As a trader, you can choose between different trading strategies. While some are suitable for short-term earnings, others offer the best long-term investments. However, if you are interested in minimal investment and short-term results, you should consider day trading. Intraday trading itself is not a new concept. It has been around in the financial markets for decades.
More importantly, day trading is broad in the sense that you can deal in a variety of assets, including but not limited to stocks and cryptocurrencies. However, intraday cryptocurrency trading is not as easy as it sounds. It would be best to consider a few aspects before starting your hobby or career in day trading cryptocurrency.
In this handy guide, we want to help users understand the basics of intraday trading in the context of cryptocurrency trading.
Introduction to Day Trading
Day trading is not a complicated concept. It is exactly what you might guess from the name. It is a type of trading that takes place during the day and only during the day. That is, you have to buy and sell assets (to make a profit) throughout the day. Because of this characteristic, intraday trading is also known as intraday trading.
Compared to long-term trading, intraday trading requires the trader to focus on small movements in value. You can’t leave an asset overnight and wait for it to rise in value the next day. Likewise, day trading will only work on weekdays of the week. However, like other types of trading, intraday trading also requires a proper understanding of the market. And it is a skill that can be honed with practice.
Factors that traders consider when trading intraday
Depending on the market and the asset they are dealing with, intraday traders consider many factors.
The liquidity of an asset means how easily you can cash out an asset or vice versa. In the case of intraday trading, it refers to how easily you can sell a stock and get cash in return. If the stock is easy to sell, it is very liquid. If not, the stock is not very liquid.
Volatility refers to the frequency and size of asset prices. If the asset price changes very frequently, the asset is considered very volatile. On the other hand, if it maintains its value over a long period of time, it would be considered energy-independent.
In addition to these two factors, different traders use different methods. For example, some traders may perform fundamental analysis to get a complete picture of the asset they are dealing with. However, some traders stick to technical analysis, analyzing historical data and patterns to calculate how the asset will perform in the future.
Popular strategies for intraday trading
Scalping is one of the most popular strategies for day trading cryptocurrencies for short-term profits. Scalping requires you to make small but frequent trades, which usually last from a few seconds to a few minutes. By repeating this process, traders can take advantage of small price movements in the markets.
At the same time, you can implement this strategy to take advantage of both top and bottom markets. The only limitation of this strategy will be your reaction time and the latency of the platform you are using. In the end,
crypto scalping requires no technical knowledge and can be used in a wide variety of market conditions.
Next, high-frequency trading is a day trading strategy for cryptocurrency that uses algorithms and bots to make trades. It is essentially automated scalping. Bots can make very frequent small trades to make profits faster than a human can manually. Finding the perfect strategy can take some time.
High frequency trading will give you the advantage you need to catch shorter price movements.
Trading in the range
Range trading is a great day trading strategy for cryptocurrency that can bring profits while mitigating the negative effects when markets move sideways. Range trading basically works by establishing a range between support and resistance levels.
The key to this strategy is to buy after the price of the asset reaches the support level and sell when the price reaches the resistance line. This method has some limitations, as the asset will inevitably move out of the range.
Technical indicators are an important tool in day trading strategies for cryptocurrency. Typically, indicator strategies make trades based on secondary sources of information such as MACD (moving average convergence-divergence), RSI (relative strength index), Bollinger Bands and more.
Technical indicators can help you avoid day trading at risky prices, potentially opening up new opportunities. Of course, you can also subscribe to receive market signals based on indicators recommended by other traders on TradingView.
With technical indicators you can trade manually in our multi-trading interface. You can also run an automated trading bot such as MACD or Bollinger Bands and take advantage of both technical indicators and high frequency trading.
Trading based on sentiment
Sentiment-based trading is another popular intraday trading strategy that uses data derived from publicly available information, such as news sources, social media, or even Google search trends, to find entry or exit points for your trades.
For example, Elon Musk tweets about Dogecoin. You can set up notifications for when this type of tweet goes live, with the potential to get ahead of the game. The faster you can receive new information and act on it, the higher your potential to make trading decisions before everyone else.
Day trading in cryptocurrencies: what is it?
Day trading in cryptocurrency is almost similar to traditional day trading. However, intraday trading must also adapt because it takes place in the crypto ecosystem. For example, even though you can focus on the smallest changes in the value of an asset, business hours do not limit your actions. You can easily trade cryptoassets at any point in time.
Nevertheless, you can pay the appropriate network and transaction fees. Thus, it becomes imperative that you choose a compatible platform to trade cryptocurrency. If you have to pay transaction fees in excess of the total profit you make from the coin’s volatility, you essentially have no reason to trade cryptoassets.
Day trading cryptocurrencies: why and how?
We mentioned that liquidity and volatility are most important for intraday trading. These factors have been hallmarks of cryptocurrencies since the beginning. Changes in the value of cryptocurrency are so large that even within 24 hours, the value of a crypto-token changes dramatically.
While these trends are not as predictable as traditional trading trends, a strategic intraday trader can make significant profits by focusing on this change in value. In terms of liquidity, there are several ways to cash in on cryptocurrency assets.
Now, when it comes to day trading cryptocurrencies, you have a few easy options. The most convenient option is to choose a reliable crypto trading platform that allows you to buy different crypto assets and sell them for cash at your convenience.
An additional advantage here is that you can use different payment methods to perform these tasks. Some trading platforms also offer margin trading options, which means you can purchase crypto-assets by borrowing money to increase your profits.
Can I make a living day trading cryptocurrency?
Anyone can certainly make a living day trading cryptocurrency. However, because of the relatively higher volatility of cryptoassets, you will have to spend more time observing market activity. Unlike traditional stocks, cryptoassets can change in price in minutes or even seconds.
For example, the value of bitcoin (BTC) can fall within seconds if a country bans its use. Likewise, even minor changes in the market can have a huge impact on the value of your assets. If you are willing to deal with this volatility and instability, you might consider day trading cryptocurrency as a full-time profession.
As you can see, there are many strategies for intraday cryptocurrency trading. They all work differently, so you just need to find the one that works best for your goals.
Scalping allows you to profit quickly while you stay the course. Range trading allows you to make profits while being safe with a stop loss set. High-frequency trading helps you profit with higher volumes. Technical indicators provide information that includes a technical analysis perspective. Finally, sentiment-based trading helps you stay on track and trade on trends.