Learn Day Trading Crypto for Beginners
Day trading is one of the most widely used trading strategies. Day traders are active in almost all financial markets, such as stocks, forex , commodities , and also cryptocurrency markets. But is cryptocurrency day trading a good idea for you? And how do day traders make money? In short: is starting crypto day trading a smart plan?
Unfortunately, we don’t have a clear answer to those questions, but in this blog you will find out what you need to know before you start day trading crypto.
Wat is daytrading crypto?
Daytrading crypto is a trading strategy where positions are taken and sold on the same trading day. The goal of day traders is to try to profit from price changes of a financial instrument. This is also the case with crypto.
The term “day trader” comes from the stock market, where trading is only open during the weekdays. In principle, day traders never leave their positions open overnight, as they try to profit from intraday price movements.
Recently, crypto markets have become an increasingly popular destination for day traders. Unlike traditional markets, crypto markets never close. Day trading crypto does not require a brokerage or margin account, making short-term trading more accessible than stock markets.
While crypto is a new and exciting industry, it does come with risks for those looking to invest in it. And with thousands of new cryptocurrencies popping up on exchanges and trading platforms, anyone considering investing in a cryptocurrency must also consider the volatility and speculative nature of the market.
How do crypto day traders make money?
Successful day traders have a deep understanding of the market and a lot of experience. Day traders often use technical analysis (TA) to generate trading ideas. They usually use trading volume, chart patterns and technical indicators to identify entry and exit points for trades.
As with any trading strategy, risk management is essential to success in day trading. Since fundamental events can take a long time to occur, day traders do not engage in fundamental analysis (FA). However, some day traders base their strategy on “trading the news.” This involves finding assets with high volume due to a recent announcement or piece of news and taking advantage of the temporary spike in trading activity.
Day traders want to profit from market volatility. As such, trading volume and liquidity are crucial for day trading. After all, day traders need good liquidity to execute quick trades. This is especially true when it comes to selling a position.
Day trading crypto for beginners: step-by-step plan
A day trader needs to have a thorough knowledge of crypto, as well as general trading principles. If you have good risk management skills and nerves of steel, read how to start day trading crypto.
- The first step a day trader must take is to decide which platform to use.
- Choose which cryptocurrency you want to day trade.
- Choose a crypto trading strategy
Crypto Day Trading Strategies
Scalping
Scalping is a common trading strategy among day traders. It involves taking advantage of small price movements that occur over short periods of time. These can be liquidity gaps, bid-ask spreads, and other market inefficiencies.
Scalpers often trade on margin or trade futures contracts to leverage their results. Since the percentage price targets are usually smaller, it makes more sense to take larger positions. In fact, this is generally true for most day trading strategies.
However, trading with leverage does not mean that risk management principles go to waste. A successful scalper will be aware of margin requirements and apply the correct rules for position sizing.
Due to the fast trade execution and high risk, scalping is generally more suited for skilled traders. Furthermore, due to the high use of leverage, a few bad trades can quickly blow up a trading account.
Range trading
Range trading is a simple strategy that makes extensive use of candlestick chart analysis and looking at support and resistance levels. As the name suggests, range traders look for price ranges within the market structure and create trading ideas based on these ranges. For example, if the price is fluctuating between a support and resistance level, a range trader can buy the support level and sell the resistance level. Conversely, he can short the resistance level and exit at the support level.
The idea of range trading is based on the assumption that the edges of the range will act as support and resistance until the range is broken. This means that the lower edge of the range is likely to push the price up, while the upper edge of the range is likely to push the price down.
However, the more times the price hits a support or resistance level, the more likely it is that the level will break. This is why range traders will always prepare for the chance that the market can break out of the range. Typically, this means setting a stop-loss at a level where the breakout of the range is confirmed.
Range trading is a relatively simple strategy that can be suitable for beginners. It requires a good understanding of candlestick charts, support and resistance levels, and can make use of momentum indicators such as the RSI or MACD.
High Frequency Trading (HFT)
HFT is a type of algorithmic day trading cryptocurrency strategy used by quantitative traders who develop algorithms and use trading bots to quickly enter and exit a crypto asset in a short period of time.
High-frequency traders use computers programmed to host sophisticated algorithms to profit from price changes that occur in seconds or even milliseconds. The systems constantly monitor and analyze cryptocurrencies across multiple exchanges, identifying trends and other trading triggers.
This strategy is suitable for advanced traders as developing such bots requires a strong knowledge of computer science and mathematics, as well as an understanding of complex market concepts.
Should I start day trading?
Day trading crypto can be a very profitable strategy, but there are a few things you should consider before you start. Since day trading requires quick decision-making and fast execution, it can be very stressful and demanding. Day trading can also be quite risky and requires a solid knowledge of the market.
Are you able to carry all this weight on your shoulders? Consider carefully whether day trading suits your individual investment goals and personality style.
If you want to day trade, you first need to choose a broker where you can do this. Through our comparison tool you can compare crypto brokers completely free, fast and independently!