Many times you’ll hear of day trading stocks and how much people make from that. As times and the concept of assets has changed, so have new platforms solely dedicated to crypto day trading. Cryptocurrencies all over the world are usually a bit volatile except those that are backed by fiat currencies. Because of these swings in prices, a prompt investor may have the right environment to make some cash.
Crypto day trading is no walk in the park. To ensure that you do it well, you need to have knowledge about crypto markets and how they behave. Although you might have an advisor on what needs to be done, you have to have a good grasp of the concepts yourself to make better-informed trades.
One of the biggest things you need to understand is volatility. High volatility readings mean that you can make a killing off of trades, which is what you are looking for. However, volatility is just one aspect of the triangle. You also have to look out for good liquidity and have the timing correct. Although a cryptocurrency might have prime volatility, not having enough liquidity means that you may have to keep an asset on the books for longer than you would like. This may cut your profits and tie up your money. To ensure success in your day trading, it may be wise to employ these strategies:
Choose high liquidity and volatility coins
The first step in making it as a cryptocurrency day trader is picking out which coins are ripe for trading. As previously highlighted, choosing one with both these characteristics will help you to trade easier and make more money in the process. Since there are more than 1600 coins currently being traded, you have a wide selection of options to choose from.
Leverage the Money Flow Index Indicator
This particular strategy is quite popular with many day traders in both forex and crypto trading. The money flow index is a simple technical indicator that basically monitors smart money to show when institutions are moving in terms of selling and buying cryptocurrencies. This tool is highly reliable but has a learning curve to it. You have to set the conditions right to cover the downsides since the tool is not always right. Your instinct will help you in fine-tuning the indicator for better overall results as you continue to trade.
This is one of the most common and useful strategies used for day trading cryptocurrency. The idea here is to take advantage of the small differences in prices that happen in limited time frames. These price differences are brought about by gaps in the bid-ask spread, liquidity, and many other inefficiencies in the market. Since the move is usually small, so are the percentage price targets. This means that you’ll have to take a larger position to earn bigger.
High-frequency trading (HFT)
High-frequency trading has come a long way. Today, it has been refined to an almost artistic level. Mostly used by quantitative traders, this sort of trading leverages algorithmic trading where bots using certain predetermined instructions can enter and exit positions in very limited time frames. This can be very lucrative since humans cannot operate at that speed or accuracy.
Day trading cryptocurrency can be a very lucrative venture. However, before you start, you should always know that it can be a very demanding and stressful career choice. It requires quick execution and decision making. It can also be very risky, given how volatile the markets are. It’s therefore prudent to also practice proper risk management to keep a good balance going.