Day trading involves buying an asset and selling it on the same day. In day trading, you try to take advantage of short term movements in the markets.
Profits are made when a trader is able to purchase a chosen asset at a relatively low price, and sell it at a higher one. The difference between those two prices, minus a small fee, is the net profit of that position.
Day trading is already very popular among stocks and forex speculators, and now it is starting to gain more and more momentum and interest in the crypto currencies market as well.
A simple example of a day trade would be when you buy 1 BTC for 9,000 USD at a certain time, and sell it one hour later for 9,500 USD. This is a day trade because the actions of opening the position by buying, and closing it by selling, take place during the same day. The profits would be the difference between those two prices, and in our case: $9,500 – $9,000 = $500.
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Why Should You Day Trade Crypto Currencies
When you day trade, you want to find a dynamic asset, one that is influenced by various factors and potentially fluctuates quickly and often. Crypto currencies are a great example.
Most people are familiar with Bitcoin but there are hundreds of other cryptocurrencies, known as altcoins, or alternative coins. Each one of them provides another solution and uses quite different technology features. But what is interesting for us at the moment is mainly their volatile nature that makes them so attractive for day traders.
When you look at assets in different exchanges, you can rarely find stocks, bonds or even currency pairs, that change more than 10% of their value in one single day. In crypto exchanges, on the other hand, you’ll not have to work hard to find cases in which the coins rose hundreds and even thousands percent during the daily time frame. Simply put, the prices of virtual coins tend to change a lot. The more the price changes, the more opportunities to buy low and sell higher there are.
Day Trading VS Longer Term Investments
When you buy an asset, you can sell it right away or hold it as an investment for several years. There are many time frames and every participant in the market has his own preferences and considerations.
There are few advantages for long term trades, such as the ability to base your decision on an in-depth research and analysis. However, longer investments also come with certain risks. There are so many factors that might affects future prices, and most of them are out of anyone’s control and cannot be anticipated.
This is especially relevant when it comes to the crypto digital coins market, which is after all still young. Even though there are many indications that this field is here to stay and to keep growing, it still needs to pass the test of time and prove stability.
When you day trade, you don’t need to worry about geopolitical events, inflation, or government’s actions. You simply try to take advantage of quick price movements during the day. You take your profit and get out, that’s it.
Advantages of Day Trading Crypto Currencies
Professional day traders have probably the best job in the world. When you day trade, you have the freedom to trade from wherever you want and whenever you decide. You enjoy constant intellectual challenge, and most importantly, huge profits potential.
Look at the attached image showing a movement of the TRX/BTC digital currency pair. Where else could you double your investment and even more on the same day, and triple it on the following day?
If you were to buy at the beginning of the day at point A when the price was merely 6 cents, you could sell it at point B at around 14 cents which is more than 100% gain. And if you would wait another day and sell it at point C you could even triple your traded capital. When you compare it with the yields of other investment channels, you’ll find that it’s hard to find stable ones that provide more than 5-10 percent for the entire year.
There are many other advantages for day trading, such as not being exposed to long term risks and being able to enjoy the exact same price movement again and again. You also don’t need to deal with the emotional ups and downs when you hold an asset for long time, seeing it keep changing.
The Downside of Crypto Currencies Day Trading
With all the above being said, cryptocurrency day trading has a downside and there are risks involved in it.
It’s not that easy to be able to day trade crypto currencies successfully over time. The volatility can work also against you and the market might be unpredictable and not always behave as you would expect.
As a matter of fact, most people who day trade lose their money by making wrong decisions.
The good news is that people tend to make the same mistakes. When you know what they are, you can avoid them. With good guidance and the right mentality you can be a successful day trader, and we are here to help you with that.
To be a good day trader, you have to spend time and energy in order to track the market and be ready whenever good opportunities occur, and so you can manage your existing positions.
Another thing you should consider is that each trading position carries a small commission. When you day trade, you naturally open and close a relatively high amount of positions and therefore pay some additional fees.
Where to Day-Trade Crypto Currencies
There are different platforms where you can day trade crypto currencies. The first type is CFD and Forex brokers. They create artificial instruments that imitates digital coins’ behavior and let you bet on their future direction. You are not actually buying the currencies themselves, but an investment tool that represents their value and allow you to make profits whenever it changes.
With these brokers you usually use fiat currencies, such as USD or EURO, in order to speculate. They offer leveraged trading, which allows small traders to take larger positions. What it basically does is to strengthen the impact of any price movement. As a result, the profit potential might be higher, but the risks for losing your money fast increase as well.
The other option, is to use real crypto currencies exchanges, where you actually buy the currency you trade on. There are some very credible exchanges around such as Binance. Many professional traders use them as their main platform for trading crypto.
In these exchanges you usually use Bitcoin as the basic currency which is traded against other ones.
However, some exchanges also offer using other coins such as Ethereum and USDT for this purpose.
Day Trading Crypto Currencies – Bottom Line
Day trading is a great method for taking advantage of short term events in the market. You use those changes and turn them into profits without being exposed to long term risks. The volatility of crypto currencies is the quality that makes them suitable for day trading and for that reason, they keep gaining popularity.
Professional traders enjoy huge gains, freedom and flexibility. But at the same it’s not such an easy task and it involves some risks.
If you want to become a profitable day trader, you need to know that it requires some time and effort. You need to learn and also develop the right mentality. Eventually, you have to choose wisely the platform where you apply your knowledge and strategies.
The good part is that we are here to lead the way for you, and the rewards at the end absolutely worth it.
Interested in learning how to day trade cryptocurrency? Start right now with our Day Trading Cryptocurrency Course.
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