In the fast-paced world of cryptocurrency, where assets experience rapid price fluctuations at regular intervals, day trading is an attractive option for beginner and expert traders alike. This trading strategy involves traders buying and selling assets such as cryptocurrency within a day (or even hours and seconds). Traders will participate in this strategy with the hopes of capitalizing on intraday market price action.
But, as appealing as day trading may be, is it actually a good strategy for traders?
In this article, we’ll discuss the pros and cons of day trading and attempt to determine whether or not it’s a good strategy for traders. We’ll also provide a simple step-by-step guide that you can follow to start safely day trading yourself! So, keep reading to find out more about this trading strategy!
The Pros of Crypto Day Trading
As a highly common trading strategy, day trading comes with plenty of benefits. After all, there’s got to be a reason why this strategy is so popular among both novice and experienced traders. Check out the main advantages of crypto day trading:
- Market volatility – It’s no secret that cryptocurrency is a highly volatile asset. Although this volatility can be disastrous for some traders, it can be beneficial for many more. This is especially the case for day traders. As crypto prices bounce up and down, you can make substantial gains with well-thought-out trading decisions.
- Reduced budget – Another advantage of day trading is that traders can utilize it to make a sizable profit with a reduced budget. You can successfully capitalize on day trading even when investing just a portion of your funds. Compared to other trading strategies, this makes day trading an attractive option for anyone who prefers to make smaller investments.
- Quick learning – As day trading is much more fast-paced compared to other trading strategies, traders are expected to act fast. This strategy advocates for rapid decision-making skills and provides continuous learning for traders.
Day trading also encourages traders to swiftly improve their skills and pushes them to adapt quickly to changing market conditions. This added pressure can be helpful for anyone who wants to excel as a trader in a short time period.
The Cons of Crypto Day Trading
Despite the advantages it provides, day trading is certainly not suitable for everyone. Here are a few disadvantages of crypto day trading that you should be aware of:
- Increased stress levels – Since, with day trading, you must be almost constantly referring to the crypto markets and making investment decisions, you could find your stress levels inflating. This may be off-putting for traders who want a more casual investment experience.
- Inconsistent hours – Similarly, since there are no set hours within the cryptocurrency market, you may have to be awake at unsociable hours to manage your holdings. Some days, you may be up past midnight, whilst others, you’ll need to rise early to take advantage of potentially lucrative trading opportunities.
- Time consumption – Day trading can be incredibly time-consuming, especially for newcomers. To make the most of your investments, you’ll need to have a thorough understanding of each crypto asset you trade. Conducting this research requires a significant time investment which not all traders are willing to commit to.
How To Start Day Trading Crypto [Step-By-Step Guide]
If crypto day trading has piqued your interest, you can try this exciting trading strategy today! All you need to do is follow our simple step-by-step guide, and before you know it, you’ll be entering the crypto market with millions of other ambitious traders!
Choose a Platform to Trade
To begin with, you’ll need to choose a crypto exchange or crypto brokerage to trade with. Crypto exchanges such as Binance allow you to directly buy and sell various cryptocurrencies. These are fairly straightforward to use but do not offer any tailored assistance for traders. Brokers, on the other hand, are firms or individuals that provide various tools (such as trading bots) and resources to assist traders. Brokers can be especially useful for day traders as they offer guidance to help their users make informed decisions.
You can find a suitable broker by joining a crypto brokerage-matching platform. Platforms such as this typically use AI technology to make optimal and switch matches, saving users plenty of time and hassle.
Once you’ve found an exchange or broker you’re happy with, you can follow their registration steps to create an account!
The next step is to choose a selection of crypto assets to invest in. When it comes to day trading, finding the right coins to invest in is crucial.
For a start, we suggest looking for coins that have high liquidity. This ensures that there are enough traders within the market to allow trades to be executed quickly and at a favorable price. Coins that have high volatility are also best for day traders. With these coins, traders can enter and exit trades to make profits in a short period of time.
To help you out, we’ve listed a handful of different types of crypto coins and tokens with top examples of each:
- Stablecoins – Tether (USDT), Dai (DAI), USD Coin (USDC)
- Utility tokens – DeeLance (DLANCE), Chainlink (LINK), The Sandbox (SAND)
- Governance tokens – Dash (DASH), Uniswap (UNI), Curve DAO (CRV)
- Non-Fungible tokens (NFTs) – Bored Ape Yacht Club, CryptoPunks, Azuki
Furthermore, as we’ve already mentioned, it’s vital to fully understand each coin you want to trade before making any investment decisions. Therefore, you must take the time to research all crypto coins by reading whitepapers, checking statistics through online marketplaces, and staying up to date with relevant news.
Decide on a Day Trading Strategy
There are several crypto day trading strategies you can adopt once you’ve joined a platform and chosen a handful of assets to invest in. The best strategy for you will depend on various factors, such as your budget, risk tolerance, and short/long-term goals. Of course, you don’t have to stick to a single strategy and can instead try out different options until you find one that suits you the best!
Here are some of the most popular cryptocurrency trading strategies that you can consider trying out when day trading:
- Range trading – The crypto market is constantly fluctuating, and traders can take advantage of this by range trading. Using the range trading strategy, traders can identify overbought and oversold crypto assets (known as the support and resistance areas). This leads to optimal price entry and exit levels that present attractive risk/reward propositions for traders.
- Trend trading – This strategy allows traders to take advantage of uptrends in the hope that the asset will continue to rise in value. Traders typically use technical analysis to determine which direction a particular asset will trend and take advantage of this movement.
- Fade trading – As the direct opposite of trend trading, fade trading is where traders buy an asset that is falling in price. By going against the trend, traders are hoping that after a certain time period, the asset will return to its average price, resulting in a profit. However, fade trading is a highly risky trading strategy that many investors shy away from.
Conclusion – Is Day Trading a Good Crypto Strategy?
To conclude, the question of whether day trading is a good crypto strategy lacks a definitive answer. As we’ve explored throughout this article, day trading has a range of benefits. This strategy is a fantastic learning opportunity for traders, can result in substantial profits, and is suitable even for those with a lower budget. However, day trading can be incredibly time-consuming and inconvenient, which can lead to heightened levels of stress.
Ultimately, whether or not you should participate in a crypto day trading strategy depends on your risk tolerance, investment goals, and the amount of time you’re willing to dedicate. You may be a trader who enjoys capitalizing on swift market movements to make a steady profit. Or, you may be someone who prefers holding on to your investments for a longer time period.
So, in the end, our question is not “Is day trading a good crypto strategy?” but rather “Is day trading a good crypto strategy for you?”. And, of course, only you can answer that! To find the answer to this question, we suggest that you take some time to think, do your own research, and continue to try out new strategies until you find one that best aligns with your needs!