In the trade of cryptocurrencies, the market was not designed to favor the hard trader but the smart ones. Now, the thin line between a hard and smart trader is simply strategy. As a trader, how strategic have you been as a beginner? Do you wish to understand the backdrop to great trading moves and decisions? Let’s dive in.
What is Day Trading in Crypto?
Day trading in crypto is a strategy that involves entering and exiting a position in the market within the same reading day. It is also called “intraday trading,” reflecting the fact that trades tend to get opened and closed within a single day. It is a type of trading technique in which you buy cryptocurrencies and sell them within 24 hours just like the traditional stock market where traders only buy and sell stocks during certain hours of the day.
A lot of seemingly complicated terms? Well, to help you understand day trading in Crypto better, say hi to Deola.
Deola is a student who wants to make some cash. Well, with the lingering ASUU strike, almost every student has been forced to develop a business mind. Eventually, she comes up with a bright idea — buying snacks and reselling them at a slightly higher price.
But, here’s the catch — Deola sells all the snacks she buys within 24 hours. Absolutely nothing crosses over to the next day. As such, she makes profits on some days and loses on other days.
Seems simple, right? Well, crypto day trading works exactly the same way!
In this regard, day traders make their profit like everyone else — through the difference in their buying and selling prices.
Volatility which is the speed at which a coin’s price changes, liquidity which describes how easy it is to buy or sell a coin without affecting its price and risk management which is essential in protecting you and your money from huge losses while day trading is all relevant areas to be paid strict attention to in the field of crypto trading. Most importantly, you can create a risk management plan by asking yourself these 5 questions:
- What is my trading goal for the day?
- What risks can stop me from reaching my trading goals?
- How will I recognize the risks?
- How can I prevent the risks from affecting me?
- How do I measure the success of my risk management plan?
Daily trading strategies to take note of:
This is a quick strategy of day trading which usually happens between 5 to 20 minutes. Scalpers make short trades several times in a single day. They focus on making small profits and combining them.
The Liquidity of the market is very important to scalpers because they must be able to move their coins quickly and prevent slippage. Slippage is when the cryptocurrency sells at a lower price than the seller requested. The drawback of scalping is that it requires advanced knowledge of crypto markets and how they work. You can consider this form of trading if you want to make multiple trades over a period of time.
B. Range Trading
In range trading, you have two prices — the highest possible price and a lowest possible price. You’re trading between both prices, and you’re watching the coin to ensure it doesn’t exceed these two points.
The highest possible price a coin can sell for is known as the resistance range.
The lowest possible price a coin can drop to is known as the support range.
Imagine you want to buy a coin. You’ve done your analysis and you’ve discovered it fluctuates between $50 (the resistance range) and $35 (the support range).
So, you can set up price alerts on your choice of Exchange and buy the coin when it drops below $35 and sell it when it increases to $50. It’s that simple.
Range traders can make a loss if the resistance range drops. The best way to beat this is by choosing coins with high volatility and liquidity.
C. Technical Analysis-Based Trading
This involves the process of using a coin’s history to determine what could happen to it in the future. Traders use several technical indicators charting tools to perform technical analysis. Some of these indicators include:
Exponential Moving Average (EMA): This is used to track the price of a coin over a set period. It focuses on the coin’s recent price range.
Moving Average Convergence Divergence (MACD): This is used by traders to determine when to sell or buy a coin based on its momentum in the market.
Others can include Bollinger Bands, On Balance Volume (OBV), Average Directional Index, etc.
D. Sentiment-Based Trading
Unlike technical analysis that focuses on the price history of a coin, news and sentiment analysis involves analyzing what other people think about a coin. This analysis is performed by tracking social media sites, news articles, crypto communities, etc. The point is to find out what people are saying about the coin.
E. Bot Trading
A bot is an automated tool that helps you to trade the market. All you have to do is to put the conditions for the trade, and the bot will execute it on your behalf.
How to Get Started with Day Trading Cryptocurrency
Now that you know some of the strategies used by day traders, it’s time to begin your journey!
Here are 3 things you need to do before you start day trading in crypto:
1. Research properly as proper research aids informed trading decisions
2. Make a plan to avoid the downsides of day trading such as overtrading, an event that occurs when a trader buys or sells more coins than they can afford. This leads to them losing a huge chunk of their profit and capital.
3. Choose a reliable and fast exchange keeping in mind factors such as the type of coins they list and the level of security architecture.
4. Bad timing
5. Fear of missing out
The continuous practice seems to be the easier route to finding a strategy that best works for you. As a beginner, the Afridex Exchange can support and monitor your growth process during this period of surfing newer crypto trading strategies. We’d love to be part of your growth as you sign up here
With a simpler user interface, capacity to list all BEP-20 and ERC-20 tokens, signing up on our exchange, and being a part of our organically grown telegram community, affords you close-ranged monitoring that’ll positively affect your crypto journey.