Connect with us

Guide to Day Trading Cryptocurrencies

A Guide To Day Trading Cryptocurrencies

Published

on

A Guide To Day Trading Cryptocurrencies

Cryptocurrency trading has become more liquid over time, and the asset is considered a candidate for lucrative day trading provides a day trading opportunity for many people around the world. Day traders buy and sell cryptocurrencies during the day, attempting to profit from sharp price fluctuations. The term “day trading” refers to the idea that a trader will open and close their position during the day and not hold the risk overnight. Day trading strategies are usually driven by technical analysis and require strong risk management and self-discipline. Some day trading occurs around specific events, where the investor believes what is priced into the market is not reflected by the value of the cryptocurrency. Successful cryptocurrency day trading requires a sound strategy, robust risk management, and the ability to concentrate on cryptocurrency throughout the trading day.

 

Day Trading Basics

Day trading is when an investor purchases and sells or short-sells and then repurchases a cryptocurrency. Day trading can be performed on most assets, but you want to ensure enough liquidity before you start to day trade an asset class. Some traders think day trading works best when there is a tight bid-ask spread and you enter an exit position without extensive slippage (the market moving while you are trading). When you day trade, your strategies are focused on short-term movements. You are much less concerned about the general direction of the cryptocurrency you are trading and instead want to predict the action over the next few minutes or hours. If you day trade cryptocurrencies, you need to be tuned into any economic releases, monetary policy releases, political changes, and other significant events that might alter the landscape for cryptocurrencies.

 

Advertisement

Day Trading Strategies

Day trading requires activity throughout the trading day. Some traders approach day trading using an automated system that systematically transacts when you reach specific price levels. If you plan to day trade where you are transacting yourself without the help of automation, you need to be around to make trades when you enter and exit a position. It would help if you also were around most of the day to ensure you do not miss an opportunity.

Some of the most popular day trading strategies involve the use of technical analysis to make trading decisions including quick-profit systems, range trading strategies, or high-frequency trading, which uses statistical information to make a trading decision.

 

What is Quick-profit?

Quick-profit is a crypto trading strategy focusing on generating small profits and losses from sharp exchange rate movements. To drive potential profits, you can use trend-following cryptocurrency quick-profit or momentum cryptocurrency trading strategies. When you engage in quick-profit, your goal is to generate small profits and losses and more wins than losers. Significant gains are not the goal. Quick-profit requires several trades throughout the day. The positions you take can be open for seconds, minutes, or even hours, but you want to take profits quickly. Remember, however, that no strategy is perfect and profits are never guaranteed.

One strategy involves looking for a short-term trend that is about to occur. For example, when the 5-minute moving average of Bitcoin crosses above or below the 20-minute moving average of Bitcoin. A buy signal is generated when the shorter-term moving average crosses over the longer-term moving average. When the shorter-term moving crosses below the longer-term moving average, a sell signal or reversal is created. Some quick-profit trading strategies have a risk management component that is a stop and reverse, while others might have you exit your position.

Advertisement

The risk management used in a quick-profit trading strategy involves winning more than you lose, and the amounts you win and lose are about the same. For example, if you trade ten times, you want to ensure you win at least six times, and the amount you win equals the amount you lose.

 

What is Range Trading?

Another day trading strategy is range trading. Range trading involves buying and selling cryptocurrencies when they reach the end of a pre-defined range. Before you enter the trade, your objective is to define your profits and losses and how each transaction will impact your portfolio. Like quick-profit, range trading is for active investors who plan to trade the cryptocurrency markets throughout the day. You can automate the process, but if you plan to place trades yourself, you must be tuned in to what is happening intra-day.

An example of a range trading technical analysis tool is Bollinger Bands. Bollinger bands, created by John Bollinger, are a technical analysis tool that uses volatility to create a trading range. Bollinger bands create a mean using a specific moving average. The standard is usually a 20-period moving average, but any period can be used. The concept is that the cryptocurrency you are trading will eventually return to the mean, however this is not guaranteed to happen.

The Bollinger bands are made up of a moving average, a Bollinger band high, which is two standard deviations above the moving average, and a Bollinger band low, which is two standard deviations below the moving average. The standard deviation range can be any level. Two standard deviations capture 95% of the returns that are created. One standard deviation captures about 68% of the returns, while three would capture 98% over the period you are evaluating.

Advertisement

A typical Bollinger band strategy has an investor selling a cryptocurrency when the exchange rate reaches the upper Bollinger band. The take-profit level could be the moving average used to create the Bollinger band. An investor might buy a cryptocurrency when the exchange rate reaches the bottom Bollinger band. The risk management could be to sell your cryptocurrency when the exchange reverts to the mean.

Another subjective range trading could be accomplished using trend lines as support and resistance. Support is a price level where demand is strong and helps prevent a cryptocurrency from moving lower. Resistance is a point where supply is robust and generally contains a cryptocurrency from moving higher. If you set up support and resistance levels, you can buy at support and sell at resistance to generate short-term day trades using a mean reverting process.

Remember, however, that these strategies are just explanatory and not intended in any way as trading advice.

 

Trading Around News

Some day traders trade around the news. When new information becomes available, a cryptocurrency’s exchange rate might surge or drop. In those instances, a day trader could take a position before the news is released right after speculating that the exchange rate will not continue its surge or drop off. Trading the news can be difficult, as it is tough to know if the new information will continue to drive a cryptocurrency’s future movements. You might consider day trading news in conjunction with other technical analysis tools.

Advertisement

 

Risk Management

Day trading risk management is less focused on generating many small profitable trades. The math behind day trading requires that you win more than you lose and that the losses and gains are about the same size. This scenario differs from other types of investing strategies in which the size of the winners dwarfs the size of the losing trades.

For example, if you are trading using a strategy that holds positions for months at a time, you might be able to lose more times than you win if the profits on winning trades are more than the losses on unsuccessful trades. If you have nine trades and you win three times $100 on each trade (+$300), then you can lose six times where you have a loss of $50 on each trade ($300) and still break even.

 

The Bottom Line

The upshot is that day trading cryptocurrency can be optimized if you use specific tools to help you generate trades. One of the benefits of day trading cryptocurrency is that you are not taking risks that occur when you are not actively trading. Day trading means that you plan to exit your position by the end of the day.

Advertisement

Day trading strategies include quick-profit and mean reversion trades, where you attempt to capture sharp movements by a cryptocurrency. The term quick-profit refers to sharp moves in the exchange rate of a captured cryptocurrency. The goal is to win more than you lose. Risk management is focused on winning and losing the same amount of money.

While it is possible to day trade if you have the processing automated, you should avoid day trading if you cannot watch the markets regularly and plan to trade manually. If news or events occur, you might not be in a position to react.

The post A Guide to Day Trading Cryptocurrencies appeared first on Analytics Insight.

Advertisement

Top posts

Manitoba Halts New Crypto Mining Projects Due To Expected High Energy Demand Manitoba Halts New Crypto Mining Projects Due To Expected High Energy Demand
Canada3 hours ago

Manitoba Halts New Crypto Mining Projects Due To Expected High Energy Demand

Authorities in Manitoba are temporarily suspending the connection of new crypto mining facilities to the power grid. The Canadian province,...

UNI is ripe for buying opportunities after a bullish crossover, but… UNI is ripe for buying opportunities after a bullish crossover, but…
Altcoins11 hours ago

UNI is ripe for buying opportunities after a bullish crossover, but…

Disclaimer: The information presented does not constitute financial, investment, trading, or other types of advice and is solely the writer’s...

Compound tightens its rules to prevent Aave-like exploit, details inside Compound tightens its rules to prevent Aave-like exploit, details inside
Aave12 hours ago

Compound tightens its rules to prevent Aave-like exploit, details inside

Compound DAO had voted unanimously to implement changes in the rules of the protocol This move was motivated by the...

Professional Liability Insurance for Traders Professional Liability Insurance for Traders
Uncategorized12 hours ago

Professional Liability Insurance for Traders

Professional liability insurance is a crucial protection for traders, allowing them to safeguard their investments and clients. In addition, without...

Data Shows There’s No Profits Left For Bitcoin Miners That Can’t Obtain Cheap Electricity, Run Efficient Mining Rigs Data Shows There’s No Profits Left For Bitcoin Miners That Can’t Obtain Cheap Electricity, Run Efficient Mining Rigs
Antminer S19 Pro+ Hyd.13 hours ago

Data Shows There’s No Profits Left For Bitcoin Miners That Can’t Obtain Cheap Electricity, Run Efficient Mining Rigs

During the last few weeks bitcoin’s cost of production has been higher than the leading crypto asset’s spot market value...

PancakeSwap’s progress may not sit well with investors, is CAKE the culprit PancakeSwap’s progress may not sit well with investors, is CAKE the culprit
Altcoins14 hours ago

PancakeSwap’s progress may not sit well with investors, is CAKE the culprit

CAKE planning to bring a new Syrup Pool/Farm on PancakeSwap However, days ahead might get harder as metrics and indicators...

MoneyGram Review MoneyGram Review
Uncategorized14 hours ago

MoneyGram Review

1 Minute Review MoneyGram is one of the largest money transfer services in the world, with over 400,000 agent locations....

Where Is The Ethereum Price Headed Next After Clearing This Resistance Where Is The Ethereum Price Headed Next After Clearing This Resistance
Crypto14 hours ago

Where Is The Ethereum Price Headed Next After Clearing This Resistance

The Ethereum price has finally been able to break above the $1,233 resistance mark. Over the last 24 hours, the...

Telegram to build non-custodial wallets and decentralized exchanges, says CEO Pavel Durov Telegram to build non-custodial wallets and decentralized exchanges, says CEO Pavel Durov
adoption14 hours ago

Telegram to build non-custodial wallets and decentralized exchanges, says CEO Pavel Durov

Telegram to build non-custodial wallets and decentralized exchanges, says CEO Pavel Durov Soumen Datta · 1 hour ago · 1...

ECB Blog Post Insists This Is ‘Bitcoin’s Last Stand,’ Officials Claim BTC Is Headed Toward ‘Irrelevance’ ECB Blog Post Insists This Is ‘Bitcoin’s Last Stand,’ Officials Claim BTC Is Headed Toward ‘Irrelevance’
"Bitcoin’s Last Stand"15 hours ago

ECB Blog Post Insists This Is ‘Bitcoin’s Last Stand,’ Officials Claim BTC Is Headed Toward ‘Irrelevance’

On Wednesday, Nov. 30, 2022, a blog post published by the European Central Bank (ECB) discusses bitcoin and the authors...

XeggeX sets industry standards for exchange transparency XeggeX sets industry standards for exchange transparency
Exchanges15 hours ago

XeggeX sets industry standards for exchange transparency

Disclosure: This is a sponsored post. Readers should conduct further research prior to taking any actions. Learn more › The...

Binance Coin (BNB), Polkadot (DOT), And Bitgert (BRISE) Price Prediction This December – Investors Will Love This Binance Coin (BNB), Polkadot (DOT), And Bitgert (BRISE) Price Prediction This December – Investors Will Love This
Uncategorized16 hours ago

Binance Coin (BNB), Polkadot (DOT), And Bitgert (BRISE) Price Prediction This December – Investors Will Love This

Binance Coin (BNB), Polkadot (DOT), and Bitgert (BRISE) Price Prediction This December – Investors Will Love This The last month...

Coinbase Drops XRP & Other Tokens, Cites Low Activity Coinbase Drops XRP & Other Tokens, Cites Low Activity
Coinbase16 hours ago

Coinbase Drops XRP & Other Tokens, Cites Low Activity

As the FTX saga continues, all eyes are on crypto exchanges: Coinbase, Crypto.com, Binance and the like all have hefty...

Crypto exchange Kraken to start layoffs as crypto winter persists Crypto exchange Kraken to start layoffs as crypto winter persists
crypto exchange16 hours ago

Crypto exchange Kraken to start layoffs as crypto winter persists

Kraken plans to lay off nearly 30 percent of its overall headcount because of crypto winter The company is providing...

Biggest Movers: LTC Nears 6-Month High, As Near Rebounds From Recent Lows Biggest Movers: LTC Nears 6-Month High, As Near Rebounds From Recent Lows
Analysis17 hours ago

Biggest Movers: LTC Nears 6-Month High, As Near Rebounds From Recent Lows

Litecoin has been a notable mover on Nov. 30, as the token edged closer to a recent six month high....

Kraken to layoff 1,100 people to ‘adapt to current market conditions’ Kraken to layoff 1,100 people to ‘adapt to current market conditions’
Bear Market17 hours ago

Kraken to layoff 1,100 people to ‘adapt to current market conditions’

Kraken to layoff 1,100 people to ‘adapt to current market conditions’ Samuel Wan · 7 hours ago · 1 min...

Bitcoin Bearish Signal: NVT Golden Cross Enters Sell Zone Bitcoin Bearish Signal: NVT Golden Cross Enters Sell Zone
Bitcoin17 hours ago

Bitcoin Bearish Signal: NVT Golden Cross Enters Sell Zone

On-chain data shows the Bitcoin NVT golden cross has now entered into the “sell” zone, something that could be bearish...

Binance’s latest acquisition will enable it to set foot in this country after four years Binance’s latest acquisition will enable it to set foot in this country after four years
Binance17 hours ago

Binance’s latest acquisition will enable it to set foot in this country after four years

Binance is all set to enter the Japanese cryptocurrency market after a break of four years The exchange acquired Osaka-based...

Trending

Free Bitcoin MiningEarn from $50 to $75 daily with just your phone