Day Trading: Strategies, Tips, and Risks You Need to Know in 2023

Daily trading of digital currencies is one of the most profitable and simplest ways to earn income from the digital currency market.

Nowadays, many traders are learning how to enter and exit the market within a day and are taking advantage of price fluctuations to make huge profits.

By using minor fluctuations in prices, daily traders engage in repeated buying and selling activities to create profits. In fact, the term “daily trading” refers to the method in which investors carry out several trades in a single day, with the goal of making profits through minor price changes. For more information on how to work with daily trading, read this article to the end.

What does daily trading mean?

As the name suggests, day trading is done throughout the day and in very short time frames. In the past, only individuals who owned large businesses in financial markets could invest in these markets. However, with the advancement of the internet, trading became possible for all individuals. In this regard, day trading has found a good place among users of financial markets such as the digital currency market. However, novice users should be very cautious and plan carefully when conducting such transactions.

Daily trading of digital currencies is a strategy that involves entering and exiting a market position on the same day, also known as “intraday trading,” indicating that trades are opened and closed within a single day.

The main goal of day trading digital currencies is to profit from small movements in the market. Day trading in the crypto market is especially profitable because digital currencies can fluctuate significantly. As a reference, it is very rare for a traditional stock or even a commodity to see a 10% jump in value in one day, but in crypto, such jumps often occur. Like other forms of digital currency trading, day trading is beyond guesswork.

Is daily trading profitable?

The main reason for daily trading of digital currencies is to make a profit. The prices of digital currencies are more volatile than any other asset class, providing an opportunity for traders who are aware of the market.

As long as you have a strong daily trading strategy and can analyze trends, the crypto market can be profitable for you.

Crypto daily trading is excellent because it offers short-term opportunities. Instead of buying and holding (HODL) or taking long positions, you can trade daily and profit from the market in a short period.

Market traders can make a lot of profit from their daily trading, but beginners in digital currency markets may become discouraged for various reasons. Trading in the digital currency market can have benefits, which we will discuss later.

Benefits of the digital currency market:

• The market is open weekly: One of the important advantages of the digital currency market is that it is always open. Therefore, a market that never closes has many advantages and opportunities for traders, but these benefits are possible only if effective strategies are considered before investing.
• The presence of volatility in the market is a rule: Regarding the digital currency market, it should be noted that market conditions are highly unpredictable due to rapid fluctuations. For example, if a digital currency is $12,000 one day, it can drop to $6,000. Therefore, as a daily trader, you can make big profits under such fluctuations, but alongside these large profits, significant losses can also occur in your portfolio. Therefore, effective strategies, market trends, and daily trading principles must be taken into account.
• Data transparency: Cryptocurrency exchanges, unlike other exchanges, usually have no hidden fees. This means that if you choose a platform that receives low transaction fees, daily trading on it is easy and cost-effective. If you want to check the prices and trading volumes of specific assets, you can easily do so on information cryptocurrency websites such as CoinMarketCap. These platforms also provide you with charting tools that can help you make informed decisions as a daily trader. Such data transparency in the digital currency market helps daily traders make informed decisions.

Disadvantages of the digital currency market:

• Lack of knowledge in the digital currency market: The digital currency market is such that it often involves novice and inexperienced traders and investors, which is why most beginners incur losses in daily trading.
• Lack of strict regulations: Decentralization is the foundation of the cryptography world. Unlike stock markets, where everything is controlled by regulatory authorities, there are fewer rules in the crypto market. You can easily start trading regardless of age, geography, or skills (however, centralized exchanges now use customer identification (KYC) as a criterion for keeping users safe.) This means that if you want to do daily trading, there are fewer barriers in the crypto market compared to other financial markets.

Common strategies in day trading

Scalping: Scalping is a common strategy in daily financial markets. In this method, traders trade and quickly exit in a short period of time. Since fluctuations in the digital currency market are not significant, traders can focus on small profits, which can ultimately amount to a considerable amount. This method is not suitable for novice users because it requires high risk management.

Range trading: Range trading requires a price fluctuation channel. Traders can buy and sell digital currencies through this channel to make a profit. However, this strategy may be simple, but traders must analyze support and resistance levels well to determine the best time to trade.

Trading with high volatility: Algorithm development and trading robots are used to perform a large number of transactions in the shortest possible time in the strategy of trading with high volatility. Some mistakenly believe that this strategy is easy, but it requires experience and knowledge to make a profit. Therefore, it is not recommended for novice users.

Best methods of selecting a suitable currency for daily trading

Many cryptocurrencies have entered the market after Bitcoin, but not all of these currencies are suitable for investment. For this reason, traders must have their own strategies before making any trades. To have trading strategies, traders must be familiar with various market analyses of digital currencies. It is practically impossible to choose the best digital currency for daily trading, but we will examine some factors that can be considered for daily trading.

Whitepaper: A whitepaper is a source where you can find all the information related to a digital currency.

Market Capitalization: Another factor that should be considered in daily trading is the market capitalization of the digital currency because it gives an overall view of the market trend to the investor.

Circulating Supply: Circulating supply refers to the number of units of digital currency that are publicly available.

Total Supply: All digital currencies are issued in a limited supply, and only a few of them have an unlimited supply. The total supply refers to the number of digital assets that are already in circulation along with the number of newly extracted digital currencies that are not yet available in the market.

Volume: Volume refers to the number of digital currencies traded in a specific time period. The trading volume in the market can be considered as an indicator for the digital currency market trend. While Bitcoin is a well-known digital currency in the market, other digital currencies such as Cardano and Bitcoin Cash can also be used for daily trading.

Who is suitable for day trading?

Those who want to trade daily should bear in mind that to carry out daily trades, they need a daily strategy. Although this daily strategy may have the potential for high profits, it also carries high risks. Some believe that such a strategy requires decision-making in the shortest possible time.

For this reason, daily trading is not suitable for everyone, and profitability in this strategy requires a proper understanding of the market and high risk-taking. If you have the ability to sit behind the system for a long time and check market fluctuations for a long time, this type of strategy can be suitable for trading.

Final Words

Financial markets such as digital currency have provided a great opportunity for traders to have significant income through trading. Perhaps at first glance, the daily trading strategy may seem simple, but it has its own complexities.