Initially, the term “day trading” was derived from the stock market wherein trading usually operates during weekdays and business hours only. One of the remarkable differences between the two is that, unlike the stock market, cryptocurrency and the stock market, the cryptocurrency market never closes and is always open 24 hours a day, seven days a week.
In the previous years, only financial institutions, trading houses, and brokerages were the only ones who were given the opportunity to actively trade in the stock market. However, recently, several trading platforms became so popular, which made trading accessible to retail investors who wanted to try their luck in the industry. Along came cryptocurrency, which has suddenly gained popularity worldwide, and crypto platforms are so efficient that it allows everyone, even those private individuals, to freely trade publicly.
What is day trading?
Day trading is also known as a short-term style of crypto trading which involves trades that are bought and sold during the same day of trading. Sometimes, it is often referred to as “intraday trading”. Day traders benefit from this trading technique, and they are able to gain profits and returns through the price movements of a certain asset or financial instrument.
Must-knows about cryptocurrency day trading
In order for the trade to be profitable, there are two conditions that must be present in the market.
Liquidity. Day traders must be able to freely enter and exit trades as quickly as possible without moving the prices too much. A market with low liquidity could eat into the profit of a trader, especially when a large position cannot be liquidated at the desired price of the trader. In the event of slippage, there might be a possibility that the position will be sold in increments with lower prices as compared to its previous ones, which may lead to smaller profits.
Volatility. Sometimes, volatility is not bad at all. Most traders, especially the experienced ones, take advantage of it. Lack of volatility simply means that there are no price movements that may hinder your opportunity to buy low and sell high. Day traders take advantage of the price volatility of prices as they tend to buy and sell during the same day. Volatility adds to the viability of the day trading strategy. Bitcoin Revolution provides easy access to updated crypto prices in the market and guides traders in overcoming the digital currencies’ volatile nature.
Crypto Trading Strategies/Techniques
In essence, an investor can simply hold bitcoin or cryptocurrencies in the long run and gain profit from it. So in terms of crypto investing, one of the strategies is simply through buying and holding crypto. This can be beneficial and applicable, particularly during the crypto bull market. However, investors must bear in mind that cryptocurrency will always be considered a highly speculative investment. The sudden rise or increase of investment does not guarantee consistency or stability. No one is certain if it will continue to do so in the future.
There are numerous strategies to consider, especially when an investor wants to try day trading. One of the most popular strategies is the so-called technic analysis. This school of thought is one of the commonly-used strategies by the majority of day traders.
In technical analysis, chart patterns and mathematical equations are used in order to predict the movement of prices in the future. There are computer programs and applications available that generate analysis. One of the examples of these programs is the Trading View, while the other way is through simply looking at charts and analyzing them.
Relative Strength Indicator or RSI is one of the popular technical indicators. By appearance, it is simply illustrated as a chart with a single line with a value from 0 to 100. When the RSI is close to 100, the closer it gets, the greater the possibility that prices would fall. RSI close to 0 signifies an oversold condition and a greater probability of price increase.
News and Sentiment Analysis. Unlike the TA or Technical Analysis, this strategy is less popular today for traders or short-term investors. This is usually done through reading and looking at the headlines as well as market sentiments and can be used in Bitcoin trading. There are instances where big news can quickly move the prices of the cryptocurrency market. For instance, the news that Turkey has banned cryptocurrency as a form of payment within its borders in mid-April 2021 sparked a global crypto sell-off which caused Bitcoin to fall out at about 3.2% and later more than 10%.
In addition, some websites offer analysis of the sentiments of the crypto market movement by tracking popular social media platforms such as Twitter. Numerous positive tweets will likely result in bullish sentiment, while bearish sentiment might be caused by negative tweets.
Range Trading. Range trading refers to the assumption that prices will move at a certain range. When traders use this strategy, they often look at candlestick charts, resistance levels and support.
When prices reach a support level, traders might buy then sell when the resistance level is reached.
One of the examples of range trading is pivot points, whereas traders are given ideas about the price levels by calculating pivot points.
Scalping. This strategy has something to do with taking advantage of the small price movements over short periods. Scalpers often take advantage of every tiny price movement. This amplifies potential gains as well as potential losses, which is why risk management is essential in this type of strategy.
Scalpers might use several technical indicators such as volume hit maps or order book analysis which help determine entry or exit positions. Online applications such as Bitcoin Revolution may help day traders and scalpers manage their accounts.
Scalping is risky in nature and is suited for expert or experienced traders.
The bottom line
There are several day trading techniques that you may choose from. Before you decide to pick one, you must first look at the features of the available options and find out which ones best suit your needs. Although this article may give you ideas about the trading styles, do not forget that the crypto industry itself is risky. Due to volatility, it is a must to do research before you decide to invest. Do not invest more than you can afford to lose.