To succeed in the risky world of crypto, you’ll need steel nerves, a successful game plan, plenty of research, and a bit of luck. Moreover, you’ll also have the necessary patience to go through every value drop and increase.
Selecting a reliable coin trade exchange platform isn’t going to be a problem because there are a few very good ones. But creating a good strategy is a bit more difficult.
Let’s go through some tips that will help you create a strong strategy to improve your day trading efforts immediately.
But first, what is day trading?
The concept of crypto day trading includes entering and exiting a position on the market on the same day. The purpose of day trading crypto is to profit from modest market fluctuations.
It is uncommon for a traditional stock or even a commodity to increase in value by 15% in a single day. However, in crypto, jumps as these occur frequently. Just look at the current state of Bitcoin and other popular currencies.
As with other forms of cryptocurrency trading, day trading involves more than sheer guesswork. You will need to create a proper crypto day trading strategy and have knowledge of fundamental and technical analysis.
The majority of day traders rely on technical analysis to generate profitable trade ideas. When making investment decisions, they analyze price movement, volume, chart patterns, and other indicators to discover entry and exit opportunities.
Strategy #1: HFT
A trading approach known as high-frequency trading (HFT) is designed to profit on price shifts that take place in a time frame of one second or less.
It is impossible for a trader to keep up with the hundreds of trades that take place every second on a regular basis; however, there is software that can.
A piece of software known as a trading bot is required in order to engage in high-frequency trading. The bot monitors the market and executes trades in line with the trading logic that is provided so long as it is connected to the exchange.
Utilizing specific trade logic allows high-frequency trading to be combined with a broad variety of different strategies, which can be utilized in concert with each other.
Strategy #2: Range trading
Cryptocurrency range trading is based on the notion that prices will only move within a set range over a particular length of time.
That range of movement suggests an abnormal price shift when it occurs outside of that range. It may be acceptable to sell if the price falls below the lower end of the range, on the assumption that this is the beginning of a significant downward movement.
Strategy #3: Scalping
Scalping is a day trading method in the cryptocurrency market that aims to take advantage of heightened market activity.
Trading positions can be closed out within minutes of opening them, allowing traders to pocket tiny profits. Trading bots are also used by some scalpers to automate their trading processes.
It is ideal for scalpers to aim for minor gains. They “scalp” the market in search of modest openings to profit from. When it comes to making a profit, scalpers need a large sum of money because the rewards from this method are rarely substantial.
Strategy #4: Arbitrage
Arbitrage is consistently ranked as one of the most successful trading strategies. It entails buying a coin on one exchange and then selling it on another in order to profit from the price difference between the two exchanges.
For example, the price of Bitcoin can be $45,000 on Binance, yet the asset trades for $45,500 on Coinbase. If you acquire two Bitcoin from Binance and immediately sell them to Coinbase, you have the potential to generate a profit of $1,000 after deducting the costs.
Arbitrage, much like scalping, typically results in very modest gains. So, the greater the quantity of your order, the more money you make from it.
Strategy #5: News and sentiment analysis
News and sentiment analysis is akin to technical analysis, but with one significant distinction. It anticipates human actions and reactions, as opposed to price changes.
Using news and sentiment analysis, you attempt to predict if demand for a given cryptocurrency will increase or decrease by studying multiple information sources.
Basically, you seek to comprehend the cultural consensus on the currency and forecast the conduct of individuals. Industry and mainstream news outlets, as well as social media posts, are the origins of this data.
Cryptocurrency day trading is a dangerous endeavor. Never invest more than you can comfortably avoid losing. You will be profitable, though, if you treat day trading as seriously as you would any other profession and study everything you can about the skill and assets you’re dealing with.