Day trading provides an incentive for those who invest their time and resources into fully understanding the marketplace in which they are going to trade.
There is no difference between digital currencies.
In fact, this emerging sector has created huge benefits for day-to-day traders to gain from price disparities and fluctuations that do not occur in traditional more developed financial markets.
What is Day Trading?
Day trading is a method of speculation on financial instruments and properties on a single trading day. Day traders also exchange any variety of securities and financial assets within a few hours and benefit from speculation on short-term market fluctuations.
Day traders stay current with what drives commodities in the immediate future and can position a huge number of transactions in a given day to make financial gains in the meantime. Good day traders will have a comprehensive understanding of the target market and a reasonable amount of exposure.
Usually, day traders would use technical analysis to develop market strategies.
They would typically use quantity, price movements, chart trends, and forecasting models to define when to buy or sell a stock. As with every trading approach, risk control is key to the viability of day trading.
As market developments can take a significant amount of time to transpire, day traders may not be concerned with fundamental analysis techniques and strategies. Nonetheless, someday traders focus their approach around following the latest trends on the stock market.
The process essentially boils down to successfully identifying assets that will go up in value. This includes identifying high-volume instruments from a recent analysis or news story and capitalizing on the transitory increase in trading interest.
Day traders try to take advantage of price fluctuations. Because of this, volume and profitability are essential to day trading. And besides, day traders require sufficient liquidity to do business quickly.
This is particularly valid when it comes to selling your asset. A significant deviation on only one exchange can have a catastrophic effect on the trading account of a day trader. Because of this, day traders will usually deal in extremely liquid stock pairs.
Some markets can exchange just one trading pair, such as Bitcoin/Tether.
Others can draw up a target list centered on technical and fundamental criteria, and select which instrument to exchange from that ranking.
Trading Strategies for Bitcoin Day Traders
Scalping is a very popular trading strategy for day traders. It includes taking advantage of the minor market fluctuations that take place over a limited period. These can involve liquidity differences and other market externalities.
Scalpers can also sell on margin or exchange futures contracts to enhance their leveraged profits. As the proportion pricing points appear to be lower, greater position sizes work better. In reality, this is usually valid for most day-to-day trading strategies.
However, leveraged trading does not mean that the ideals of risk control go out the door. An effective scalper would be conscious of the criteria for margins and will undertake suitable position-sizing principles.
Scalpers can use techniques like order book analysis, volume graphical analysis, and a variety of technical factors to determine their entry and exit thresholds for particular trades. However, owing to the accelerated nature of
trading and significant risk, scalping is usually more acceptable for professional traders.
Range trading is a basic technique that includes the study of candlestick charts and the analysis of resistance and support levels. As the name implies, range traders are searching for price points within the context of the market system and are developing business concepts focused on those ranges.
The principle of range trading is focused on the premise that the boundaries of the range can be retained as protection and leverage before the range is breached.
This indicates that the bottom part of the range is inclined to drive the price higher, whilst the higher end of the range is inclined to swing the price downwards.
However, the sooner the price hits a resistance level or support level, the more possible it is that the level would break. That’s why the range traders will always account for the possibility that the price will move out of range.
Usually, this involves placing a stop-loss at a stage where the range breakdown is identified.
Range trading is a reasonably simple technique that can be satisfactory for anyone.
However, you have to have a clear knowledge of candlestick diagrams, support, and resistance points and can include momentum metrics like RSI or MACD.
High-frequency trading is an algorithmic trading strategy widely utilized by quantitative traders. It includes designing algorithms and trading bots that can rapidly make trades and place positions within a very small window of time.
These time intervals are a millisecond. A couple of milliseconds of edge for a high-frequency trader can offer a substantial lead over the competition. HFT algorithms can be built to execute very complicated strategies.
Although high-frequency trading can seem like a promising day trading tactic, it’s a lot more complex than it may sound. High-frequency trading requires a lot of back-testing, tracking, and tweaking models to respond to the rapidly evolving market dynamics.
So, if you assume you should just sit on the sidelines while a trading bot completes all the trades, this isn’t the reality. Another factor to remember is that high-frequency trading is a very exclusive business.
As such, it is challenging for the regular consumer to access high-quality details. If successful investment houses and hedge funds were to begin exchanging their high-frequency trading methods with retail investors, these strategies would no longer function.
There is also an added thing that you can remember when it comes to trading bots. You need to be particularly cautious about privacy and security when thinking about buying a high-frequency trading bot from a third-party so make sure your source is trustworthy.
Alternatively, you can develop your own. Developing HFT bots needs an awareness of advanced business principles as well as a comprehensive understanding of computer engineering. As such, it is more suited for experienced traders.
Before You Begin
If it’s securities, foreign currencies, or cryptocurrency, there are always uncertainties particularly when it comes to some sort of investment, risks that might result in a loss on your investment. Here’s what you need to think about before day trading Bitcoin or other cryptocurrencies.
As with any other investment, you need to know when to cut your loss in cryptocurrencies. The price of these currencies can fluctuate wildly so you need to recognize when you’re in possession of a cryptocurrency that’s on the downtrend and exit the position.
Cryptocurrencies, as described earlier, can be highly volatile. Asset volatility relates to how rapidly the value will rise and fall, and for cryptocurrencies, that rate can be incredibly large. Examples of market spikes like this are what create a double-edged sword for consumers.
Learning a new tactic like this can be challenging, which is why information is a strength for traders. Before you start trading, it is crucial that you research and study as much as you can, it will help you mitigate all the risks involved.
Apart from learning from all the tools accessible on the Internet, you could start practicing with trading simulators, but don’t be too sure if you beat them, it’s vastly different when actual money is on the table. They can hone your trading abilities, but day trading will challenge your mental prowess.
One factor that will help you mitigate your losses is to define a target. Once you’ve done your homework and have a simple understanding of how markets operate, it’s essential to establish a target for each of your transactions.
Choosing a Trading Platform
If you want to start making progress with day trading Bitcoin or any other cryptocurrency, the first step is to search for a reliable exchange to deal with.
Cryptocurrency portals and platforms can allow you to sell and make investments anytime, offering you the ability to optimize your transactions. There are two major forms of platforms, traditional platforms, and peer-to-peer exchanges.
In short, traditional platforms are more prevalent, and the platform can often serve as an intermediary to help handle transactions, and consumers are often requested to connect their bank accounts to their crypto wallets, making trades simpler.
On the other side, on peer-to-peer exchanges, the network typically has few or no market intervention until there is a disagreement, essentially creating a personal trading experience that, in exchange, makes transactions more cost-effective.
Choosing the correct platform or platform is essential for day-to-day cryptocurrency dealing since you will simply be choosing where to invest most of your time.
NeuronEx is a peer-to-peer exchange platform where you can easily trade Bitcoin or other altcoins and cryptocurrencies.
After studying different exchanges and marketplaces, you would be able to learn how trading operates on each particular site. When you choose one that you’re familiar with, make sure you understand all the strengths and weaknesses of the network to prevent losses due to common errors.
The next move is to deposit the funds on your chosen website. The number is completely up to you, but if you’re just starting out, it would be easier to start using small figures. And, if you have an understanding of it, you will start to reap the benefits.
While this stage could be optional, you may also check for external trading resources that help you properly interpret market changes of particular assets. These tools can help you find the right time to join and exit the market.
Pros and Cons of Day Trading Bitcoin
Traders should reap the benefits of a plethora of different features that the cryptocurrency market has to offer so that they can optimize their earnings through day trading.
However, there are also some disadvantages to day trading, and there are some risks involved as well.
The Market is Always Open
One of the most interesting features of cryptocurrency trading is that the exchange is accessible to traders anytime. Day traders are fortunate to be able to stay ahead of all the possibilities that come from a marketplace that never closes.
The Market is Very Volatile
If it comes to cryptocurrency, you should be mindful that the business is extremely unpredictable. Bitcoin can begin the day at $10,000, and not even a few hours later, the value has risen to $12,000. However, if you wish to start day trading, this uncertainty may be a very profitable instrument, since there are several prospects to generate income.
The Market is Unregulated
The stock market is highly controlled, especially in the U.S., and such markets come with a lengthy list of rules and regulations, including but not limited to how frequently transactions are permitted. Cryptocurrency exchange, for the most part, is lightly governed and does not have the standard restrictive laws that the stock exchange doesn’t. In certain cases, you will start trading irrespective of background. This ensures that if you were to start investing on a day-the threshold that is slightly smaller than the barrier to trading in other asset groups on a day-to-day basis.
Accessible and Clear Data
In the cryptocurrency industry, you usually will not have to pay trading commissions. This ensures the data critical to day trading is open for you to see without any strings tied to it. On the same page, these exchange platforms would also come with a variety of technical research resources built into them as well. While this would not seriously affect the decision to start day trading cryptocurrency, it is definitely a positive and will assist you when you get started.
The Market is Immature
Luckily for you, the cryptocurrency business is so easy to buy into that there is an influx of newcomers and less skilled traders who deal in it. The amount of entry-level traders implies that one with a little more experience immediately has an advantage and can get in and out of positions or respond more easily to circumstances and prevent losses.
Risks of Bitcoin Trading
Bitcoin investing for newcomers entails a wide variety of risks, and traders must be conscious of them before placing capital on the line. Learning Bitcoin trading may entail costly errors, so ideally this list of risks can give novice traders some advice to prevent pitfalls.
Bitcoins and cryptocurrencies are very recent, leaving their existence a little unclear.
People don’t know how policymakers are going to behave later down the road and how tight laws are going to be.
Risks of Uncertainty
Bitcoin is the riskiest currency of any kind, even the equity and gold markets. Although market fluctuations of bitcoin prices can positively affect the trading potential for financial gains, it also brings with it skepticism and unpredictability. For instance, Bitcoin reached an all-time peak in 2017. However, the incredible rise in value was followed by a significant drop in price that same year, which left a lot of people regretting their decision. You must ensure that your bitcoin day trading plans take into account volatility.
Risk of Refund Transactions
Although your bitcoins won’t ever vanish, the investments you make are irreversible and can only be refunded by the receiver. This ensures that you just have to do business with those you recognize, trust, or are widely reputable.
Now that you know more about what goes into day trading Bitcoin, you can get started with your own journey. Log on to NeuronEx today and start trading today!