Let’s face it, the cryptocurrency market is presently seeing one of its worst ever slumps. In such a situation, it is only natural to wonder if there is a way to earn from such a bear market using numerous trading tools and methods. You might even wish to just try and stabilize your portfolio by bringing down the risk factors and limiting your exposure.

Irrespective of your trading goals and the notions behind your trading strategies, you may be familiar with the concept of day trading. Either you’re simply keen to learn more about it or you’re apprehensive about it and want to dive deeper into the factors that affect it. For instance, you wonder how Bitcoin (BTC) can be traded during the day and whether it will reap any profit.

Read more: crypto spot trading

In this article, we will explore day trading and the way it works. We will also assess how one can earn from day trading and look at some tips to get you started.

What is day trading?

Earlier, only trading companies or major financial institutions were able to purchase and sell assets a number of times in a single day. As automated trading’s popularity continues to grow, anyone can practice day trading using automated systems that can process the trades on your behalf. All you need is a device and a good internet connection and you’re all set to day trade.

Day trading or intraday trading is where assets are bought and sold on the same day, typically through computers so they can leverage even the smallest of the market movements. The goal here is to not make one big profit but to accumulate multiple small profits from the fluctuations that occur.

Day trading crypto

Crypto day trading requires you to enter and exit a trading position in the market during the same day. It gets the name ‘intraday trading’ because the positions need to be opened and closed in a single day. The aim of day trading crypto is to make a profit with the small market movements. Day trading can be very rewarding in the cryptocurrency market as cryptos are rather volatile. Look at it this way–you may not find the typical stock or a commodity’s value going up by 10% in a day but it is very likely to happen in the crypto market.

There’s more to day trading than just guesswork. There needs to be an effective crypto day trading strategy in place along with a sound understanding of fundamental and technical analysis. Indicators like price action, volumes, and chart patterns can come in handy when deciding the entry and exit points in the investments.

Here are some day trading strategies that investors use:

Algorithmic trading

Building algorithmic trading bots are often easier than what one would think. Modern technology like an in-browser Python code editor is well capable of putting trading strategies in place for day traders. Even if you are inexperienced or do not have a fair understanding of coding, you could make use of the drag-and-drop options and have automated crypto trading bots designed.

Scalping

Scalping refers to the technique of earning profit by accumulating small wins. You end up trading in a big volume so you enter and exit hundreds or trades within a day. It is an active style of trading and is best suited to seasoned investors as you need to keep a close watch on the rates.

Arbitrage

Arbitrage trading refers to buying assets from one exchange and selling it in another to make a profit from the price differences. But to be able to make a substantial profit, one has to take into consideration the deposit and withdrawal fees along with low volumes.

Day trading crypto and profit

Profit is the key motivator for anyone who indulges in day trading. Cryptocurrency prices keep fluctuating as the market is very volatile and this is where traders with sound knowledge of the market can benefit. With a good crypto day trading strategy and the ability to assess trends, the crypto market can bring you great profits. Another reason why people opt for day trading are the short-term profit-making opportunities that it entails.

Is it for you?

Day trading demands patience, time, and effort. In crypto day trading, it is easy for one to lose sight of the overall picture because of the small trading window one has. Day trading is a combination of technical analysis, news analysis, and one’s best judgment. While this can be hard to achieve, it does turn out to be rewarding. 

If you have the time to spare and the will to carry out the hits and trials until you have an effective strategy in place, day trading can be profitable for you. A smart approach is to automate the trades using crypto trading bots.  

Common day trading pitfalls

Lack of automation

It is not practical for any trader to be glued to their screens to monitor trades all day long. Thus to ensure you don’t miss out on any major price movements, you should consider automating your trading strategy. There are several advantages of using automated crypto trading bots. These go on from emotionless trading, better trading speeds, backtesting capabilities etc.

(Mis)understanding the market

Understanding the market dynamics and the way it works is key. If the basic understanding is missing then even the finest trading tools cannot come to your rescue. Once you’ve made up your mind about diving into the crypto world, read up as much as you can on crypto trading, explore some online courses and be thorough with the details before jumping in. 

The wrong tools

Crypto trading tools and strategies can have numerous features that set them apart. A few tools and strategies work in tandem with a particular set of market conditions and trading types. However, they may turn out to have little or no effect if one doesn’t understand how they need to be used. Certain wrong steps can even lead to a loss. 

Locked in a position

Many times, you will be able to open a position easily but exiting the position can seem difficult. There are several cryptocurrency exchanges that are basically illiquid. This means that they do not have enough trades to fulfill your order and give you the price quoted. Even if the exchange has proper liquidity, the low volume of trades can impact your ability to exit the trade.