We have already discussed in our previous blog how you can earn through trading in cryptocurrency in 2021. Here is a detailed guide for beginners on what day trading has to offer them.
In this blog, we are going to cover the following topics:-
- What is Day Trading?
- Day Trading Strategies
- How to get started for yourself?
- Points to remember before starting
Let’s get into it then.
What is Day Trading?
Day trading is in which traders enter and exit positions in the market on the same trading day. It is also known as Intraday Trading.
Intraday traders take advantage of the rapid price fluctuation of the asset. Of course, it largely depends upon the volatility of the asset.
Here, asset means Financial asset or Financial instrument. Financial instruments are tradable assets, which include cash or precious metals (gold or silver). These assets can be traded and converted into cash or equivalent at any given period of time. Volatility means how fast this asset is getting converted into cash. In other words, how fast it is traded for any other financial asset.
So, intraday traders enter a position in the market at any given point of a day, and exit that position after booking their profit or after the price hits Stop Loss. Simple as that!
Day Trading Strategies
There are multiple-day trading strategies that you can follow.
Scalping
It is a strategy where traders open one or multiple positions for a very short time and close it with very little profit.
As per Investopedia, “Scalping is a trading style that specializes in profiting off of small price changes and making a fast profit off reselling.” In day trading, scalping is a term for a strategy to prioritize making high volumes of small profits.
Scalping means when traders take advantage of the small price fluctuation that happens in a short time frame. To be a good scalper, you should have a good knowledge of the market. It involves fast trade execution and high risk. Scalpers have a strict exit strategy because one large loss could eliminate the many small gains the trader worked to obtain.
Range Trading
Range trading means when traders trade in a range in which the price of any given asset fluctuates. It involves heavy use of candlestick charts and support and resistance level.
The whole concept of range trading revolves around the assumption that the edge of the range will hold as support and resistance until the range is broken. In simple words, when the price will go down, the lower edge of the range will push the price up and then the price will go up, the upper edge of the range will the price to go down.
Range traders take advantage of this process. This trading strategy is very suitable for beginners. You just have to get a good understanding of candlesticks and support and resistance levels.
High-frequency Day Trading
High-frequency trading or HFT is a type of algorithmic financial trading. It involves transacting a large number of orders in a second. HFT traders move in and out of traders at a very rapid pace. Their aim is to capture small amounts of profits each time that add up to a substantial sum of profit.
HFT involves developing algorithms and trading bots that can quickly enter and exit the market in milliseconds. It is not suitable for beginners, as it requires the development of a trading bot and deep knowledge of market concepts.
Also Read: FAANG+: THE WORLD’S TOP 10 COMPANIES
Getting started with Day Trading
The first step should be to choose what trading you would like to do. You should choose whatever fits your budget and goals.
The second step would be to make your online mobile wallets. It’ll help you buy and sell cryptocurrency at any given period of time. To know more about how to make mobile wallets, read our previous blog.
Now, you just have to select the cryptocurrency in which you will trade and trading tools like RSI, moving average or MACD. But before selecting any kind of indicator or trading tool, make sure that you have knowledge about that particular indicator. A simple way to get knowledge about trading indicators is to wait patiently for our upcoming blogs on trading strategies and tools.
Points to Remember Before Starting Day Trading
As a beginner, you should know some tips that may go a long way in your trading career. These are the points that every trader should know in the beginning so that they can minimize their loss due to silly and basic mistakes.
Knowledge is Power
As mentioned in our previous blog, day traders require a good knowledge of the market and trading tools so that they can predict movement in the price of the asset.
So, before starting, it’s better to do your homework so that you can avoid unnecessary losses due to a lack of knowledge.
Time and Risk management
When you are trading in cryptocurrency, the market is open 24*7, unlike stocks. So, it’s better to learn how to manage time for better results.
Risk management is a major topic that can be discussed. Many beginner traders don’t have much knowledge on how to manage their risk and end up losing money in the market.
Always remember, 95% of traders lose money to the 5% of smart traders in the market.
Start Small
As a beginner, focus on sharpening your trading skills and the best way to do that is to test your knowledge and skills in the market. It doesn’t mean that you can go on putting a whole lot of funds in the market because as an amateur you may end up losing your money.
So, start small in the beginning until you get confident and experienced enough to make good money from the market.
Avoid emotions while trading
While trading, many traders, no matter if they are beginners or not, make the mistake of getting carried away with emotions while trading. It may seem hard, but you have to keep your emotions aside while trading in the market.
You have to treat trading as your real job. Dedication, patience, and good knowledge of the market are what make an ordinary person, a day trader.
Be Realistic about Profit
As a beginner, you must have read many blogs or watched youtube videos on the internet that suggest the best trading strategy that will guarantee 100% success in every trade. I request you not to believe that because no strategy is perfect and profitable in every market condition.
Even experienced traders make a profit in 50%-60% of their trades. However, they make more in their winners than they lose their losers. All because of their risk management strategies.
Conclusion
So, this was all about what is day trading, how you can get started making money by making use of rapid price change in the market, and what are the things that you should keep in mind while trading, not only as a beginner but these points should in mind whenever you trade.
If I have missed out on something, that you would like to know, please leave it in the comments.
