Cryptocurrency is a digital asset base and just like investing in it, trading cryptocurrency has also become extremely popular over the past few years. Now you must be wondering what differences are there between investing and trading cryptocurrency.
These terms are often used interchangeably in the cryptocurrency space. However, there are fundamental differences that you need to know about. If you know how to invest in cryptocurrency already, then trading it will be easier for you.
For instance, cryptocurrency investors like Josh Baazov think about the long term while using their money in cryptocurrency. On the other hand, day traders in the cryptocurrency market think of the short term. They gain from the market fluctuations and for that, they keep a close eye on the market.
There are various kinds of traders in the market such as day traders, momentum traders, and scalpers. In this blog, we are going to talk about day traders. Daytrading can provide you with a lot of returns. Day trading is one of the most commonly used strategies. They are very active in the financial markets and they make a lot of money in a short period. Day trading basically refers to entering exciting positions in the cryptocurrency market on the same trading day.
Day traders look out for making a profit off the fluctuations on a particular day of a cryptocurrency type. Generally, day traders have a deep insight into the market and they’ve been doing it for a considerable amount of time.
They use their technical analysis skill to create trade ideas.
They will analyze common strategies, use chart patterns and technical indicators to figure out entry and exit points for trades. Moreover, they have a deep understanding of risk management, which is essential for success in cryptocurrency day trading.
You must be wondering how day traders make their money out of the market volatility. Some of the factors playing an important role are volume, liquidity, etc.
Common trading strategies:
Scalping: This is a common trading strategy among day traders. Here you take full advantage of small price moves that play a huge role.
Scalpers often trade on margins or else, the great future contracts to boost their results with leverage. Since the percentage is generally lower, larger position sizes seem more profitable to scalpers.
Range trading is yet another strategy that heavily involves support and resistance levels, Candlestick chart analysis, etc.
On the other hand, high-frequency trading is a type of algorithm trading strategy for traders.
It includes algorithms and trading bots, which can quickly make their way into and market and even exit many positions in a short span of time. One of the first things that you need to know in this case is that high-frequency trading is an exclusive industry and getting your hands on high-quality data is quite difficult.
How to start with day trading cryptocurrency?
You must know the fundamentals of day trading before you jump into space. There are thousands of online trading platforms where you can trade cryptocurrencies. Binance is one of the ecosystems that offer you various services, such as market data in real-time, margin trading features, leveraged tokens, etcetera.
Day trading involves fast decision-making and quick execution skills so we would recommend you to start slow. It is risky so we don’t generally ask people to make their living out of day trading. You need a solid understanding of the market that can only develop with time.
The more time and effort you put in, the better you get at day trading. This will not happen overnight.
Day trading is also commonly used in the stock market.
As a daytrader, you need to be a pro at technical indicators and technical analysis.
Things to know about crypto day trading
Liquidity: Traders have to enter or exit trades quickly without waiting or delaying too much.
Volatility: If there is a lack of volatility, there is no chance of buying at low prices and selling at high prices. If the prices aren’t moving, they won’t be of any benefit to traders.
Bitcoin mining plays a huge role in the market.
How to start trading Bitcoin or any other cryptos
Step 1: Have a deep understanding what is the best way to invest in cryptocurrency. Becoming a successful trader needs persistence, patience, and time.
Step 2: Open an account in a suitable Bitcoin trading platform or exchange.
Step 3: You can now start while making an initial investment capital.
Mistakes to avoid while day trading:
Trading more than you can afford to lose: Do not put in all of your money in day trading. There are so many ways where your profits can get eaten up. Do not put in money more than you can afford to lose. It is a high-risk game and thus, no matter how much strategizing you do, there is always a risk of losing money. Your trading skills will grow with time and you should only increase your fund for crypto day trading gradually.
Overtrading: It is one of the common mistakes made by traders. Do not be emotional while trading. Moreover, do not be overly greedy.
Not doing your homework: You need to research well when you get into the world of cryptocurrency. There are various people or platforms that will give you the wrong information, but you have to find out the right one by doing enough research.
No matter which cryptocurrency you choose, you should go through its white paper. Joining several platforms might also help.
Learn how to conduct technical analysis: Follow every news headline that is directly related to the market or affecting the market. There are many online materials for crypto day trading.
Following trends: Do not follow trends when it comes to cryptocurrency. Just because one of your friends has gained by entering at a particular period of time and by exiting, it does not mean that this will favour you too. You can face significant losses if you are going for fear of missing out.
The takeaway: To wrap it up, day trading is a strategy that involves entering and exiting the market on the same day. It could be extremely profitable for you if you practice and have enough patience. However, you need to know about technical analysis, range trading, scalping, news and sentiment analysis, etc. that directly affects the cryptocurrency market. To know more about cryptocurrency, kindly keep an eye on this blog section.
