Day Trading Cryptocurrency – Everything You Need to Know

There are hundreds of different types of traders in financial markets. Each trader has a different view point on the market and how to approach it. One of the famous groups of traders is called day traders. Yes, these traders are quite famous and have risen in popularity in recent years. How good or bad day trading is depends on a lot of factors. One thing is for sure; everything can benefit or hurt you in some way, and day trading is no exception. If you have been wondering what it is all about, you will know a lot when you have read this piece.

So, here are XTRGATE Day Trading Cryptocurrency – Crypto Trading Strategies 101 guide for you to start your trading career the way you want.

Understanding What Day Trading Really Means

So, in the past, you could not have thought about trading in any financial market, let alone cryptocurrency market. In the past, only the people who were associated with large financial institutions in some way had the opportunity of trading stocks, commodities, energies, etc. Ordinary people doing their regular jobs could not have imagined trading in financial markets. However, things changed drastically with the coming of the internet. The whole thing blasted and you had traders from all around the world looking for ways to trade assets and make money.

That’s when day trading came into being. The world saw a huge population of traders that was interested in making money from the market as quickly as possible. They would trade only to make profits within a given day. They would not hold on to stocks or any other assets for more than a day. The question is, could they have made profits using this strategy? Well, you will not be reading about them had they ceased to exist. While they have their challenges as they trade, you can’t deny the fact that some people have changed their lives through day-trading.

How Day Trading Works

So, what happens is that the prices of the assets are going up and down almost all the time – yes, all the time. When you look at the price charts, you might not see a lot of movement in a day. However, you will have to zoom into the chart to know the small price movements that have taken place all within a day. The price might have kept going up or down, or it might have gone up and down in different spurts. In short, the price is always moving and if you can benefit from these movements over the course of many weeks and months, you can benefit from them during the day as well.

Of course, you have to realize that these movements are very small. In some cases, if the asset is not liquid, the movements are nearly negligible, and hence your profits too. In day trading, you have to look at the movements in the value of an asset, make a judgment on the spot, and place your order to either buy or sell the asset. Yes, you can benefit from selling the asset as well. In that scenario, you hope for the prices to go down since you can then buy back the assets you sold at a smaller price. The difference in buying and selling price is your profit.

The Biggest Challenges of Day Trading Cryptocurrency

There are many challenges associated with day trading cryptocurrencies and any other asset in any other financial market. Let’s look at some of the most prominent challenges of day trading a digital coin.

·         Losses Can Be Colossal

You might not believe it at first but your losses can be huge when you day-trade cryptocurrencies. Of course, day trading involves profits and losses in very small quantities. However, you cannot completely ignore the high value of cryptocurrencies. You have cryptocurrencies like Bitcoin, Bitcoin SV, Bitcoin Cash, etc. that have huge values. Even the smallest movement in the value of these assets means you lose a lot of money. Not to mention, a small piece of news can cause the market to go down entirely during the day. You can say that the market has very little time to recover because you have to take all your decisions within a day.

Had you been trading long-term you can tolerate a bad day for an asset because you would hope that it will get offset with a great day. In day trading, on the other hand, there is no “other day” when the asset can recover its value. Even if it does, you have already lost your money.

·         Decisions Have to Be Extremely Quick

It is ironic that a lot of new traders want to benefit from day trading because they do not have the patience to wait for the fruition of their efforts. They just want to make money as soon as possible. However, the big irony lies in the fact that day trading requires them to know a lot about the market, which is not the case. How can you know about the market when you are entering it for the first time? How do you know that the small decline in the price will not be followed by a small rise in the price in the next few moments? Can you be brave enough to click on the “place order” button just because you saw a small tick in the price?

The quickness of the decision can cause new traders to sweat. In fact, that’s what happens to most of them. They are not able to think in time and by the time they take a decision, they are already too late.

·         Profitability Can Be Frustrating

You might find this particular point in conflict with the first one, but that’s not the case. Yes, when there is negative news and the market moves in a particular direction, you will lose the money you have invested in a trade. However, what you usually experience in day trading is extremely small profits. How much can the price of an asset move in a single day? You can’t expect it to go up or down by hundreds of times its original price. It happens quite rarely. Yes, the frequency of this rare event might be high in the cryptocurrency market, but you will still be profiting from small movements most of the time.

The small movements yield small profits. That’s why, profitability with this method of trading can be extremely frustrating.

How to Make Day Trading Work for You

There are many ways to make day trading work for you. Here are some strategies for you to stay safe while day trading and increase your chances of making profits on your trades.

·         Learn to Hedge

Hedging can be your best strategy while day trading. In this strategy, you invest your money in two different trades. Supposedly, you are going to invest your money in two cryptocurrencies that move oppositely to each other on the market. From the past results, you have to obtain a pattern that shows that when cryptocurrency A goes up, cryptocurrency B goes down or vice versa. In that case, even if you do not profit on one trade, you will offset that with the profit on the other trade.

·         Go with Stop Loss Strategy

Make sure that you deploy the stop loss strategy even when you are day trading. By using this strategy, you can put a limit on the loss that you can possibly incur on a trade. This allows you to stay safe and protect some money in your account for the next trade. If you suffer a loss indefinitely, you might not be able to do another trade.

·         Be in the Know

Use your smartphone to your advantage and join all the online forums you can to get the latest news about any cryptocurrency. This will allow you to stay on top of the game at all times. That’s exactly what you need as a day trader. You have to take your decisions within seconds, and you can only do that when you are getting news about your traded cryptocurrency in real-time. You can also rely on the market sentiment. For that, you will have to join online social networking platforms like Quora and Reddit and listen to the most avid traders in the market.

·         Use Leverage Intelligently

Leverage is your best weapon when you are trading cryptocurrencies. Leverage allows you to enter trades that are not possible otherwise within the budget that you have. Leverage increases your budget and allows you to trade even the most valuable cryptocurrencies on the market. However, leverages can go against you as well. Keep away from a broker that keeps pushing you to take advantage of large leverages.

Final Thoughts

Day trading is not for everyone. In fact, traditional traders still stay away from this method of trading. However, millions of people have earned their livelihood with this type of trading. If you think you can stay in the know of things all the time and have the power to make a decision on the spot, you should definitely try this method of trading.

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