What is cryptocurrency day trading?
Day trading is a term used to describe the practice of buying and selling instruments for periods of less than one day. Day traders use a combination of strategies and analysis to predict market movements and make profits over the course of hours, minutes, and even seconds, seeking to exploit arbitrage opportunities, price divergences, and volatility following news announcements.
From time immemorial, intraday trading has been an integral part of the traditional stock and commodity markets. Although trading hours for these instruments are limited, cryptocurrency exchanges are always open. This makes cryptocurrencies uniquely profitable for talented day traders.
Tips & Tricks: How To Make Money By Day Trading Cryptocurrency
It's no surprise that 95% of day traders never make a profit. After all, if it were that easy, everyone would be doing it. While there is no surefire recipe for success, there are a few principles that can help you avoid many of the pitfalls that drown novice day traders.
Set clear goals for each trade: If you are a day trader, you trade quickly, you cannot allow greed or fear to keep you from closing a position. When the deadline set by you expires, take away any received paper profit or loss and do not look back. It's incredible how much money people lose trying to recoup their losses or maximize profits.
Use stop-loss orders: this is a great way to neutralize the influence of emotions on day trading. Set a Stop Loss level when you open your position to ensure that you don't lose more than you can afford. Thus, the application will automatically liquidate your position when this level is reached, and thereby eliminate the risk of succumbing to feelings and waiting for a reversal that will never happen.
Use take profit/limit orders: like stop-loss, they help maintain a healthy level of stoicism. By using a take-profit order to sell coins when the target return (1 – 2%) is reached, you will avoid the temptation to hold out longer in the hope of a bigger profit. Most often, a trend reversal occurs before you have time to react to it, and in a split second, a 2% return turns into a -1% loss.
How much can you earn?
There is no limit to the potential income from day trading. At the same time, it will largely depend on the capital with which you start. Therefore, it is best to evaluate it in terms of profit as a percentage.
Using the strategy of sustainable accumulation of incremental profits (more about it later), it is quite possible to earn 100-200% per month. Granted, this is a pretty ambitious assumption for a beginner, but over time it is certainly achievable. Just don't risk more than 1% of your total funds on a single trade.
Cryptocurrency day trading strategies
The idea behind cryptocurrency trading is to look for trading opportunities that have the potential to make quick profits. If day trading suits you personally, let's move on to a step-by-step guide on how to participate in day trading cryptocurrency.
The secret to successful cryptocurrency trading is learning to recognize opportunities for quick profits. This is not a traditional investment, where you need to analyze the data of fundamental analysis and try to select assets with long-term growth prospects. Day trading is all about applying reliable strategies to make quick short-term profits. So, here are a few of the favorite strategies of day traders:
Sustainable Incremental Profit Accumulation Strategy (SIPAS)
Beginners in day trading should try to minimize the chances of market fluctuations. This can be difficult when dealing with volatile instruments like cryptocurrencies, but there are some steps you can take. This is where a robust conservative strategy like SIPAS is just right.
Use USDT as your base currency: large fluctuations in one cryptocurrency in a pair complicate things, not to mention fluctuations in both currencies. Being stable, Tether is protected from the sharp fluctuations that usually occur in the crypto market. This means that you can focus all your attention on the coin you expect to profit from.
Set realistic profit targets: aim for a 1-2% return on several different altcoins that have shown relative stability over the past 2-3 days. You should expect 7-12% profit in 12 hours of trading. This means a weekly profit of over 50%.
Avoid more volatile altcoins: you can get 5-15% on one trade with a more volatile asset, but you can lose the same amount. Of course, you can make money by trading with large swings, but this is a completely different strategy that is not suitable for beginners. When using SIPAS, limit your profitability to 1-2% on multiple trades to avoid big losses.