Is Day Trading Cryptocurrency Profitable?
Day trading is a system that’s been tested and proven to return investments among traders. Traditional financial markets like stock markets and foreign exchanges are guaranteed procedures, but the same goes for the emerging cryptocurrency market. Cryptocurrency is a newcomer in the investment scene and exists in a digital platform. But, is day trading cryptocurrency profitable?
Buying and selling your assets using cryptocurrency yields better profit than the traditional ones. That’s because it is a decentralized process with high volatility. Experts and full-time traders can always take advantage of these situations and get huge returns. In this article, you will learn everything essential about day trading step by step.
Before anything, you should first know what day trading is. It is the process of buying or selling your digital assets within a trading day. The magic happens through a financial instrument and efficient data analysis. Now, it’s time to know how you make money!
Making money out of day trading
To be successful in day trading, you need to have in-depth knowledge about the market and a progressive track record of experiences. No worries, even beginners can handle this with slow but steady measures. There are two types of analysis a typical day trader would use to come up with strategies: technical analysis and fundamental analysis.
The technical type of analysis entails the methodological aspects of day trading. It includes monitoring the trade volume, price trends, historical and recent charts, and other necessary indicators that suggest your most appropriate strategy. Above all, you should be ready to manage the risks of your investments to ensure that if you lose some assets, it won't hurt your portfolio.
Keeping a close eye on the news and significant events in the cryptocurrency trading market are some fundamental analysis examples. As you may already know, media has a considerable influence on whatever public information they release. So, if it releases a list of top crypto coins based on market capitalization, it’s easy to find your next target when the price is spiking.
Another set of factors that are crucial for your profit potential include a target crypto value’s liquidity and trade volume. Because the cryptocurrency market is highly volatile, a crypto coin should be liquid to ensure you are executing a quick and guaranteed trade. A healthy and competitive trade volume tells you that it is a considerable choice.
Efficient strategies for you
There are three known ways to make day trading cryptocurrency profitable for you. Check the following and find out which one works best for your strategic plans:
- Scalping – This strategy works best for skilled traders because it uses extensive experience as a basis for day trading. In scalping, you have to take advantage of a small crypto price movement within the timeframes of the day. You can either trade on a margin or use future contracts to achieve more profit. Most price targets are small, so you should always prefer a long position when day trading.
- Range trading – It is a type of day trading strategy that focuses on the candlestick chart that consists of support and resistance trends. You can rationally forecast what to do based on the range of price movements at a given timeframe. The range's edges determine the support and resistance, and it's expected to hold until broken. The lower edge pushes a crypto coin price up, and the other scenario pushes it down. When a price reaches the edge of either level, it is best to set a stop-loss move to mitigate the risk. This strategy is a friendly process for beginners.
- High-frequency trading – This strategy is a more quantitative approach to day trading because it uses algorithms. With the help of a bot, you can buy and sell from your crypto trading account within seconds. Although it sounds ideal and convenient, there are complications to undergo and technical expertise needed to make it work for you. You would find this useful if you are experienced in advanced cryptocurrency markets and have a fondness for math and computer technology.
When you decide to get into day trading cryptocurrency and make it a profitable venture, you may now create an exchange account. There are too many online trading platforms you may choose from, but ensure to get the best choice. Some factors to consider are the following: market capitalization, security features, user-friendliness, and availability based on your location. The verification may take a while, but this ensures that your transactions are well-protected.
Some popular options for cryptocurrency trading are Binance, Bittrex, and eToro. Once you made a choice, start funding your account and manage your trades. With the knowledge and skills you learned earlier from this article, you can begin taking baby steps and gauge the market. Through time, you will capture more experience and strategies that will elevate your informed decisions. You cannot rush success, so your profit grows with you.
You can make a living out of this industry, but you have to be ready for its rapidly changing characteristic. It will undoubtedly require you to allot more time and effort because the demand for quick decisions and executions are inevitable. It would help if you also conditioned your mind that it's not always a good day in trading. At some point, you have to accept some calculated losses. Discover more about day trading cryptocurrencies here!
Now that you are aware that day trading cryptocurrency is a profitable venture, you can educate yourself further through online courses and independent research. Study the strategies better and explore the cryptocurrency market. Maximize the available tools and consult a professional trader if necessary. After all, personal encounters offer a different kind of interactivity.
Lastly, do not be afraid to make mistakes along the way. What’s important is you learn and do better on the next strategy!
UPDATED April 5, 2021
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