Cryptocurrency day trading involves entering and exiting multiple positions during trading hours on the same day. Typically, a day trader would never leave a position open overnight as he intends to profit through intraday price movements.
Although day trading is a common strategy for a traditional financial instrument, it works perfectly well for cryptocurrency.
Still, you should fully understand the fundamentals before diving into the market.
Here are some tips.
1. Always trade with a reliable cryptocurrency exchange
Cryptocurrency exchanges allow users to buy, sell, and trade cryptocurrencies like Bitcoin using different fiat currencies or altcoins. Although most crypto exchanges offer similar services, they are not all the same. The last thing you want is for a crypto exchange to disappear with your funds.
You should always look for reviews of crypto exchanges on forums, blogs or any active community to give a genuine opinion. Also, make sure the exchange has good liquidity and has good customer support. For example, Bybit offers 24/7 customer support to all of its users.
2. Get the technical and fundamental analysis right
Understanding how the market works and reacts gives you the edge in making rational trading decisions, even if the market is going sideways.
First, fundamental analysis is based on how external factors or industry-specific trends, or developments in crypto technology, influence the market. This analysis is often used to determine the quality of long-term investments. You have to be aware of the difference between the value of an asset and the price at which it is trading.
Technical analysis is used to review actively traded assets to make a short-term investment decision. Understanding price action in technical analysis gives traders an overview of the supply and demand dynamics of the asset to determine the ideal price of the asset.
3. Don’t underestimate trading fees
Before trading cryptocurrencies on the day, be sure to dive into the exchange’s trading fee structure.
A cryptocurrency exchange can waive deposit fees, but there are creator, taker, and withdrawal fees. These transaction fees are implicit charges when you buy an asset. For example, on Bybit, takers pay 0.075% while creators earn a refund of 0.025%.
Ultimately, you should choose an exchange with lower transaction fees to maximize your net profit.
4. Never invest more than you can afford to lose.
The golden rule is to spend less than you earn. By applying the same concept to day trading, you can mitigate the risks of losing your funds.
Of course, you can make a quick buck when you trade during the crypto boom, but crypto trading can also come with extreme volatility. You should expect the price of a crypto asset to fluctuate in hours or even minutes. If you intend to take out crypto day trading loans, you need to think twice.
5. Never let your emotions influence your decision
A cryptocurrency veteran would agree that fear and greed fuel bad decisions. These are the effects of market noise.
Instead, work towards a strong trading psychology to make rational decisions. Focus on a day trading course, join a community with reliable trading news, stick with your evaluations, and most importantly, learn from your mistakes.
Understanding how the market works and how you can secure your funds is essential. Work on improving your knowledge and learning from both failures and successes to become a profitable day crypto trader today.