During the last half a decade, Crypto has undoubtedly taken over the market as it has become a more valuable asset to invest apart from its regular usage as a transactional means. There is a sharp rise in Crypto Companies as well.
According to Roland Berger, in 2021 alone, the rise in the number of Crypto Unicorn Companies
What is Crypto Day Trading?
The easiest and most attractive way to make money from the crypto market through short term investment is
Why Day Trade Crypto?
The sole purpose of crypto day trading is to make significant profits by speculating short-term movement. The prices of different crypto coins keep on fluctuating every single day. Day traders can benefit from these daily temporary spikes and execute quick trades.
For instance, at times, the price of a certain crypto coin can witness a jump of as high as 10% in its value. Generally, it will not be the best time to buy that coin since cryptos are very volatile, and thus, there are higher chances of such uprisings in its prices will fall soon.
It may further increase as well, but the ability to predict the curve mainly depends on how well you can read the crypto trends. To cite a concrete example, we may look at the spectacular spike in Dogecoin’s price in May 2021 when Elon Musk made his Saturday Night Live debut.
The price of dogecoin started to soar in leaps just before Musk’s appearance on SNL and on the day of his appearance, i.e.
Many made a fortune during this movement doing Day Tradings. But these kinds of fluctuations don't happen daily, so it's better to learn the intricacies of daily crypto markets which can help immensely to be able to conduct Crypto Day Tradings effectively and confidently.
A good reason to start crypto day trading is that you need not buy and hold for long. You just need to focus on short-term opportunities and invest wisely. But, it must also be noted that there are equal chances of slippage. As a result, you may also suffer huge losses too. Therefore, there is a high risk involved in day trading crypto.
Crypto Day Trading Strategies
Like conventional day tradings, in crypto day tradings as well, the volume and liquidity play a significant role in this trading activity while aiming to harness as much profit as possible.
Day trading principles in the crypto market remain the same as that of the traditional financial market. Although this form of trading calls for a deeper understanding of the crypto market. You also need to have a good deal of experience along with adequate knowledge of technical analysis, chart patterns, identification of trade entry and exit points, and other technical indicators to devise a proper trading strategy.
One of the basic requirements of crypto day trading is getting used to the interrelations of different coins and their changing prices with major currencies, predominantly USD. Most of the coin exchanges provide real-time charts but you can also use different coin converters like
Here you need to remember that like traditional trading, there are two values of any crypto asset - buy and sell, where the buy value will always be a little more than the sell value.
Three Major Strategies of Day Tradings
Scalping
This strategy is commonly used to make profits based on the increased trading volume. In short time frames, small price moves occur. Traders monitor these slight fluctuations in the prices and exit trades even in seconds. They make small gains as they target relatively smaller price ranges. Scalpers also use automated crypto trading bots to improve the trading frequency, intensify profits, and make the process more convenient.
As the profit acquired through scalping is generally small, the investment capital needed is massive. Therefore, scalpers try to implement proper position sizing rules. The trade execution is very fast, and the risk involved is high too. Traders require proper skills and expertise for scalping. Also, risk management principles must be applied for convincing wins.
Range Trading
This strategy is based on identifying price ranges, and based on these; trade ideas are created. The range is structured on support and resistance levels. It suits beginners, and with a good understanding of momentum indicators, candlestick charts and levels, one can use the range trading strategy.
The ends of the price ranges act as support and resistance. Support level can be considered as a demand zone. The resistance level can be thought of as a supply zone. Based on these levels, areas of interest can be identified, and the entry and exit positions are decided accordingly.
Arbitrage
This strategy makes use of the price disparity across two platforms or marketplaces. The traders buy crypto on one platform and sell them on another. The profit is referred to as spread, and it is the difference between the prices of the two platforms. The reason behind such price difference is that the crypto market is unregulated. So creating an exchange platform and accounts are quite easy.
Usually, the profits made from arbitrage trading are small. So, huge capital is needed to make significant profits as with large-size orders, the gain becomes large. Also, if you want to implement this strategy, you need to open trading accounts across different exchange platforms.
Conclusion
It cannot be stressed enough that even if crypto day trading appears to be very lucrative, it involves enormous risks too. Traders tend to overtrade, hoping to generate huge profits quickly. But, day trading also requires good risk management skills along with proper planning and execution.
So, if you want to get into crypto day trading, make sure to conduct extensive research, develop trading skills and make informed and wise decisions.
Disclaimer: Nothing in this article constitutes professional investment advice. Please do your own thorough research before making any investment decisions.