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In cryptocurrency trading, there are different types of trading strategies like investing and holding, spot trading, intraday trading, day trading, range trading, swing trading, and scalping. Day trading refers to carrying out transactions within a trading day. Day traders may scalp the market, trade ranges, or open trades for a short time but they always end their trades within the trading day and not into the next day or several days. Crypto day trading differs from forex day trading in the sense that forex day traders can trade into the next day according to the timing of their trading session.
What's in this post
To understand how the day traders make money, it is necessary to know how scalpers trade. Scalpers are traders who seek short-term trades to enter and exit. Scalpers enter trades for a short time, ride a few profits, and exit before the position closes on them. Scalpers typically hold positions for minutes of a few hours and can open multiple positions within a short time.
Day traders are just scalpers who leave their positions for longer periods, typically within a day. Doing this means that they can ride the loss or profit more, increase their risk and reward margin, and do more in the market than scalpers. Day traders mostly make money by using take profit (TP) to exit trades once their desired price is reached within the trading day. Thus, they perform analysis on the higher time frames like the hourly and daily timeframes.
The goal of day trading is to make a profit from the short-term movement of price on any market; typically enter at a price and wait for a movement in the right direction before exiting. Day traders are also known to favor leverages to improve their profit within a day’s trading session.
There are several strategies for day trading, but they are all based on one principle; buy low and sell high. Each day trading strategy helps traders to find favourable positions just before a major or minor market move in the right direction. Here are a few strategies:
News Analysis/Trading
This is also called trading the news or fundamental analysis. Traders who trade the news are those who make trading decisions based on their interpretation of the impact of relevant news reports on the crypto market. For example, the recent announcement by the Chinese government to ban cryptocurrencies and declare them illegal in China had a negative impact on the crypto market. Barely a day later, bitcoin, ethereum, and other tokens dived to lower prices.
Technical Analysis
Technical analysis involves studying historical price movement and making trading decisions based on the analysis. Technical analysis is done using charts, indicators, and charting tools. This strategy is based on the theory that future price movements will reflect historical price movements.
Range or Swing Trading
Traders who range or swing take advantage of certain resistance and support zones to enter and exit positions. Range traders study candlesticks and patterns to determine the best support and resistance zones where they can place trades.
Trading Bots
Day traders can also utilize trading bots as a strategy. Trading bots are intelligent programs designed to make market decisions based on available data and analysis. Bots are programmed to act like human traders, buying and selling when the price is low and high respectively.
Scalping
Scalping means trading short-term positions and making quick profits -or losses. Crypto scalpers typically do futures or leveraging to increase their profit margins. This is as risky as it is rewarding; traders spend time making accurate analyses.
To get started with day trading, study the strategies and decide which is best for your trading plan. Besides the trading robots, every other strategy requires dedication to learning and studying charts. You’ll need to:
The following are the advantages of day trading:
Day trading also has some important disadvantages that you should consider before you begin trading:
Day trading is one of the best ways to make profits on crypto exchanges. You need a good strategy to trade with; consider technical analysis or fundamental analysis to accurately predict price movement. There are several important benefits of day trading but the risks are just as important. Test your strategy repeatedly until you have a good setups to enter and exit positions at the right time.
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