Day trading crypto is a short-term trading system based on buying and selling crypto assets on the same day. It’s a high-risk endeavour made possible by the high volatility and liquidity of the cryptocurrency markets.
The Basics of Day Trading Crypto
Day trading crypto is a strategy of entering and exiting a position in the market within the same day. Also called “intraday trading”, indicating the fact that transactions are typically opened and closed in a single day.
The goal of crypto day trading is to profit from small activities in the market. Day trading in the cryptocurrency market is particularly profitable as cryptocurrencies can be volatile. For reference, it’s a rarity for a traditional stock, or even a commodity, to see a 10% jump in value in a single day. However, such jumps are very common in cryptography.
Like other forms of cryptocurrency trading, day trading is more than guesswork. You must have a proper strategy and awareness of basic and technical analysis for day trade crypto.
Crypto Day Trading Strategies
As explained above, day trading crypto assets like bitcoin would only be successful if you have the right cryptocurrency day trading strategy. Here are some strategies that can help you increase your profits from day trading the market:
Scalping is a day crypto trading strategy in which traders attempt to profit from increased trading volume. You can exit trades within minutes of entering them, making small profits along the way. Some scalpers also use trading bots to automate their trading activities and make them more convenient for them.
Ideally, a scalper wants to make a small profit. Scalpers need a lot of capital to make profits as the profits from this strategy are usually very small.
Arbitrage is one of the most popular strategies out there. It involves buying a coin on one platform and selling it on another, manipulating the price differences between the two platforms.
For example, Bitcoin is worth $45,000 on Binance, while on Coinbase the asset might trade for $45,500. If you buy 2 BTC on Binance and sell it on Coinbase within minutes, you could earn $1,000 less the fees.
Arbitrage also tends to make small profits as scalping. Accordingly, the larger your order quantity, the more profit you can make.
It is a statistical trading strategy. By performing different statistical calculations on historical price data, you can try to find trends in the market. Technical trading is based on the assumption that past prices have some impact on future prices.
Traders should take the time to familiarise themselves with the upcoming rules and regulations affecting the taxation of cryptocurrency gains. For example, crypto is not exempt from tax on short-term capital gains. For day traders, selling crypto held for less than a year is taxed as marginal income. Be sure to include your crypto earnings when reporting earnings online or to your accounting professional.