Day trading involves buying and selling an asset within one day or even several times during the day. Using small price movements can be a profitable game if played correctly. In this article, we will analyze what day trading is, what are the main strategies, how to start day trading and whether it is possible to earn a living by it.
How do day traders make money?
In fact, the success of day trading largely depends on the experience and knowledge of the trader. In day trading, it is necessary to have a deep understanding of technical analysis and risk management. To apply the basic strategies of day trading, traders rely on such concepts as: volume, support and resistance levels, price movement, graphical patterns, liquidity, and technical indicators.
Since day trading is a short-term trading strategy, the volume and liquidity of the selected pair are crucial indicators for traders. For this reason, experienced traders often focus on BTC/USDT. The volatility in this case, although not incredibly high, however, allows you to earn steadily, quickly, and efficiently.
Day trading strategies
There are different approaches to organizing day trading. An important detail that no truly effective intraday trading can do without is a strategy. Let’s consider the most popular schemes of work:
Scalping is an intraday trading strategy based on a speculative principle. Its essence lies in the fact that the trader completes a large number of transactions with minimal profitability, but due to the intensity, the trader receives a high total profit. It involves selling almost immediately after the transaction becomes profitable. Usually the scalp trade closes within a minute, sometimes 3, but a maximum of 15 minutes.
Experienced scalpers often trade with leverage in order to increase profits. However, such trading in the hands of an inexperienced trader can increase not only profits, but also losses.
Scalpers often analyze the imbalance between supply and demand, which can lead to a directional price movement. In addition to analyzing the order book, various technical indicators are also often used.
Range trading with proper preparation is perhaps one of the most profitable and simple intraday strategies. To begin with, a trader needs to be able to analyze a candlestick chart, as well as correctly determine support and resistance levels. The logic is extremely simple: when the price of an asset reaches the support level, traders actively buy the asset, which leads to an increase in the price. Conversely, when the price of an asset reaches the resistance level, traders actively sell their stocks.
The main risks are that sooner or later the price breaks through the range, which leads to losses for traders. It is to prevent losses of this kind that stop losses are used.
HFT (High Frequency Trading)
High-frequency trading is a kind of scalping at maximum speeds. The principle is to determine the minimum price fluctuations and conclude a large number of transactions in a matter of seconds. Such a speed is simply beyond the control of a human, but it is subject to bots. In simple words, you buy the services of HFT bots that are programmed in a certain way and act according to a certain algorithm. To date, there are various platforms that provide HFT bot services, but before you turn to their services, weigh all the pros and cons.
Yes, a well-programmed bot can bring you a stable profit without your full participation. But programming and storing bots costs a lot of money. In addition, the price of a crypto asset is constantly fluctuating and it may happen that the bot simply will not be able to predict something. Among other things, the platforms of this kind charge fees for the use of bots, regardless of the outcome of the transaction.
How to start day trading crypto
Even inexperienced or novice traders can learn day trading in the shortest possible time, and you will not need a lot of capital to start day trading. Focus on getting comfortable with the different types of trading instruments and assets available. Then find or develop your trading strategy.
Firstly, day traders have to learn technical analysis. You need to have a clear idea of what information the chart carries, what support and resistance levels are, what graphical patterns exist, how and what technical indicators can be used, how to place stop loss orders, and many other tools.
It is also worth paying attention to the risk management strategy. We highly recommend that you keep a trading journal in order to be able to analyze winning and losing trades. Also, for novice traders, we highly recommend using stop loss orders.
Choose a suitable platform for day trading. You need to pay attention not only to the interface, reliability, and security of the exchange, but also to the amount of fees. Day trading entails the payment of multiple service fees, for this reason, it is crucial to calculate your profit by taking into account fees.
Why should I start day trading crypto?
Day trading is exactly the strategy that allows you to earn on a daily basis. Many experienced traders make day trading the main way to earn money. And it is not surprising, because with proper preparation it is extremely profitable.
The key point for beginners who want to try their hand at day trading is the desire to learn and analyze information. Understand the basics of technical analysis, use stop-loss orders, choose liquid and reliable assets, as well as carefully think over your trading strategy and profit is guaranteed to you. It is also important to limit the deposit amount in order to fill your hand and minimize losses.
Day trading is a profitable and popular strategy, the profitability of which, however, requires sufficient practice and consistent evaluation of results. Before proceeding, you need to study the basic concepts of technical analysis, choose a trading strategy, as well as a suitable platform.