The world of cryptocurrencies has exploded in the past few years. The value of the cryptocurrency has topped up to over $1 trillion, and it is one of the highest high-yield investments in the digital world. Bitcoin is the most well-known cryptocurrency, but there are many more, and many are still being created. There are various ways of making money in cryptocurrency, and trading is one of the most effective ways. There are different kinds of trading, but today, we will look at Day Trading. In this article, we’ll explore five reasons why you should day trade crypto in 2022
First, let’s look at Day trading crypto and its implications.
What is Day Trading Crypto?
Day trading crypto is a form of trading in which you buy and sell crypto on the same day. It can be referred to as a short-term trading strategy that entails buying and selling crypto assets on the same day to make a high profit.
Day trading crypto is a form of trading that has become popular with the introduction of computers and software.https://www.ig.com/en/cryptocurrency-trading/benefits-of-cryptocurrency-trading#:~:text=The%20benefits%20of%20cryptocurrencies%20for%20the%20global%20economy%20are%20thought,the%20secure%20nature%20of%20cryptocurrencies.
Compared to other forms of trading, day trading is a high-risk venture enhanced by the cryptocurrency market’s volatility and liquidity. It requires a more profound knowledge of blockchain technology and crypto market mechanism to succeed.
Day trader uses any advantage in the crypto market to make an immediate profit. To be a successful crypto day trader, you must know how to take advantage of tools and resources.
5 Top Reasons to Day Trade Crypto in 2022
Day trading crypto has many benefits, such as the opportunity for high-risk, high-reward trading and the ability to set your own hours. The best thing about it is that you can make money relatively quickly with a small investment.
Some of the top reasons to day trade crypto in 2022 are:
1) The market is volatile: You have more opportunities to make money by buying and selling different coins quickly. The volatility of the market poses a huge advantage to the day traders. A coin can pump up in seconds, and you can cash out immediately. The advantageous nature of the market volatility can be dangerous if you are not solid in your knowledge of crypto and blockchain. This is why you must implore the help of resources and tools to navigate the market volatility to make profits.
2) It’s easy to start with small amounts of money: You don’t need thousands of dollars to get started, which makes it accessible for everyone. Unlike other aspects of trading, day trading is the cheapest, to begin with. With as low as $10, you can start day trading crypto. The only limitation is that your profit margin will be small because the more your capital, the higher your profit. Your profit comes in percentages. Imagine you traded with $10. A 10% profit will be $1. But if your trader with $100, a 10% profit will be $10. However, do not invest more than what you can lose.
3) You can always be on the lookout for new opportunities and trades as they present themselves. As a day trader, you always keep a tab on the market. This allows you to grab opportunities as they present themselves in the market.
4) It offers short-term high-yield opportunities/better leverage: Day trading crypto enables you to take advantage of short-term high yield opportunities. In 2021, Elon Musk made a statement on Dogecoin, and within minutes, the coin’s value shot up and began to drop after a few hours. Only day traders can quickly take advantage of the sudden increase before other traders and investors realise the changes. Also, you get better leverage with day trading than in the traditional market.
5) The crypto market is open 24/7: One of the reasons to day trade crypto is the fact that the market is available 24 hours. So you have broad access to take advantage of any time of the day to make a profit. You can be in a country and partake in an ICO in a different country, even if the proposed time falls in the middle of the night in your country of residence. The 24/7 feature of the market coupled with the revolutionary technology makes, say, trading highly profitable.
What are the Strategies to Day Trade Crypto in 2022?
Step 1. Find a Cryptocurrency to Day Trade
Cryptocurrency trading is a digital currency trading system that allows users to buy and sell different currencies. When trading cryptocurrencies, traders can use the same strategies that they would use in other forms of trading.
Many different cryptocurrencies are available for trade, but not all are created equal. Some more popular ones include Bitcoin, Ethereum, Ripple, and Litecoin.
Finding a cryptocurrency to day trade can be very confusing and challenging. You can be drawn apart from choosing to day trade a coin with multiple use cases, meme coin, or NFTs (non-fungible tokens). The best option is to use various sources to vet a coin. There are several places where you can easily see what crypto coins promise to trade daily. They are:
- Cryptocurrency exchanges – Cryptocurrency like Binance, Kraken, Coinbase, Gemini. Crypto.com list coins each day. For example, Binance lists coins uprising in value and the ones falling.
- Social media handles like Twitter or Telegram
- Data aggregators like CoinMarketCap or Coingecko
- Crypto tools like TokenSniffer or PooCoin charts
- Crypto websites such as ICO Bench, Smith & Crown or Top ICO
- Defi Platforms
- NFT marketplace
You should always research before you start day trading cryptocurrency because there can be a lot of risks involved with this type of investment. One way to reduce this risk is by using a stop-loss order on your trades to limit your losses if the price fluctuates too much in one direction or another.
Step 2. Choose A Trading Platform
There are many trading platforms that you can choose from. But before you decide which is the best for you, it is essential to know your needs.
Some of the most popular trading platforms are the following:
- Binance – Overall best crypto exchange/supports over 600 cryptocurrencies and 1000+ altcoins
- Coinbase – Best for convenient, easy trading/Best for beginner
- Coinbase Pro – Best for low fees
- Crypto.com – Best crypto mobile app
- BitMart – Best for Altcoins
- Cash App – Best for Bitcoin
- Bisq – Best decentralised exchange
- Gemini – Best for security
- Kraken – Best for experienced traders and low fees
Before deciding on the particular crypto exchange to go for, you must consider the factors below:
- The User Interface (UI)
- Number of supported coins and tokens
- Numbers and types of funding/payment options
Step 3. Choose Your Strategy
As a day trader, you must devise a winning strategy to execute your plans. There are different types of strategies you can employ. Below are some of the main types of strategies you can utilise daily. One of the pointers in choosing a preferred strategy is the complexity of the market and your competence with crypto knowledge.
1. Scalping – This is one of the most popular strategies used by crypto day traders because of its low risk, potential profitability and ease of bot automation. In scalping, you take advantage of the small change over a short period using a large amount of liquidity. Scalping has the fastest turnarounds and is used to build dozens of small wins. It is not a strategy to get big wins.
2. Range Trading – This day trading strategy involves majoring in the non-trending markets by identifying stable high and low, which is shown on the candlesticks charts as support levels and resistance. Here, you purchase on the support levels and sell on the resistance level. Most times, day traders employ this strategy to purchase a crypto asset when it is oversold and sell when it is overbought to make a profit quickly.
3. Technical Analysis – This day strategy involves using market data to predict a crypto security asset’s possible future price movement. Technical analysis is a more advanced strategy involving knowledge of statistics that can be used in any financial market with historical trading data to evaluate possible future profits or losses using past performances as a premise. To maximise your chance of making a profit using this strategy, it is advised you employ the help of technical analysis indicators. Currently, the best analysis indicator for crypto day traders is the “Moving Average Convergence Divergence (MACD).”
4. Arbitrage – This strategy is best used to day trade crypto. It involves purchasing a cryptocurrency on one exchange and selling it on another exchange at a higher price to make a profit. Here, the trader takes advantage of the difference in the price of crypto pairs across different exchanges. To use this strategy, you must conversate with at least two or three exchanges and have an account with them. Arbitrage does not sound simple as it seems. However, you can easily automate it using crypto tax software to ease the process.
5. High-Frequency Trading (HFT) – This is an algorithmic day trading crypto strategy used to develop algorithms coupled with the aid of trading bots to enter and exit a crypt asset quickly over a short period. To use this strategy, you have to be a quantitative trader due to its complexity. Here, the day crypto trader uses a computer programmed to host sophisticated algorithms to capitalise and take advantage of price changes that occur in milliseconds and seconds by monitoring and analysing cryptocurrencies across several exchanges to identify trading triggers and trends. This strategy is solely designed for advanced traders with solid mathematics and computer science knowledge.
How to Day Trade Cryptocurrencies and Make Money on the Ups and Downs of the Crypto Market
Day trading is buying and selling a cryptocurrency to profit from short-term price fluctuations.
Day trading cryptocurrencies is a risky proposition. It requires constant attention to market conditions, quick reflexes, and decisive action. You always have to keep a tab on the market.
The basics of day trading are simple: buy low, sell high. But things can get complicated quickly if you don’t have a strategy in place before you start trading. Solid knowledge of cryptocurrency and blockchain technology is vital for day crypto traders. Your level of knowledge and the degree to which you want to penetrate the market will guide you on the strategy to employ.
Lastly, learn how to control your greed. If you are greedy, there is a high chance that you will always make a loss when day trading crypto. You mustn’t make 50% and above always. A 10% profit is also okay. A check on your greed level is an essential psychological pre-condition to enter the market.
Frequently Asked Questions (FAQs)
Can I day trader cryptocurrencies with $200?
Yes, with $200, you can open an account in a cryptocurrency exchange, fund it and begin to day trade. You don’t need many funds to start day trading cryptocurrency.
How much can you make day trading crypto?
There is no specific answer to that. The amount of money you can make depends significantly on the coin’s volatility. The higher the coin’s volatility, the higher the profit you can make. You must know that high volatility poses high returns and losses as well.
What day is best for crypto trading?
Fields (1931) stated that the best trading day of the week is Saturday, using the day of the week effect.
Is crypto good for day trading?
As long as you have a good knowledge of cryptocurrency, blockchain technology and a good strategy, day trading cryptocurrency can be very profitable for you.
Conclusion: Why You should Day Trade in Crypto Markets
Day Trading is an investing technique used by traders who trade within the same trading day. Day Trading can be done in stocks, futures, foreign exchange and cryptocurrency markets.
It is a high-risk investment strategy that requires constant market monitoring and quick decision-making. Investing in this way without any knowledge or training in the field can be very stressful and dangerous.
The volatility of cryptocurrencies makes them perfect for day trading. You can make a lot of money if you buy low and sell high on short-term price fluctuations.