This article will explain in detail what day trading is and how you can day trade crypto. Moreover, it will dive into how you can day trade crypto on the HedgeTrade platform.
The role of a day trader is to execute an excessive amount of volume of both short and long trades. In doing so, they are able to capitalize on intraday market price action. The price action is a direct outcome of temporary supply and demand incompetencies. The cause of these inefficiencies are primarily the purchases and sales of the asset.
Generally speaking, there is no special qualification for becoming a day trader. If anything, day traders are classified by drawing from the frequency at which they trade.
Okay, but what is ‘day trading’? Well, it is the act of buying and selling a financial instrument in the span of a single day. It also applies to buy and sell that instrument multiple times over the course of a day. The core idea of this type of trade is to take advantage of small price moves. This can be an incredibly lucrative strategy; that is if one plays it correctly. However, it can prove to be dangerous for newbies. It can also be risky for anyone who fails to adhere to a carefully thought-out strategy.
The basics of this type of trading
‘Day trading’ is basically the purchase and sale of security occurring within a single trading day. This kind of trade will usually take place in any marketplace, but is more common in the foreign exchange (forex) and stock markets. More often than not, day traders are well-educated and have the proper funding for their endeavors. They frequently use high amounts of leverage and short-term trading strategies to capitalize on small price movements. Specifically, price movements in stocks or currencies that are highly liquid.
Day traders have grown accustomed to events that trigger short-term market moves. A notable technique that is quite popular is trading the news. Announcements on a schedule like economic statistics, corporate earnings, or interest rates are typically subject to market expectations, Likewise, they are subject to market psychology. Markets will often react when there is a failure to meet these expectations. Alternatively, when they are exceeded – usually with sudden and significant moves – which day traders can benefit from.
Day traders employ the use of a wide variety of intraday strategies. Among these strategies are the following:
- Scalping: This method focuses on trying to make numerous small profits on small prices changes throughout the day
- Range trading: This strategy predominantly uses support and resistance levels in order to determine their buy and sell decisions.
- News-based trading: This typically seizes trading opportunities from the heightened volatility that commonly surrounds news events.
- High-frequency trading (HFT): These are strategies that use complex algorithms as a way to exploit small or short-term market inefficiencies.
Here is a quick rundown of how you can quickly and easily trade cryptocurrency:
- Make the decision between one of two outcomes. You either want to own the cryptocurrency or you merely have a hunch that its value will rise or fall.
- Let’s assume that you wish to own the currency. In this case, you will need an exchange. An example of a good platform to use is Hodly, which is a simple, user-friendly app.
- If you choose to make speculations on the price, then you will need a broker. There are plenty of brokers out there for you to choose from.
- Properly fund your account.
- Either purchase the cryptocurrency that you want or open a trade on its price.
And that’s it. After following these steps, you will have become a cryptocurrency trader. Yes, that’s all it takes. Keep in mind that you can conduct the purchase or sale of cryptocurrencies on a broker demo account. Unfortunately, it is also a fact that you cannot practice on an exchange.
For the most part, trading crypto focuses primarily on speculating on its price. This is in lieu of actually owning any of the coins themselves. It is because of this that brokers offering forex and CFDs are a much easier starting point for beginners. The alternative, which is comparatively more difficult, is buying real currency through an exchange.
Day trading digital currency
There are several things you need to know about before you start day trading crypto.
1 – Volatile nature
First and foremost, we must establish the major difference between day trading cryptocurrency and day trading real-world assets. The reason for this divergence boils down to volatility. In essence, volatility is when an asset’s price fluctuates, moving up or down at a quick rate. This means that it can either result in being a great success for the trader or a humongous failure.
Let’s use day trading stocks on the NYSE (New York Stock Exchange) as an example. In this particular case, it is unlikely that the prices would change substantially in a 24-hour time period. This is due to them being safe companies that have been up and running for a very long time. Prices will obviously continue to go up or down at random times. However, in comparison to cryptocurrencies, it would typically only be by a small amount.
On the other hand, you have the prices of cryptocurrencies, which are equally as volatile. As a matter of fact, it’s not that bizarre for a coin’s price to rise or fall by more than 10%-50% in the span of a single day. In some circumstances, it can drop or rise even more.
2 – Practice will eventually lead to perfection
There is something you need to remember before you can deposit funds into your new trading account. Above all else, it is vital that you make sure to practice first.
Very few – if any – of the major cryptocurrency exchanges provide their users with a demo account. However, a good recommendation for a place to start would be Coins2Learn. This platform offers a trading simulator that allows you to trade with the use of fake money. It is a really good platform for novices. What’s more, they provide some tips that will be helpful on the road to success.
When you reach the point where you have a better understanding of how the markets operate, the next step is doing the real thing. Using a demo simulator is ideal for learning the ins and outs of trading and how it works. Still, it does not wholly prepare you for real-world losses.
This is the main reason why it is imperative that you start off with really low amounts. Furthermore, it is important that the amounts are not larger than what you can afford to lose. This point in your day trading cryptocurrency career is valuable. You will be gaining enlightening information about the highs and lows of the markets. Most importantly, you will learn about improving your knowledge and skills.
3 – Stop-Loss
Another important aspect pertaining to day trading cryptocurrency is setting yourself a stop-loss. A ‘stop-loss’ is when you enter a price that you want to immediately exit your trade. Its design allows it to limit an investor’s overall loss on a security position.
Let’s say, for example, that you buy Ethereum at a $700 price. In this particular scenario, you could very well set yourself a stop-loss of 10%. This basically means that if the price of Ethereum falls to $630, then the system would sell your investment automatically. This will effectively protect you from a sudden decline in price. Alternatively, if you were not at your computer to conduct it yourself.
You can also execute a ‘limit sell order.’ This means that your trade can experience automatic closure as soon as your coin hits a certain higher price. Going with the same Ethereum example from earlier, you could set a 10% limit sell order. What would this mean? Well, should the price reach $770, the system would shut down your trade immediately?
4 – Targets
Eventually, you will figure out how the markets work and you believe you are ready to start trading with real money. When you reach this point, you will need to establish some targets for yourself. This is crucial, especially if you are planning to do this type of trading as your part-time or full-time job. If you are going down this route, you need to have expectations concerning how much you aim to make.
Day traders are looking to make quick, short-term gains. More often than not, these gains can be lower than 1% with each trade. These traders will inevitably possess a large “bankroll”, which means that they can still make good money. And they can do so even if the percentage gains turn out to be quite small. Traders with experience are not ones to risk more than 1% of their total bankroll. Put simply, if you have $1,000 you want to invest, then you should never place more than $10 per trade. Admittedly, this may come across as a very small amount. However, in the long run, this will provide you with the protection you need to keep you from going broke.
There is one more thing to remember about targets. They will allow you to build a steady income through a gradual increase in your overall bankroll long-term.
Day trading with HedgeTrade
To reiterate, day trading encompasses quick trades that take place within a single day. Now, with HedgeTrade, users can make predictions anytime. However, it will often take a day or two for people to actually purchase them. Therefore, day trading by publishing Blueprints may not work. The best way to look at this is by going over the ‘momentum’ day trading strategy.
This is quite popular with trading strategies that are ideal for beginners. It generally revolves around acting on news sources and pinpointing substantial trending moves. And this is all with the support of high volume. Oftentimes, there is at least one stock that moves around roughly 20-30% each day, which means there is ample opportunity. All you need to do is hold onto your position up until you notice signs of reversal. When this happens, you get out.
This is a very simple strategy and it is effective if you use it correctly. You must, however, make sure that you are aware of upcoming news and announcements that concern earnings. A mere few seconds on each trade could potentially make a huge difference to your end of day profits.
In this sense, traders can use charts, as well as fear and greed index, in HedgeTrade in order to gain valuable insight. They are also able to view the real-time news feed on the dashboard so that they can spot trades.
While it helps to be knowledgeable about basic trading procedures, day traders need to go the extra mile. They need to be up-to-date about the latest stock market news and events that could affect stocks. So, you should do some research and educate yourself. Create a list of stocks that you want to trade and make sure you remain informed about the companies and general markets. You can accomplish this by reading up on business news and visiting reliable financial websites.
A good recommendation when it comes to HedgeTrade would be to follow traders that make a lot of predictions. Specifically, ones that focus on Bitcoin, Ethereum, or Ripple (XRP) to get into their mindset.
One other thing to remember is that you should start small. As a beginner, you should concentrate on a maximum of one to two stocks during a session. Tracking and finding opportunities is easier with just a few stocks. Recently, it has become increasingly common to have the ability to trade fractional shares. Because of this, you can specify certain smaller dollar amounts that you wish to invest in.
Not too long ago, HedgeTrade entered a partnership with blockchain technology provider and cryptocurrency trading platform, Bittrex Global. It is thanks to this union that traders can implement day trades by using the insights stemming from copy trading. Or, to put it another way, buying prediction Blueprints on the HedgeTrade platform.