A Guide to Day Trading Cryptocurrency
Day trading is a strategy used within cryptocurrency, and other financial markets such as forex, stocks etc. The question here is, is crypto day trading an option for you, and should it be something you consider incorporating within your everyday lifestyle? Of course, there is no definite answer, until you actually learn the basics and know what you need to know. So, for that reason, we have compiled some information that should be the answers you need to consider, before you start trading cryptocurrency. Stay tuned, and have your notebook at the ready guys.
What is day trading anyway?
So, day trading is a strategy implied when you enter and exit positions within the same trading day. The trading will always be executed within the same day, meaning really the initiative should be called intraday trading. However, we are humans who like to abbreviate and shorten things, don’t we? For that reason, you may refer to it either way, traders will know both and there is no sweat here on which term you use.
The ultimate goal of day trading is to profit from price changes within any given financial institution. Day trader originally comes from the stock market, as trading will never be carried through overnight, and only carries itself across business days in a week. The aim is to capitalise on day price movements.
How do you make money day trading?
The way you make money, will depend on the degree of how you understand the market, alongside the experience you have to date. There is no secret that you will improve and have a knack for trading and noticing trends, as time goes on. However, usually you will become more competent at using technical analysis for trading potential. In addition to this you will find all the procedures to follow, such as volume, chart patterns, price action and the general technical indicators will become more natural to you, the more you repeat them and become more prone to their uses. Remember though, all the best traders will make money because they have analysed and performed a risk management for a success in day trading.
Day traders will often not concern themselves too greatly when it comes to a fundamental analysis, due to it taking a while to actually play out. However, as a beginner you should definitely get into the habit of it, at least at the beginning anyway. Most traders will often take advantage of the news, as that always can indicate any mulling spikes in assets, which you could possibly take advantage of. The media and trading news is something you need to dip in and out of constantly.
You will make profit from the volatility, when it comes to the volume and liquidity. These are crucial when it comes to day trading. Day traders will need to ensure they have good liquidity for quick trading execution. You will find that large slips in any trade will be super bad for the digits in your trading account, for that reason most proficient traders will make use of high liquid pairs on the market. You can create a watch list, so you can perform technical analysis as you bide your time.
What are the strategies that you should know?
There are many strategies that you could try out for yourself. Yahoo managed to list a complete guide of what and how, however we have compiled the ones that we believe to be the most imperative on your journey forward. Make sure to take notes of these, as they are crucial for your development in day trading overall!
This method is very common amongst traders and a great one to integrate if you are a beginner wanting to advance your game to all of this. You will find that you will need to take advantage of price movements that happen to be operating very small. This will occur over short time frames, so you will need to grasp liquidity, bid-ask spreads, amongst other factors.
With this strategy, you will often trade on margins, or use contracts projected for the future to increase results and leverage. You will find that the price target percentages may be smaller, therefore larger positions will be more appropriate and make sense more. This is true for almost every strategy out there by the way.
Again, a proficient scalper will always assess their leverage and perform risk management. This principle will be consistent throughout each and every strategy. You will never throw this away, and for this strategy, being aware of the margins which are required for positioning and sizing is key too. The order book analysis, heat maps etc. are other great strategies to combine with scalping. It will allow you to define the entry and exit points more definitively.
This strategy involves the candlestick analysis, which focuses on resistance levels. Traders will look at the price range and the structure of the existing market at present. All trade ideas will be created based on the ranges projected, meaning if the price ranges from a support or resistance, you will see a range trader buy support but sell the resistance.
This idea of trading is to base your trades on assumptions of the range and edges will be passed as support and a resistance, until some broken range is formed. Ultimately, the lower the edge, the range will maximise up and the edge of range will then be able to push that price down a bit, to steer a profit. Usually though, when there is a price touch for support or a resistance, you will see a break in level. Therefore, traders will always make preparations to ensure that the market can ultimately break out of that range. Usually, this will set a stop-loss here the range and breakout can be affirmed.
High-frequency trading: HTF
HTF is a trading which integrates algorithms, usually defined by quantitative traders, as their go-to. It involves the trader developing some algorithms that trading bots will be able to enter and exist as quickly as possible, within little to no time at all. The time frame is estimated in milliseconds and thus, positions can be really taken advantage of. It has proven to create high frequency trading, and a lead over other establishments.
This strategy is without a doubt, pretty complex. It may be tempting, but it needs much more thought and experience to be input. You will find that high frequency trading can be testing and you will need to keep changing the algorithms to the ever-changing markets and the volatile conditions that are highlighted. The bots do not do all the work, that really is very far from the truth.
How do you get started?
After reading the strategies, you are probably wondering how to actually get started. Well, you could always try paper trading, which ultimately will allow you to mimic everything you would do during real money trading, but this time you have no risk as it does not involve any investments from your side. Testing a trading system without the loss of any money is always the way to go forward in our opinion.
We would also suggest that you do your research on the trading platforms that will allow you to day trade in cryptocurrency. Not all will be great for beginners, meaning it is important to select those that are great for a first-time user experience. Simplicity, no matter the experience, is always the best way forward.
Can trading be done for a living?
It can be super demanding to actually sustainably make a profit, meaning it can be quite stressful. You need to dedicate super quick time though and call to action on making trades. The finance market knowledge is also a must, meaning you will need to invest quite a lot every single day to make successful trades. The weight that must be carried, alongside responsibility is testing, we will give you that.
What we suggest is, you gradually build upon your competency, and carefully consider if you can see this being your full-time thing. Day trading is a habit, attitude and luck. It is not all daisies and roses all the time, so you will need to really evaluate if you can live with that pressure, and your only source of income overall. It will be massively testing, and there will be times where you wish you never started, so you will need to keep bringing yourself to the reason why you started! Multiple pep talks at a time, and see where you go. Many traders enjoy the process and never take anything to heart, or too seriously. But of course, it will also be important that you only trade what you are willing to lose too.
So, develop your strategies, invest in paper trading as a way forward to test your strategies, and try to profit from market volatility, when you start to go full throttle with real money trading. It will be a work in process, but slowly and surely with the right frame of mind, you can hopefully succeed in making some successful trades!