Day trading is defined as the buying and selling of financial instruments within a single trading day.
Bitcoin is a hyper-volatile asset, that can generate tremendous gains or losses. While some investors hold the digital commodity in the long-term, others use alternative strategies. Cryptocurrency exchanges offer intra-day trading abilities, for investors who want to benefit from short-term rise or fall, in Bitcoin’s price.
Additionally, certain exchanges provide on-leverage trading, which is the ability to open positions, larger than the size of the available capital. While taking leveraged (or on margin) positions can generate more significant profits, investors should be aware that they will be exposed to significant losses at the same time.
Beginners should be advised to open a demo account initially and to risk their real money only after they have gained confidence in the platform’s functionalities.
Choosing the right exchange
Potential investors should first decide which cryptocurrency they want to trade. Bitcoin, as the leading digital currency, has the highest liquidity of all digital assets and can be traded on a 24-hour basis. Finding the right exchange is one of the most important parameters; an investor should always make sure that the selected exchange will have high liquidity of the chosen asset. Moreover, the exchange’s daily volume of transactions should be researched extensively.
An intraday trader may execute multiple orders on the trading platform. For this reason, it is very important to understand the fees’ breakdown of an exchange thoroughly. Deposit/withdrawal fees, as well as trade and exchange fees, should be taken into consideration and have an impact on your decision.
As the majority of cryptocurrency exchanges are unregulated, making an educated decision will mitigate risks like the inability to handle trades during congestion times.
The regulatory framework around cryptocurrencies changes on a daily basis, as new rules are being implemented across different nations. It is highly essential to research about the legal matters in your country of residence, to ensure that the selected exchange is compliant regulations.
The trading platform
Similar to Forex trading or other commodities, traders will gain access to a trading platform. On the platform, they will be able to monitor real-time price movements of Bitcoin across different time intervals, in the form of charts or the traditional candlesticks.
Traders are offered with many tools to help them adapt their strategies, and open, buy or sell positions accordingly. They can set a market order when the desired price is reached, or to apply for advanced orders like “Stop-Loss” and “Take-Profit.” Their sentiment and fear often drag inexpert and undisciplined traders. This results in closing profitable orders rashly, while at the same time, keeping losing-orders open, waiting for the market to go in their favor. “Stop-Loss” and “Take- Profit” orders are used as an additional tool to protect investors and should be set at the points that the analysis outlines.
To that extent, almost every platform provides traders with a range of indicators, that can be used for their analysis. Moving averages, Bollinger bands, Fibonacci lines, and Oscillators, are available to the traders.
Exchanges, as well as third-party companies, offer the ability to automate your strategy using trading bots. Using preset parameters, traders can save essential time and avoid slippage, while being able to trade across multiple markets. However, trading bots involve complexity, so they are mostly applicable to experienced traders.
The technical analysis
Technical analysts say that history repeats itself, hence by applying a combination of indicators and fundamentals, can identify certain patterns on the chart. While these formations are not a panacea for the movement of the index, frequently are able to show new trends and support/resistance levels.
Investors are able to bet on Bitcoin’s price movement, without the need to actually hold the asset, to understand its complexity or the risk of being hacked. However, cryptocurrencies are even more volatile, as important news is broadcasted; therefore it would be useful that a trader understands the Blockchain technology and the impact an update can have on Bitcoin’s price. While there is no standard, in general, positive news tend to appreciate prices, while they plummet on negative ones.