Beginner's Guide To Day Trading Crypto

As a trader, you can choose between a variety of trading strategies. While some are suitable for short-term earnings, others offer better long-term investments. However, if you are interested in minimal investments and short-term results, you should consider day trading. Day trading isn’t a new concept, per se. It has been around in financial markets for decades now.

More importantly, day trading is broad in that you get to deal with various assets, including but not limited to stocks, forex, and cryptocurrencies. However, day trading with crypto is not as simple as it seems. It would be best to consider a few aspects before starting your cryptocurrency day trading hobby or career.

In this handy guide, Liquid wants to help users to understand the basics of day trading in the context of crypto trading.

An introduction to day trading

Day trading isn’t a challenging concept. It is precisely what you would guess from the name. It’s the type of trading that happens during the day and within a day only. That is, you would have to acquire and sell the assets (for profit) within a day. Due to this characteristic, day trading is also known as intraday trading. 

Compared to long-term trading, day trading wants the trader to focus on small movements of value. You cannot keep the asset overnight and wait for it to gain value on the next day. Similarly, day trading will work on business days of the week only. Like other types of trading, though, intraday trading also requires a proper understanding of the market. And it’s a skill that you can finesse through practice.

Factors traders consider while day trading

Depending on the market and the asset they are dealing with, day traders consider many factors.

- Liquidity

An asset’s liquidity refers to how effortlessly you can cash in the asset or vice versa. In the case of day trading, it refers to how easily you can sell the stock and get money in return. If the stock is easily sellable, it’s very liquid. If it’s not, the stock is not very liquid.

- Volatility

Volatility refers to the frequency and size of an asset's price. If the asset's value changes very frequently, the asset is considered very volatile. On the other hand, if it retains its value for an extended period, it will be regarded as non-volatile.

In addition to these two factors, different traders employ different methods. For instance, some traders may perform Fundamental Analysis to get a comprehensive idea about the asset they are dealing with. However, some traders stick to Technical Analysis, analyzing historical data and patterns to calculate how the asset would perform in the future.

Popular day trading strategies

- Scalping

This trading style will focus on the small price changes of an asset in the market. As a result, scalping requires the trader to sell the stocks as quickly as possible. It is impossible to employ the scalping trading strategy if you don’t have the right access to live information from the market. Because scalping relies a lot on the total volume, traders may have to margin-trade to amplify the profits.

- Range Trading

This active investment strategy requires the trader to define a price range in the market structure. The trade will take place within this range only, and the trader has to continue the process until the asset is out of that range. The trader should properly understand candlestick charts and momentum indicators to get the best results from range trading.

- High-Frequency Trading

High-frequency trading, better known as HFT, is a trading strategy that uses algorithms. Traders who are into HFT will develop algorithms and trading bots to watch the market and buy/sell assets. Since the transactions occur within milliseconds, HFT proposes an increased profit chance. Nevertheless, building trading bots and algorithms requires coding knowledge and market expertise.

Day trading cryptocurrencies: what Is It?

Day trading cryptocurrency is almost similar to traditional day trading. However, intraday trading also has to adapt because it happens in the crypto ecosystem. For instance, even though you can focus on the minute changes in the value of an asset, the business hours don’t restrict your actions. You can easily trade crypto assets at any point in time. 

However, you may want to pay corresponding network and transaction fees. So, it becomes imperative that you choose a compatible cryptocurrency trading platform. If you have to pay a transaction fee higher than the overall profit you gain from the volatility of the coin, you essentially have no reason to trade crypto assets in the first place.  

Day Trading Cryptocurrencies: Why and How?

We mentioned that liquidity and volatility matter the most regarding intraday trading. These factors have been trademark characteristics of cryptocurrencies from the very beginning. The change in cryptocurrencies’ value is so much that even within 24 hours, a crypto token value varies very much.

While these trends are not as predictable as traditional trading trends, a strategic intraday trader can earn considerable profit by focusing on this value change. As for liquidity, there are multiple ways to cash in cryptocurrency assets.

Now, when it comes to how to day trade cryptocurrencies, you have some straightforward options to pursue. The most convenient option is to choose a reliable crypto trading platform, which will allow you to purchase different crypto assets and sell them for money at your convenience.

The additional benefit here is that you can use various payment methods to perform these tasks. Some trading platforms also offer margin trading options, which means you can purchase crypto assets by borrowing money to augment the profits.

Can I make a living by day trading cryptocurrency?

Anyone certainly can make a living by day trading cryptocurrency. However, because of the relatively higher volatility of crypto assets, you have to spend more time watching the market activity. Unlike traditional stocks, crypto assets can have a price change in minutes or even a few seconds.

For instance, the value of Bitcoin (BTC) may go down within seconds if a country bans its use. Similarly, even minute changes in the market can have huge implications on your assets’ value. If you are ready to deal with this volatility and instability, you can consider cryptocurrency day trading as a full-time profession.

Buy and Trade cryptocurrency on Liquid

If you are interested in cryptocurrency investments, create a free account on Liquid and enjoy access to over 80 crypto coins and tokens via simple purchases with your VISA card. Additionally, Liquid offers high-performance API, deep liquidity, and low fees. Liquid offers some of the most unique trading experience in the industry with a wide variety of assets, all in one platform.