Day Trading Strategies – Introduction, Liquidity, Consider, and More
5 Popular Cryptocurrency Day Trading Strategies
As a trader, you can choose from a variety of trading strategies. While some are suitable for short-term gains, others offer improved long-term investments. Still, if you are interested in minimal investments and short-term results, you should consider day trading. Day trading is not a new concept, per se. It has existed in the financial markets for decades.
More importantly, day trading is broad because it can deal with various assets, including stocks, forex, and cryptocurrencies. However, day trading cryptocurrencies is not as simple as it seems. It would be better to consider some aspects before starting your hobby or career in cryptocurrency day trading. In this handy guide, we want to help users understand the basics of day trading in the context of crypto trading.
Table of Contents
Introduction to Day Trading
Day trading is not a challenging concept. And also, it is indeed what you would guess from the name. It is the type of trading that happens during the day and only within a day. It would have to acquire and sell the assets (for a profit) in one day. Due to this feature, intraday trading is also known as intraday trading.
Associated with long-term trading, day trading wants the trader to focus on small movements in value. You can’t hold onto the asset overnight and expect it to appreciate the next day. Similarly, intraday trading will work only on business days of the week. However, just like other types of trading, day trading also requires a proper market understanding. And it’s a skill you can hone with practice.
Factors Traders Consider During Day Trading
Depending on the market and the benefit they are dealing with, day traders consider many factors.
The liquidity of an asset state to the ease with which you can collect the benefit or vice versa. The day trading situation refers to the ease with which you can sell the stock and get money in return. If the broth is easily sold, it is very liquid. If not, the broth is not very runny.
Volatility refers to the frequency also size of an asset’s price. If the value of investments changes very frequently, the support is considered very volatile. On the other hand, if it holds its value for a long period, it will be regarded as non-volatile.
In addition to these two causes, different traders employ 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, looking at historical data and patterns to calculate how the support would behave in the future.
Popular Intraday Trading Strategies
Scalping is one of the most popular cryptocurrency trading strategies for short-term profits. And also, scalping requires you to make small but normal trades that typically last anywhere from a few seconds to a few minutes. By repeating the process, traders can take advantage of small price changes.
At the same time, you can implement this strategy to take advantage of both the top and bottom markets. The only limit to this strategy will be your reaction time and the latency of the platform you are using. After all, crypto scalping does not require any technical knowledge and can use in a wide range of market conditions.
Next, high-frequency trading is a cryptocurrency trading strategy that uses algorithms and bots to execute trades. It is essentially automated scalping. Bots can manage very regular small businesses for profit faster than a human could manually. It can take time to find your model strategy.
High-frequency trading will give you the edge you need to catch shorter price movements.
Range trading is a great cryptocurrency trading strategy that has the potential for profit while mitigating the downside when the markets move sideways. Range trading works by setting a range between support and resistance levels.
The key in this strategy is to buy after the price of an asset reaches the support level and sell when the price comes to the resistance line. This technique has some limits, as the investment will inevitably break out of the range.
Technical indicators are a prominent tool in cryptocurrency trading strategies. Usually, indicator strategies make trades based on secondary sources of information like RSI (Relative Strength Index), Bollinger Bands, MACD (Moving Average Convergence Divergence) and much more.
Technical indicators will help you avoid intraday trading at a risky price and, at the same time, provide new opportunities. Of course, you can also sign up to receive market signals based on indicators recommended by other traders on Trading View.
With technical indicators, you can trade physically within our multi-exchange trading interface. You can also run an automatic trading bot like MACD or Bollinger Bands and benefit from technical indicators and high-frequency trading.
Sentiment Based Trading
Sentiment-based trading is an alternative popular day trading strategy, using data from public 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 notifications when that type of tweet goes live, potentially getting you ahead of the game. The faster you can receive new information and act on it, the greater your potential to make business decisions before everyone else.
Day Trading Cryptocurrencies: What is it?
Intraday cryptocurrency is almost similar to traditional intraday trading. However, intraday trading also has to adjust because it happens in the crypto ecosystem. For example, although you can focus on the minute changes in an asset’s value, business hours do not restrict your actions. You can trade crypto assets at any time.
However, you may wish to pay any applicable network and transaction fees. Therefore, you must choose a supported cryptocurrency trading platform. If you have to pay a higher transaction fee than the overall profit you make from currency volatility, you essentially have no cause to trade crypto properties in the first place.
Day Trading Cryptocurrencies: Why and How?
We declared that liquidity and volatility matter the most regarding intraday trading. These factors have been trademark features of cryptocurrencies since the beginning. The change in the value of cryptocurrencies is so much that even within 24 hours, the value of a crypto token varies greatly.
Although these trends are not as predictable as traditional trading trends, a strategic day trader can make considerable profits by focusing on this value shift. There are multiple ways to cash out cryptocurrency assets regarding liquidity.
Nowadays, when it comes to trading cryptocurrencies, you have some simple options to follow. The further most convenient option is to choose a dependable crypto trading platform, which will allow you to buy different crypto assets and sell them for money at your convenience.
The added profit here is using various payment methods to accomplish these tasks. Some trading platforms also propose margin trading options, which means you can buy crypto assets by borrowing money to increase profits.
Can I Make a Living Trading Cryptocurrencies?
Certainly, anyone can make a living trading cryptocurrency. However, due to the relatively higher volatility of crypto assets, he must spend more time watching market activity. Unlike traditional stocks, crypto assets can see a price change in minutes or even a few seconds.
For example, the value of Bitcoin (BTC) can drop in seconds if a country prohibits its use. Similarly, even minor changes in the market can have huge implications on the value of your assets. If you are set to deal with this unpredictability and instability, you can consider day trading cryptocurrencies as a full-time profession.
For example, you can see there are many strategies for day trading cryptocurrencies. They all work differently, so you need to find the one that best suits your goals.
Scalping allows for a quick way to profit as long as you stay updated. Range trading allows for-profit while being safe with a stop loss in place. High-frequency trading helps you make a profit with higher volumes. Technical indicators make available information to include a technical analysis perception. Finally, sentiment-based trading will help you stay knowledgeable and trade using the trends.