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Some Ways of Daily Crypto Trading
The primary starting point for trading cryptocurrencies is to have some of your chosen currency (e.g. Bitcoin) and have a means to exchange it. The easiest way for you to get started is to open an account with one of the leading centralized crypto exchanges (e.g. Coinbase or Kraken), fund your account with fiat currency, and purchase your chosen currency. From there, you can use one of the day trading strategies below to get started day trading crypto.High Frequency Trading (HFT)
High Frequency Trading is a technique where you take advantage of price changes that occur on the order of seconds or fractions thereof. The frequency in question is routinely on the order of dozens of trades per second — far beyond the capabilities of a human trader. The only way to engage in high frequency trading is to use software known as a trading bot. The bot monitors the market and, based on a given trading logic, executes trades continuously as long as it is connected to the exchange. By instituting a specific trading logic, high frequency trading can be combined with many other strategies.Scalping
Scalping is a strategy of making small profits from a large number of trades, which add up to larger profits. Scalping uses large amounts of liquidity (currency) to take advantage of small price changes over a short period of time. The time horizon is typically a few minutes but can be as short as seconds or as long as hours.Range Trading
Range Trading is based on the assumption that crypto prices typically — over a given period — only fluctuate within a certain range. Price movements outside of that range are assumed to indicate that a price is about to experience an abnormal change. For example, if the price drops below the lower limit of the range, it could indicate that it is time to sell—assuming that it is the beginning of a significant downward swing.Technical Analysis
Technical analysis is a statistical trading strategy. By performing various statistical calculations on historical price data, you try to uncover trends in the market. Technical trading is based on the belief that past prices have some effect on future prices.News and Sentiment Analysis
News and sentiment analysis is similar to technical analysis, with one important difference: it is based on predicting human actions and reactions, not price trends. With news and sentiment analysis, you are trying to predict whether demand will go down or up for a particular cryptocurrency by analyzing multiple sources of information. By analyzing sources, you are trying to understand the social consensus about that currency and predict what actions people will take. These data sources include industry and mainstream news outlets, as well as social media posts.Mistakes Daily Traders Make When Trading
Here are some mistakes I see new traders making; consider these possibilities carefully before you break the bank.1. Executing Market Orders Without Understanding Supply and Demand Zones
The excitement that the market brings to new traders often results in the “market order” button being pressed prematurely. “Market” and “limit” orders are the two types of orders that most brokers will offer (note: we will not go into trigger orders or GTC orders in this article). A market order will get a trader into a trade immediately, while a limit order will allow a trader to set a specific price at which they are most comfortable entering the market. A market order does not give the trader the flexibility to control the entry price.
As a day trader, I know firsthand how tempting it is to get a buy-in on an existing “rip” (usually the point where a stock/crypto breaks through a resistance line and rises to a new high). However, most new investors neglect to do critical pre-market research to identify the supply and demand zones of the stock/crypto they wish to trade for the day.
In its simplest terms, a supply zone is an area where a stock/crypto is likely to be considered overbought and will typically see its price drop back to the demand zone. A demand zone is a profitable area for traders because it offers a lower price to enter and is generally followed by an uptrend. As a new trader, take the time to learn your supply and demand zones, then add the RSI (Relative Strength Index) indicator to your chart to monitor when trades enter overbought and oversold conditions.
2. Selling Too Early
Think twice before selling a stock. New traders (especially day traders) tend to stay glued to the 1-minute chart of the stock they have invested in and forget about the bigger picture. For example: you have made a perfect entry in the demand zone, your RSI indicator is showing momentum—and suddenly you see a bearish engulfing pattern. At this point, most new traders immediately close their position. To avoid letting your emotions get in the way of your trading, add MACD (Moving Average Convergence Divergence) and Stochastic Oscillator to your 5-minute chart to help you gauge when there is a real shift in momentum versus normal volatility. MACD and Stochastic Oscillator will also enhance your entry and exit indicators to help new traders with confirmation before making a trade.Trading Strategy with "Bullish Engulfing" Candlestick Pattern
3. Not Understanding Liquidity, Scarcity and Volatility
In addition to the stock price, several factors must be considered when investing in stocks/crypto. Liquidity, scarcity, and volatility are all important. It is only when trying to sell a stock/crypto that one realizes the importance of all three. Liquidity refers to how much a stock can be traded without significantly affecting its price. Stocks with poor liquidity are difficult to sell, as selling a large number of shares will drive the price down. You can gauge a stock’s liquidity by evaluating the average daily trading volume and the number of shares outstanding. The concept of “float” and “relative volume” of a stock or crypto will help new traders understand the potential liquidity and volatility during pre-market evaluation. For traders looking to enter and exit trades quickly, there is a need for a low float and a relative volume of 1.5 or higher. This trade setup will ensure that there is enough shift in the highs and lows to actually make entries and exits throughout the day. Entries and exits are provided by a lower amount of stock availability (hence the term “low float”), but a high amount of volume and price action (as identified through relative volume).Tradingview: Tutorial, Indicators, Platform, Advantages, and Disadvantages
