Day trading of digital currency is one of the most profitable and easiest ways to earn money from the digital currency market. Today, many traders are learning how to enter and exit the market in one day and have used coin price fluctuations for massive profits.
Taking advantage of minor fluctuations in asset prices, day traders engage in repeated buying and selling activities to generate profits. In fact, what is meant by day trading is the method in which investors make several transactions in one day, and the purpose of doing such transactions is to make a profit through minor price changes. To learn more about the process of day trading, read this article to the end.
What is meant by day trading?
Day trading, as the name suggests, is done throughout the day and in very short periods of time. In the past, only people who owned large businesses in the financial markets could invest in this market, but with the development of the Internet, trading became possible for everyone. It was in this direction that daily trading found a good place among users of financial markets such as the digital currency market . Of course, this point should be taken into account that novice users should be very careful and planned when making such transactions.
Cryptocurrency day trading is a strategy that involves entering and exiting a position in the market on the same day, also known as “intraday trading”, which refers to the fact that trades are opened and closed within a day.
The whole purpose of day trading cryptocurrencies is to profit from small movements in the market. Day trading in the crypto market is particularly profitable because digital currencies can fluctuate. For reference, it’s very rare for a traditional stock or even a commodity to see a 10% jump in value in one day, but in crypto, jumps like this happen often. As with other forms of cryptocurrency trading, day trading is beyond speculation.
Is day trading profitable?
The main reason for daily trading of digital currencies is to make a profit. Cryptocurrency prices are more volatile than any other asset class, and this is an opportunity for traders who know the market.
As long as you have a strong day trading strategy and are able to analyze trends, the crypto market can be profitable for you.
Crypto day trading is great because it offers short-term opportunities. Instead of buying, holding or taking buy positions, you can trade daily and profit from the market in a short period of time.
Financial market traders can make a lot of profit from their day trading, but it is possible that beginners in digital currency markets are discouraged from day trading for various reasons. Carrying out such transactions in the digital currency market can bring benefits that we will examine further, stay with us.
Advantages of digital currency market
The market is open weekly
One of the important advantages of the digital currency market is that it is always open. Therefore, a market that never closes brings many advantages and opportunities for traders, but these advantages are possible if you consider effective strategies before investing.
Fluctuation in the market is a rule
As for the digital currency market, you should keep in mind that market conditions are highly unpredictable with rapidly fluctuating rates. For example, if a digital currency is 12,000 dollars in one day, it can fall to 6,000 dollars. Therefore, as a day trader , you can make huge profits under such fluctuations, but you may also incur huge losses in your portfolio along with huge profits. Therefore, effective strategies, market trends and day trading principles should be kept in mind.
Unlike other exchanges, crypto exchanges usually have no hidden fees. This means that day trading is easy and affordable if you choose a platform that charges low transaction fees . If you want to check the prices and trading volume of certain assets, you can easily do so from crypto information websites like CoinMarketCap . These platforms also provide you with charting tools that can help you determine your moves as a day trader. Such data transparency in the cryptocurrency market helps day traders make informed decisions.
Disadvantages of the digital currency market
Lack of knowledge in the digital currency market
The digital currency market is such that most of the beginner and inexperienced traders and investors are present in it, that is why most of the beginners suffer losses in doing daily transactions.
No strict rules
Decentralization is the foundation of the crypto world. Unlike stock markets where everything is controlled by regulatory authorities, there are fewer rules in the crypto market. You can easily start trading regardless of age, geography or skills (however, centralized exchanges now use KYC as a measure to keep users safe.) This means that if you want to day trade, the barriers in the crypto market are lower than in other financial asset markets.
Common strategies in day trading
Scalping is one of the common strategies in daily financial markets . In this method, the trader makes a trade in a short period of time and exits quickly. Since the volatility in the digital currency market is not high, traders can focus on small profits, but in the end these profits can add up to a significant amount. This method is not suitable for beginner users, because this method requires high risk management .
- Trading in the range of volatility
The trading strategy in the range of volatility requires a price fluctuation channel. The trader can earn profit through this channel for buying and selling digital currencies . Of course, this strategy may be simple, but in order to make such transactions, the trader must analyze the support and resistance levels well in order to recognize the best time to make the transaction.
- High volatility trades
In the high volatility trading strategy, algorithm development and trading robots are used to perform a large number of transactions in the least amount of time. Some people mistakenly think that in a high volatility trading strategy, the trader needs accurate information, but in most cases the information is not easily available.
How to choose the right currency for daily trading
After the Bitcoin digital currency , many cryptocurrencies have entered this market, all of which are not suitable for investment. This is why traders should have their strategies before making any trade. In order to have trading strategies, the trader must be familiar with all types of digital currency market analysis. It is practically impossible to choose the best digital currency for daily trading, but we will continue to examine some factors that can be considered for daily trading .
- White paper
The white paper is a source where you can see all the explanations related to digital currency.
- Market Capitalization
One of the other factors that should be taken care of in daily transactions is the market value of digital currency. Because the digital currency market value will provide an overview of the market trend to the investor.
- Circulating Supply
Circulating capital refers to the number of digital currency units that are publicly offered.
- Total supply of digital currency
All digital currencies are in limited supply and there are only a very few digital currencies that are unlimited in number. The total supply is the number of digital assets that are already in circulation, plus the number of newly mined digital currencies that are not on the market.
- Volume of transactions
Transaction volume means the same number of digital currencies traded in a period of time. The trading volume in the market can be considered as an indicator in the digital currency market. Because increasing market growth is directly related to increasing volume in the market. Most people think that because Bitcoin digital currency is considered as a well-known currency in the market, it can be used as a daily trade. If you can use other digital currencies such as Cardano, Bitcoin Cash .
Who is daily trading suitable for?
Those people who want to trade on a daily basis should keep in mind that a daily strategy should be used to trade daily. Of course, this daily strategy can have high profit potential, but it also has high risk. Some believe that such a strategy needs to be decided in the shortest possible time.
This is why day trading is not suitable for all people, and making a profit in this strategy requires a correct understanding of the market and high risk tolerance. If you have the ability to sit behind the system for a long time and check the market fluctuations for a long time, this type of strategy can be suitable for trading.
Financial markets such as digital currency have provided a good opportunity for traders to earn significant income. This type of strategy can be very important for Iranians due to the conditions in the country. Perhaps at first glance, the day trading strategy is simple, but at the same time, it has its own complexities. We hope that reading this article will be useful for you.