When we talk about cryptocurrency day trading we are referring to the negotiations between two tokens or perpetual contracts that, as the name implies, last up to one day. After making a thorough analysis of the market, the goal is to obtain benefits with the rise or fall of your price, by predicting price levels. The difference with other cryptocurrency investment systems (such as long-term investments) is that these operations can only last a few hours.

When day trading cryptocurrency, you should carefully analyze the market volume and how the price is advancing. If an order was placed several hours ago and the price is lateralized, the next movements become unpredictable.

Why are traders day trading cryptocurrencies?

  • Day Traders prefer to close their positions before market volume declines and their trades are affected. Unlike Forex, the crypto market does not have a closing time, although it does have more activity during certain hours than the rest of the day.
  • Day Trading is a short-term strategy in which to open numerous positions and achieve a day-to-day profit objective instead of a longer-term investment in which long-accumulated profits may disappear or be considerably reduced in future fluctuations that go against him.
  • It should be noted that multiple trading platforms have strict commission policies and require a high fee for each operation that is kept open at certain times, so naturally, it is preferable to complete them before that time.

Day traders chase market liquidity

Liquidity plays a very important role in day trading, which can be defined as the speed in which one asset can be traded for another.

In the Forex market, trillions of dollars move daily, although cryptocurrencies still do not have the liquidity expected in the future, since currently there are not many companies and individuals who use them as a means of exchanging daily value. However, with each passing day more liquidity is created in the crypto market. The growth in the adoption of this new means of payment is notable.

As with many strategies, day trading of cryptocurrencies involves some risks due to the large spreads that may exist when liquidating a position.

However, many experienced traders already know how to control it, and continue to use it as a means of capitalization; in addition to today there are many brokers & exchanges with a large number of participants that provide liquidity to the market.

Day trading usually involves high leverage

Leverage works like a line of credit or "loan" that the exchange gives you, thus allowing you to enter the market with higher trading power than what you actually have. For example, if you have $100 and place an order with 100x leverage, then you would be trading at $ 10,000. With this investment capacity, you will be able to win as if the trade were of this size (and also lose), so it is necessary to establish solid risk management.

When day trading cryptocurrency, leverage comes in handy because it helps you make the profits you seek on a daily basis without having to rely on multiple trades. If you set a goal of getting at least 5% of your capital in one day, you can achieve it only with a leveraged trade, which allows you to keep your head calm and not act under the frustration of not having made a profit in that market. day.

Although leverage is an excellent tool for cryptocurrency day trading, it is also a strong double-edged sword, as leveraged instruments can cause total capital loss in just one trade. For this reason, it is not recommended for people who are just starting to invest in cryptocurrencies, but more suitable for those who already have a little more experience with this market.


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