A Beginner's Guide to Day Trading Cryptocurrency

  • Crypto day trading is a popular strategy among investors
  • It envisages opening and closing positions within the same day
  • There are several day trading strategies available in the crypto market
  • Understanding the pros and cons of day trading are very important

What Does Day Trading Crypto Mean?

Crypto day trading explained: When day trading, you are opening and closing positions within 24 hours how crypto day trading worksAmong many crypto trading strategies, one that is used very frequently is day trading. The main idea behind day trading cryptocurrency is to buy and sell crypto during the same day. This strategy is a short-term trading strategy and is used by traders who want quick returns in the market. The general idea behind day trading is that you are opening and closing your trades during the same trading day. However, as you might already know, there is no “trading day” in the crypto market, as it can be traded at any time. Because of this, crypto day trading refers to the activities that are done within 24 hours. In terms of its technical side, it is pretty much comparable to day trading any other assets. In the financial markets, day trading is among the most used trading strategies. These types of traders are active in many different financial markets, including cryptocurrencies, Forex, stocks, and many others. Although very popular, the question remains - Is it a good idea to day trade cryptocurrencies? And if so, how much profits will you be making? Having one single answer to this question is impossible. There are many sides that crypto day trading has, and as much as it can be rewarding, it can also be quite risky. There are many things that you have to keep in mind when day trading crypto, which can be quite overwhelming for beginners. That said, it is not impossible to become a successful day trader. In this guide to crypto trading, we are going to discover all the sides that traders should know. So, follow our comprehensive guide to cryptocurrency day trading as we discuss all the advantages and disadvantages of this activity.

Crypto Day Trading - Why Is It A Good Idea?

To better understand if day trading is a good fit for you, it is very important to understand both, negative and positive sides of crypto trading with a day trading strategy. There are numerous advantages as well as disadvantages that this strategy has. The biggest advantages of crypto day trading are the massive volatility that it comes with and near unlimited variety. Another huge advantage of this strategy is that you see your profits right away, without having to wait for weeks, or even months and years to see your rewards. Below, we will discuss the two of the biggest advantages of trading cryptocurrencies using a day trading strategy, which can make it a great fit for traders of all backgrounds.

Massive Volatility

how to day trade cryptocurrencyWhen it comes to day trading cryptocurrency strategy, one of the most important things that traders have to know is the high volatility of the crypto trading market. Because the prices are moving so fast in the market, it creates a lot of opportunities to earn high turnovers in even just a day. This happens because the price of cryptocurrencies can increase drastically in just a day. Single news can send the price of crypto very high, which makes it a perfect match for day trading strategy. Price changes in the market can be utilized by traders to make fortunes during the day. For example, the price of a cryptocurrency can increase above 5-10 percent a day if there is important news or positive development in the market. Volatility is one of the most attractive factors of cryptocurrencies. Because of high volatility, the opportunities for traders are increasing a lot. When you are day trading cryptocurrencies, you are opening a position during the day, and closing it within the next 24 hours. Because of high volatility, if your position is successful, you can make a fortune. But the risks should not be disregarded either, as much as cryptocurrency prices can increase during the day, they can also fall, but more about that later.

Almost Unlimited Variety

Among the biggest advantages of day trading cryptocurrency is the almost unlimited variety that this market comes with. While it is true that the majority of the cryptocurrencies in the market are growing and shrinking alongside Bitcoin, many others have their performance in the trading market. The so-called altcoins in the market, which were created after Bitcoin, have developed and transformed a lot in recent years. The best thing about them is that many of them have managed to gather their following, which can be quite an important factor for traders. While there are some that are resembling the performance of Bitcoin, there also are many others that have their own performance in the market. Because of this, it can be quite helpful to use different types of cryptocurrencies when you are trading. The main idea of such diversification is that you can always find a cryptocurrency that is performing well. So, if the cryptocurrency that you have been trading is down, you can always find another one that has positive momentum and you can trade. Diversification is a very important factor in becoming a successful trader not only in the cryptocurrency trading market but in other financial markets as well. Different types of news releases and ongoing events around the world have different impacts on different assets. While one asset might impact positively by some release, another one can be sent higher.

Crypto Day Trading - Why Is It A Bad Idea?

crypto day trading strategiesWe have already discussed the most important positive sides of trading cryptocurrencies, but there are some disadvantages that traders should also be aware of. Much like anything else in the financial world, day trading cryptocurrencies also comes with some cons. By keeping these disadvantages in mind, you can better plan your trading and make sure that you are doing the right thing. As much as it can be rewarding to day trade cryptos, it still is quite a risky market. The biggest disadvantage of crypto trading is that while the prices can change drastically and positively, they can also change negatively.

Massive Volatility

As we have already mentioned above, volatility can be used by traders for their own advantage. But you should also keep in mind that high volatility can be quite dangerous as it increases the risks of trading. It is true that the price of cryptocurrencies can increase several times during the day, but they can also fall drastically. These changes are not miner, they can happen suddenly and it can negatively impact your trading positions. One thing you can do to avoid such risks is to make sure that you always stay alert and informed about the things that are happening in the market. If you see that there is a negative trend, it might be better to avoid trading and wait for the momentum to end. Massive volatility can be both advantage and disadvantage of the crypto trading market. While you can get as much as 100 percent return in just an hour, you can also see your profits melt away in less than a minute if the market is being manipulated or if it is extremely unstable. However, it is very important to always make sure that you know exactly what you are