In the past, only brokerage firms, and financial institutions in general, could afford to buy and sell assets repeatedly during a trading day.
However, day trading has become accessible to everyone due to the growing popularity of trading plain and simple. Retail investors can even use automated trading systems to trade short term.
What is day trading?
Day trading, sometimes called day trading intradayis the practice of trading short-term listed assets.
The day trader tries to take advantage of more or less weak price movements. For example, instead of buying Bitcoin at $20,000 to target its high of $70,000, the day trader can only sell back at $20,500.
Its profits in a trade are usually very low, but the idea is to make several operations in a day or week and to take advantage of the accumulation of small profits. Day trading is therefore more difficult than buying and holding.
Day traders often use price action for their decision making. Since there isn’t enough fundamental news in a day to move prices, the day trader often uses technical analysis to take advantage of micro-movements in cryptos.
In day trading, you can use technical indicators and price action. But today there are many automation or semi-automation tools to help in decision making.
What time units are used in day trading
We often show the daily chart (D1) to analyze Bitcoin for example. But if you are day trading, this chart only adds a candle every 24 hours. These are not enough actions to exploit.
In day trading, we often use shorter time units such as the one-hour chart (H1) or the 15-minute chart (M15).
This indicates faster price movements as well as profitable technical setups. Basically, volume, support and resistance are the main things traders look at during the day.
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Day trading and crypto swing trading, what is the difference?
Most crypto traders do swing trading. Swing trading takes advantage of the relatively long-term movement of cryptocurrencies, for example several days to several months. Unlike day trading which often involves cutting positions at the end of the day.
Is Crypto Day Trading Worth It?
If the market remains calm for a long time, as is often the case with cryptos after a bear market, retail investors get bored and tend to move to shorter time frames in the day trade.
Day trading has its own advantage and his disadvantages.
- As for the advantages, we quote a limited exposure to the market, not being surprised by a big move because you actively observe the prices.
- In addition, if you have developed a profitable strategy, day trading can allow you to earn regular income in the crypto markets.
But day trading has many disadvantages.
- Since you are always exiting your positions to make a profit, you are almost certain to miss a good part of the long move. Aside FTX CEO, Sam Bankman, Rarely are investors building their crypto fortunes through day trading!
- Day trading can be time-consuming, and because you’re often cutting your positions, gains are limited.
- The loss percentage of crypto traders is greater among day traders than among long-term holders.