Day trading is an investment strategy where the investor or trader makes numerous trades of an asset or security throughout the day. Although they might end up turning a small profit on each trade, the profits add up depending on their strategy and the number of trades they make in a day. Day trading is very different from buy-and-hold investment where an investor relies on the long-term growth and performance of an investment to make a profit. To be successful in crypto day trading, you need to know the strategies that work best for the traders and investors doing it.
Arbitrage is a trading strategy that relies on the differences in the price of different cryptocurrencies on different exchanges. The trader has to keep an eye on different exchanges to notice slight differences between these prices. If there are differences, they buy at the lowest price and sell at the higher one.
A common strategy used here is taking advantage of cryptocurrency pairs. If one of the currencies in the coin pair is lesser known and the price of the altcoin and stable coin vary between exchanges, there is an opportunity for a trader to take advantage of this difference in value.
Because of how fast things move in the crypto market, many traders use price-monitoring software to keep an eye on things.
2. Bot Trading
Trading bots are automated software used to trade assets, commodities, and other financial instruments. They do so following a set of predefined conditions and can also execute trades at a preconfigured time. When it is time, or when the conditions are met, the bots exchange the trades.
Crypto trading bots can simplify the process of looking at price differences, price movements, opportunities for short-term trades, and exchange fees so traders can make more trades while profiting off each.
3. Range Trading
Range trading relies on sideways markets. These are markets where the price of an asset remains within a tight range without going up or down. There are no clear price trends and this causes a tight range. However, it is still possible to trade within these margins.
They do this by checking the support and resistance levels of price charts, which represent the lower limit and higher limits of the price respectively. Range traders are looking to buy when a cryptocurrency has been oversold, meaning its price is low, and sell when it is overbought, meaning the demand is high and so is the price.
Once you understand how range trading works, you can use it within other markets. Another advantage of range trading is that it lets traders know clear entry and exit points so they can make a profit on the difference.
Crypto day trading is very similar to other types of day trading. That said, a trader or investor needs to understand the different strategies used when day trading so they can maximize profits and minimize losses.