As a new trader, you should know that there are different types of trading strategies and crypto day trading is one of them. Buying, selling and trading crypto may not be as simple and easy as one might anticipate as there are several crucial factors to be mindful of.
Learning about day trading is one of the factors that is essential for traders to be familiar with. The more a trader knows about trading the easier the overall experience can be. Therefore, if you are interested in trading crypto you should know the details mentioned in this crypto day trading guide below and determine if this is a good strategy for you to follow or not.
Stepping into anything such as day trading without proper information or prior experience can complicate trading for the beginners and jeopardize their funds and security as well.
Understanding What is Crypto Day Trading
As mentioned above, day trading is a crypto trading strategy that is quite popular and widely used. The use of this strategy is not only limited to the crypto space but expands through other financial markets as well such as forex, commodities, stocks and more.
Day trading is also called intraday trading and means that the traders close their trading positions within 24 hours. None of the day trading positions are kept open overnight. Crypto traders exit and enter a trade in the same day and look for profits based off of small price fluctuations noted for digital assets in a day.
Even though it is an exciting and interesting concept, day traders need to be very careful as small windows of opportunities also come with risks and some complexities.
That is why this crypto day trading guide addresses all the major aspects that need to be considered before opting for this strategy.
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Is Day Trading Risky?
Crypto day trading is a popular strategy but using it to trade crypto can be somewhat risky, especially for beginners. As mentioned above, day trading means that the traders open and close a trading position within the same day. While this may sound simple, trading within 24 hours requires you to make quick decisions so you can get profits off the small fluctuations seen in the prices of the cryptocurrencies.
The crypto market is known to be volatile and the price fluctuations can, therefore, cause you to lose some or all your funds if you are not careful while day trading.
This trading strategy is quite demanding and requires the traders to be vigilant and mindful of the market movements so they can determine the right time to enter and exit a trading position.
Due to high volatility of the market, day traders also need to be careful of the liquidity and volume. If the liquidity available is not enough, the traders can lose all their funds.
How Do Traders Benefit from Day Trading?
Before you begin crypto day trading, it is crucial for you to note that getting benefits from trading is never guaranteed, regardless of the trading type and strategy you opt for. However, having detailed information and a deep understanding of things like technical analysis (TA) can help traders have a better experience of day trading crypto.
This crypto day trading guide also talks about some of the essential tools that can be used to determine the right moments when traders should enter and exit a trading position.
As a day trader you can analyze the entry and exit points with the help of:
- Chart patterns
- Key technical indicators
- Price action
- Trading volume
3 Major Day Trading Strategies
Crypto day trading is comprised of several aspects, one of which is the different day trading strategies. Knowing about these strategies will not only give you a better understanding of the day trading concept but will also help you map out your trading plan more efficiently.
Here are the three main types of day trading strategies mentioned in this brief crypto day trading guide.
High-frequency Trading (HFT)
This is an advanced trading strategy that is mostly opted for by traders who are dependent on quantitative data. It is a bit more complex than other trading strategies as it involves the creation and use of advanced bots that open and close trading positions based on the data.
Short timeframes like scalping are mostly targeted by the bots. The short timeframes can be as short as milliseconds.
Scalping
This strategy helps traders benefit from the price movements that occur in small timeframes. The small price movements occur due to small factors such as market asks and gap in liquidity, hence, making them predictable.
Range Trading
This is a rather straightforward crypto day trading strategy that relies on candlestick chart analysis. Traders who opt for this strategy depend on the resistance and support levels of a cryptocurrency’s price and open or close trading positions accordingly.
Conclusion!
Crypto enthusiasts who are interested in trading crypto assets need to know about other relevant factors such as crypto day trading. The details mentioned above can help traders learn more about this trading strategy.
