Day trading is considered a challenging yet profitable way of making money. By utilizing the appropriate strategies, cryptocurrency day trading can be an ultimate game-changer, especially for new traders.

Today, we’ll define day trading and describe the advantages and risks of day trading as well as some of its core points. You’ll find out about day trading crypto and whether it is worthy or not. So let’s begin!

About Day Trading

Day trading is the short-term trading of financial assets that occur in a single day. Day traders depend on analysis and intuition over the price movements of various financial assets or products. Furthermore, day traders always stay updated about the market to leverage any opportunity to make a profit. This process can take a few minutes to hours to capitalize on the price movements.  

Earning Money Through Day Trading 

  • Entry and Exit Points: Traders need to perform extensive research on the entry and exit levels of an asset. Also, they have to keep an eye on the perfect time to exit the position at a profit. Fortunately, day traders will exit before the market closes which reduces the overnight risk of losing money.  
  • Managing Risks: Day cryptocurrency trading may involve some financial losses like any traditional form of trading. But a step-by-step risk management process to identify, assess, and monitor risks can reduce capital loss. 
  • Volatility and Profit: Crypto markets are extremely volatile. But sudden price changes in a volatile market can be a lucrative opportunity for day traders. Since day trading involves rapid price changes, traders can quickly take entry and exit positions and make a profit in hours. 
  • Watchlist and Market Pairs: Having a trading watchlist helps day traders make the most profitable trading decisions. Each watchlist will contain the assets that traders want to track for their recent performance. Often, watchlists save time when it comes to locking into profitable trades. However, day traders can also utilize a single cryptocurrency pair to earn money.

Benefits of Day Trading

Day trading has several benefits for both novice and experienced traders:

  • Learning from Free Sources: Learning day trading involves zero cost if you utilize free online sources. Even resources that are available locally, such as libraries, can be used without paying a big fee. 
  • Diminishing Overnight Risks: Day traders can easily close positions before the trading day ends. Closing the position before the end of the trading day means that traders can sleep peacefully.
  • Making a Profit in Poor Conditions: Day traders can utilize short-selling strategies to make money from a bearish market. The strategy can have an extreme profit-making advantage over other traditional strategies.
  • Technical Analysis-Based: Traditional traders used to focus on the fundamentals such as the latest news, reports, currency performances, etc. However, day traders can skip the fundamentals and deploy a technical analysis-based strategy to ensure faster profit growths. 

Drawbacks of Day Trading

While day trading comes with several benefits, there are a few drawbacks to day trading:

  • Volatility Risk: When a day trader bets on a short-term market it comes with some risks. There is the chance that traders’ predictions might see a negative trading result. Forecasting the market volatility for a very short time period, for example, minutes or hours can bring higher volatility risk.
  • The Risk With Margin: Crypto traders have the ability to take margins to create better earning opportunities without investing money from their own pockets. This borrowed money can become a risk factor. Losing margin money with day trading doesn’t mean that you don’t have to pay back the money.
  • No Tax Benefit: While long-term investment comes with tax benefits, day trading returns have no additional benefits. Rather than counting day trading as a capital gain, it is considered an ordinary income. Hence, there is a higher tax burden if you are a day trader. 
  • Trading Addiction: Day trading can be similar to gambling because investors can earn large amounts of money in a very short time. As a result, it is considered an addictive way to make money. 

Day Trading and Best Strategies

There are a number of day trading strategies from range trading to arbitrage strategies. This section will talk about the best day trading strategies: 

  • Range Trading: This trading strategy involves an active system where traders will target a range for buying and selling cryptocurrencies. If there are signs that a pair is overbought or oversold, traders can make a quick entry and exit decisions using a range trading strategy. 
  • Market Scalping: Scalping is a form of trading where traders can make frequent and quick trades to utilize volume for profit. Also, there are automated crypto day trading platforms, such as Obolon9, to make the strategy more accurate than manual trading operations. 
  • Crypto Arbitrage: When investors utilize the price difference of the same asset in different markets it is called an arbitraging strategy. Due to the decentralized nature, different crypto exchanges will have price differences of the same coin. Hence, arbitrage can be a quick and profitable way to earn money as a day trader.

What Are Common Day Trading Mistakes?

Now you have an idea of how to day trade crypto. Let’s look into the most common mistakes day traders make.

  • Influenced by FOMO or FUD: The most common cryptocurrency slang is fear of Missing Out (FOMO) and Fear, Uncertainty, and Doubt (FUD). Traders make mistakes by using information like market crashes and booms, which is related to FOMO and FUD. For instance, many investors lost money by trading Bitcoin in 2017 due to FOMO. They started to invest in the asset when the market was already falling.  
  • Trading Tool Mistakes: Day trading tools can provide a trader with the power to make a maximum profit from each trade. On the contrary, selecting the wrong tools can make your profits disappear. So choosing safe tools should be a priority. 
  • Getting Locked After the Entry: If you take a trading position, there is no guarantee that you can make quick exits with a profit. Illiquid markets can force you to lock into a position. To avoid this mistake, traders can choose exchanges with higher liquidity.
  • Poor Spread Calculation: A trading spread is a difference between the prices or rates of an asset. Some traders calculate the spread by checking the top of the order book at the exchange platform. But traders must check the order book thoroughly to make a proper estimation.

Summary

In conclusion, we’ve covered the most important factors regarding day trading that can kickstart your crypto journey with success. If executed properly, day trading can be a lucrative way to earn money without getting involved in long-term investments.

Focus on the best strategies and avoid common mistakes, and there’s a chance you will make a profit day trading. To start with automated crypto trading, try the Obolon9 platform.