Whether you have been all-in on crypto since the beginning, or have just recently started hearing about digital currencies, you may be interested in trading them but not really know where to begin.
The ideal situation would be to find a mentor to walk you through the process, and then jump right into trading and learning as you go. But for those of us who don’t have the luxury of having someone who is already knowledgeable about trading, this article will show us the ropes from start to finish.
Here are some helpful tips for those interested in starting their own crypto trading journey.
What is Day Trading in Crypto
Day trading is an unofficial term for holding an asset for a very short period and then selling it immediately for a profit. It’s important to know that day trading can be risky, but if conducted properly, it can also be extremely lucrative.
Day trading is a set of techniques used to make money on short-term price movements of a given asset. Traders who use these techniques are called "day traders".
In day trading, since the time frame is very small, the trader has to have quick reflexes. The exchange rate can change in only a small amount of time. Day traders try to profit from this by buying at one price and selling at a higher price.
How Does Day Trading Work?
Here’s how day trading works:
Day traders typically make trades throughout a single day to profit from small price changes on cryptocurrency exchanges. Day traders will buy an asset or a stablecoin at one price and then sell it or trade within minutes or hours.
These quick transactions allow them to make multiple trades per day, rather than buying and holding onto assets for extended periods. Since cryptocurrency prices are usually highly volatile, it’s easy to profit by buying low and selling high several times in a single day.
Day trading has become more popular over time due to the growth of crypto exchanges, which allow people to buy and sell cryptocurrencies quickly and efficiently.
Types of Crypto Day Trading Strategies
There are two main types of day trading strategies, based on the time frame you're looking at.
Scalping
Scalping is a strategy in which you buy and sell assets such as BTC, ETH, XLM, XRP, BRISE, or pairs such as BTC/USDT as well as other digital assets within minutes, or even seconds. You can execute many trades in this amount of time, and profit from the small price fluctuations that occur within that period.
Trading fees on the most popular exchanges can range from 0.1% to 0.25%, so scalpers can make a lot more money by devoting their attention to faster trades instead of waiting around for hours or days before executing another trade.
Swing Trading
Unlike scalping, swing trading is not concerned with having many trades in a short amount of time—instead, it's focused on holding positions for longer periods, usually ranging from hours to a few days.
Sometimes the end goal with this type of trading is simply to capture gains in an asset that's rapidly moving up or down (although it isn't always profitable). It can also be used as a way to enter very large orders into the cryptocurrency markets without causing drastic price swings or affecting the overall trend of the market.
Position Trading
This strategy is so simple that most people overlook it. A position trader uses the same currency pair over a long period (days, weeks, or months). Position traders open multiple trades with different amounts of money on each trade.
This gives position traders the freedom to exit their trades whenever they want while making the most out of their positions. The goal is to optimize your profit per unit investment by increasing the number of winning trades while decreasing the amount you lose on losing trades.
Steps In Day Trading
Decide What Platform To Use
When you're looking to get into crypto day trading, the first thing you'll need is a platform. There are several reputable exchanges out there—Kucoin, Poloniex, and Kraken are two of the biggest names in the business, and Bittrex offers plenty of options for altcoins—but it can be tricky to find one that's right for you.
Weighing factors like functionality and fees is important, but another key question to ask is whether or not the platform you're using will let you get started with a minimal amount of personal information.
What other Reads?
Choose Crypto To Invest
When deciding what to day trade, it's important to understand that you're looking for the asset that will most reliably increase in value over time. There are several factors involved here:
Is the asset's value dependent on a single person or organization? This can limit its potential. It's always best to choose an asset whose value is dependent on a larger community of people and companies, to increase in value as the number of users increases.
Does an organization influence the price? If so, it might be possible for them to manipulate the price, including the SHIB price, up or down.
Are there upcoming events related to the asset which could affect it? A new product could be announced, a piece of legislation might affect it, etc.
Choose a Trading Strategy
You have to have a strategy. To buy low and sell high, you have to know when a token is undervalued and set up a buy order; similarly, if you think the price will drop, you can use strategies like short selling or buying put options to profit from the decline.
You can’t just buy a bunch of tokens and hope they’ll shoot up in value—you need to know when to get in and when to get out.
You should choose a strategy that fits your personality and style. For example, if you’re a long-term investor who hates taking risks with investments, you might want to stick with something like dollar cost averaging—wherein you buy equal amounts of tokens at regular intervals regardless of price—or simply wait until the price drops before investing at all.
