Cryptocurrency is a digital asset base and just like investing in it, trading cryptocurrency has also become extremely popular over the past few years. Now you must be wondering what differences are there between investing and trading cryptocurrency.
These terms are often used interchangeably in the cryptocurrency space. However, there are fundamental differences that you need to know about. If you know how to invest in cryptocurrency already, then trading it will be easier for you.
For instance, cryptocurrency investors think about the long term while using their money in cryptocurrency. On the other hand, day traders in the cryptocurrency market think of the short term. They gain from the market fluctuations and for that, they keep a close eye on the market.
There are various kinds of traders in the market such as day traders, momentum traders, and scalpers. In this blog, we are going to talk about day traders. Daytrading can provide you with a lot of returns. Day trading is one of the most commonly used strategies. They are very active in the financial markets and they make a lot of money in a short period. Day trading basically refers to entering exciting positions in the cryptocurrency market on the same trading day.
Day traders look out for making a profit off the fluctuations on a particular day of a cryptocurrency type. Generally, day traders have a deep insight into the market and they’ve been doing it for a considerable amount of time.
They use their technical analysis skill to create trade ideas.
They will analyze common strategies, use chart patterns and technical indicators to figure out entry and exit points for trades. Moreover, they have a deep understanding of risk management, which is essential for success in cryptocurrency day trading.
You must be wondering how day traders make their money out of the market volatility. Some of the factors playing an important role are volume, liquidity, etc.
Common trading strategies:
Scalping: This is a common trading strategy among day traders. Here you take full advantage of small price moves that play a huge role.
Scalpers often trade on margins or else, the great future contracts to boost their results with leverage. Since the percentage is generally lower, larger position sizes seem more profitable to scalpers.
Range trading is yet another strategy that heavily involves support and resistance levels, Candlestick chart analysis, etc.
On the other hand, high-frequency trading is a type of algorithm trading strategy for traders.
It includes algorithms and trading bots, which can quickly make their way into and market and even exit many positions in a short span of time. One of the first things that you need to know in this case is that high-frequency trading is an exclusive industry and getting your hands on high-quality data is quite difficult.
How to start with day trading cryptocurrency?
You must know the fundamentals of day trading before you jump into space. There are thousands of online trading platforms where you can trade cryptocurrencies. Binance is one of the ecosystems that offer you various services, such as market data in real-time, margin trading features, leveraged tokens, etcetera.
Day trading involves fast decision-making and quick execution skills so we would recommend you to start slow. It is risky so we don’t generally ask people to make their living out of day trading. You need a solid understanding of the market that can only develop with time.
The more time and effort you put in, the better you get at day trading. This will not happen overnight.
Day trading is also commonly used in the stock market.
As a daytrader, you need to be a pro at technical indicators and technical analysis.
Things to know about crypto day trading
Liquidity: Traders have to enter or exit trades quickly without waiting or delaying too much.
Volatility: If there is a lack of volatility, there is no chance of buying at low prices and selling at high prices. If the prices aren’t moving, they won’t be of any benefit to traders.
Bitcoin mining plays a huge role in the market.
Read More: How to Learn Day Trading Cryptocurrency