:
Trading crypto on a day-to-day basis isn’t a kid’s game. Instead, it takes analysis, rule-based strategies, and a thorough knowledge of different crypto assets. The following day trading crypto strategies will serve as your guide in earning massive profits.
Taking risks:
To profit from the growing trading volumes, traders use scalping as a trading strategy. The majority of cryptocurrency traders are scalpers. When they see a slight increase in the price, scalpers close a trade within seconds or minutes of opening it. A day trader, better known as a scalper, relies on small profits and exits their position as soon as a change in market sentiment or coin price occurs.
The scalpers use automated trading bots to increase the frequency with which they trade. In Scalping trading, traders take advantage of slight price fluctuations quickly. This strategy requires a massive bankroll to work. A scalp can earn a substantial amount by staking a large amount, but the return on investment is very small on each trade. Moreover, even if you trade 10-20 times within 5 minutes, the small gains will add up.
Trading ranges:
The candlestick chart pattern is heavily relied on when trading crypto. This day-trading crypto strategy relies heavily on candlestick chart support and resistance levels. To be successful as a cryptocurrency trader, you must learn how to identify price ranges within the market structure, support and resistance levels, and support and resistance levels. Identifying the price ranges will help you plan trades.
With the range trading strategy, you buy the crypto when the range touches support and sell it when it approaches resistance. Since range trading requires precise market timing, it is significantly risky. If the coin price moves in the direction you expected, you could gain a lot of money.
Affair arbitrage:
Arbitrage day trading involves buying a cryptocurrency at a specific price and selling it on another cryptocurrency exchange in a completely different manner. Day trading crypto is an entirely different strategy. The difference between the buy price and the coin’s selling price is known as the spread. Cryptocurrency markets are unregulated and decentralized, and we know that. The fact that anyone can open an account on any crypto exchange illustrates a huge difference in the spread between different exchanges due to the differences in volume and liquidity.
Crypto day trading mistakes to avoid:
There is no doubt that crypto markets are highly volatile, and traders can lose a lot of money in the vicious cycle to make a profit. Here are some common mistakes that traders should avoid:
Excessive trading:
There are plenty of opportunities for day trading on cryptocurrency markets. Plus, it is human nature to seek more winning opportunities after winning once. And this works best when we stake a lot of money on something. You might end up in a disastrous situation if you become too zealous about crypto day trading and stake everything you have.
Experts and traders in the financial markets recommend investing logically and sticking to a pre-decided and rule-based approach rather than investing emotionally.
Avoid trading beyond your means:
A cryptocurrency market is highly volatile and speculative. Unlike stocks and commodity markets, crypto assets are subject to huge price swings daily. Even professional traders experience significant losses when starting a side hustle. Beginners who stake whatever they have earned to date on a cryptocurrency can earn and get rich fast.
There is no such thing as a get-rich-quick scheme or a gamble that can make you rich overnight when you trade crypto. Intraday trading is a well-planned, well-analyzed, and well-researched strategy that requires proper trading skills, knowledge, planning, execution, and risk management. It is possible to prevent huge losses from traders by implementing a good risk management strategy and skill set.
Researching on your own:
People who claim to be experts in the crypto market post advice on social media about how to get rich, which many beginners follow blindly and lose a lot of money. Social media platforms play a huge role in guiding our life journey. A wise trader does not rely on secondary information when it comes to trading. You can learn how to conduct technical analysis on various educational websites.
What are the ways day traders make money?
It is common for successful day traders to have years of experience and a strong technical skillset in the cryptocurrency market. To prevent significant losses while day trading crypto, day traders devise a risk management strategy to prevent significant losses. Day traders use technical analysis (TA) to create profitable trade ideas regarding when to enter and exit the market. Crypto assets are entered and exited using daily exchange volume, chart patterns, price movements, and technical indicators.
Most day traders are not involved in fundamental analysis (FA). Day traders are taking advantage of a temporary spike in trading activity and making a profit from it. As I mentioned earlier, the two main factors for day trading are high volume and high liquidity. Similarly, day traders require higher liquidity when exiting a trading position. Even a small slippage on just one trade can devastate their trading account. It is, for this reason, that day traders always trade highly liquid market pairs like BTC and USDT.
Summary:
Crypto-day trading can be extremely profitable if executed correctly and in a planned manner. For beginners with limited crypto knowledge, crypto day trading can be disastrous since the technical and fundamental analysis will not be possible. They will also need help with reading chart patterns and candlestick charts.
To become a successful day trader, you should also learn the technical analysis indicators you will need to know when to enter and exit the market.
