In one of our previous blog posts, we talked about spot trading. Now we are going to talk about day trading strategies. This is a beginner’s guide to day trading, where you will learn some of the best day trading strategies.
You must understand the fundamentals of day trading methods in order to become a crypto day trader. Day traders are active in most financial markets, including stocks, currencies, commodities, and, of course, cryptocurrency markets.
Day trading, to put it simply, is a trading strategy that comprises entering and exiting positions on the same trading day. This method is also known as intraday trading because the trading takes place on the same day. Day traders use intraday trading strategies to profit from price changes in financial assets.
Here are some of the best day trading strategies
One of the most common day trading strategies is scalping. It requires profiting on small price movements that happen on short time frames. These can include liquidity gaps, bid-ask spreads, and other market “anomalies”.
Scalpers frequently trade on margin or in futures contracts to increase their profits through leverage. Because percentage price goals are typically smaller, larger position sizes make more sense. In reality, this is true for the majority of day trading techniques.
Another very popular day trading strategy is range trading.
Range trading is a simple strategy that relies on candlestick chart analysis and looking at support and resistance levels. A quick explanation of support and resistance levels: they are critical areas where demand and supply factors meet.
Range traders, as the name implies, seek out price ranges within the market structure and generate trading ideas based on those ranges. A range trader can buy at the support level and sell at the resistance level if the price is ranging between them.
Range trading is a great starting point for day traders, but it requires a better understanding of the support and resistance levels. We published an article covering candlestick analysis, support, and resistance. You can read more about them here.
Then another day trading strategy is high-frequency trading (HFT).
High-frequency trading is a kind of algorithmic trading approach that quantitative traders often employ or “quant” traders for short. This day trading strategy consists of creating algorithms and trading bots that can instantly enter and exit several positions in a short period of time.
When we say “short”, it can be milliseconds. A few milliseconds of advantage for a high-frequency trading business can give a major advantage over competitors.
The HFT day trading strategy is a rather advanced strategy. Creating HFT bots requires an understanding of complex market techniques as well as a strong foundation in mathematics and computer science. Having said that, the HFT strategy is more recommended for experienced day traders.
How to become a day trader in the crypto market
Day trading can be a lucrative strategy, but there are a few things to consider before getting started.
Because day trading involves quick decision-making and execution, it may be extremely stressful and demanding. Day trading is also highly risky and needs a thorough understanding of the crypto market.
You should ask yourself this: Are you capable of carrying all of this weight while potentially losing money? We only hear about successful day traders, but what happens when you are not successful?
The good news is that with CoinPanel you will be able to automate trades, so you don’t need to monitor the market all day.
You can check out our Stop-Limit/Stop-Market, Take-Profit-Limit/Take-Profit-Market features. We watch the markets 24/7 for you, so you can relax, knowing your strategy is locked in.
Don’t forget to check out the other articles of the Crypto 101 series here.