Is crypto day trading profitable? The popularity of daily cryptocurrency trading has increased in recent years as many investors try to profit from the volatile market. However, there is still debate over whether this approach can generate financial gains. In this article, we will explore the feasibility of crypto day trading as a viable investment method.
Crypto Day Trading – Is It Profitable
The art of trading cryptocurrencies intra-daily may appear as an exceptionally advantageous investing method. Still, it also involves an extremely risky one. The cryptocurrency market is notorious for its volatility, with values that move swiftly and unpredictably. This implies that day traders must always keep a keen eye on the market and be ready to make split-second decisions based on the most recent price fluctuations.
One of the most noteworthy perks of daily cryptocurrency trading is the possibility of achieving substantial profits. Due to the market’s extremely volatile nature, one can earn considerable gains in a very short period. This holds especially true for those individuals who are proficient in technical analysis and have the ability to recognize market patterns and trends.
However, daily cryptocurrency trading carries a considerable amount of inherent danger. Due to the market’s extreme volatility, significant financial losses can also occur in a very short amount of time. Additionally, day trading demands a considerable investment of both time and effort on the trader’s part, as one needs to continuously monitor the market and make swift decisions.
Another aspect to consider in this business is the cost of trading. Trading on many cryptocurrency exchanges often incurs large fees, significantly cutting a company’s profitability. Furthermore, day traders often have to pay taxes on any capital gains they make, another factor they need to keep in mind.
Is crypto day trading profitable? The answer depends on several factors, including the current state of the market, trading expenses, and the trader’s level of expertise. This investment approach is not recommended for beginners or risk-averse, as it has the potential for significant profits.
An Introductory Guide to Mastering Crypto Day Trading
To succeed in day trading bitcoin, it is crucial to have a comprehensive understanding of how the market functions. The volatile nature of the market makes trading without proper knowledge akin to jumping out of a plane without a parachute. However, if one has adequate information and follows a well-crafted strategy, day trading cryptocurrency can be profitable.
Cryptocurrency’s high volatility makes it a lucrative asset class for day traders. However, before jumping into Bitcoin or any other digital currency, it is important to wait for a high level of volatility to be recorded. Even during periods of low volatility, there is still the potential to make a decent profit.
Regarding successful cryptocurrency day trading, timing, and liquidity are critical factors. Precise entry and exit points should be identified. Trading should be avoided on low-activity days or exchanges with poor liquidity. Checking the 24-hour trading volume of the cryptocurrency you intend to trade can help ensure sufficient market liquidity.
It’s important to remember that inadequate liquidity can result in significant slippage, leading to more significant losses. Thus, it is crucial to use resources such as CoinMarketCap to get an idea of the market size.
Not every day necessitates a trade. Wait for all the right circumstances to be in place before entering into a deal. Try to restrict trades to days with the highest activity levels since weekends may not be the ideal time to trade.
Is crypto day trading profitable? Professional traders use various techniques and tools to maximize their gains in the cryptocurrency market. With the right research, risk management, and patience, day trading Bitcoin can be lucrative.
Mastering Day Trading of Cryptocurrencies: A Step-by-Step Guide
If you’re looking to day trade cryptocurrencies for quick profits, then you need to be constantly on the lookout for new trading opportunities. In this guide, we’ll provide you with a step-by-step approach to day trading cryptocurrencies and help you determine if it fits your investment objectives and personality.
Before proceeding to the next step, we highly suggest that you grab a pen and paper and jot down the guidelines for using this scalping technique.
In this article, we’ll be focusing on the “buy” side of day trading.
Step #1: Choose High-Volatility and High-Liquidity Coins
As mentioned earlier, your first major decision should be to select coins with high volatility and liquidity. If you’re not day trading Bitcoin, which has the most liquidity in the market, and prefer altcoins instead, choose coins with decent liquidity and high volatility.
Suppose you limit yourself to the most popular cryptocurrencies. In that case, your options will be limited since there are already over 1,600 coins available, and the number is continuously growing.
Day trading with less popular cryptocurrencies can be more rewarding but also comes with higher risks. Remember that the value of cryptocurrencies can drop just as quickly as they can rise.
Let’s explore how one can make money through day trading crypto assets.
Step #2: Use the Money Flow Index (MFI) Indicator on the 5-Minute Chart
The Money Flow Index (MFI) is a simple technical indicator used to execute this day trading method. This indicator is what we use to track the movements of smart money and determine the times when institutions are buying and selling cryptocurrencies.
Our recommendation is to set the MFI indicator to three periods.
Modify the default values for buying and selling from 80 to 100 and 20 to 0, respectively.
Step #3: MFI Indicator Reading of 100
When the MFI indicator reading reaches 100, it means that there are significant new investors in the market. The activity of these investors can be monitored through the use of the MFI indicator, as they leave traces of their activity in the market.
However, technical indicators may not always be reliable. To enhance the effectiveness of our day trading strategy, we have included some additional requirements. Specifically, we will ignore the first two MFI readings of 100 for the current day to focus on the reaction of the cryptocurrency price.
During the first two readings of MFI 100, the price must remain stable without changing. If the price drops after the first two readings on MFI 100, it suggests that a down day is more likely to occur than an up day.
Now that we know where to buy Bitcoin, let’s discuss the technical requirements that must be met.
Step #4: Buy When MFI = 100 and the Subsequent Candle is Bullish
We need to wait until the MFI reaches 100 for the third time. Suppose you cannot catch the third 100 reading on the MFI indicator due to your schedule. In that case, you may choose any other MFI = 100 reading as long as all other technical parameters are met. It does not have to be the third MFI = 100 reading.
Additionally, the candlestick on the MFI = 100 reading needs to be bullish, and the candle’s closing must be at the upper end, resulting in a candle with few wicks.
This brings us to another important consideration in day trading Bitcoin: determining where to place our protective stop-loss orders and where to take profits when trading.
Step #5: Put the Stop Loss Below the Day’s Low. Take Profit in the First Hour.
To protect your position in the market, placing a stop loss order below the low of the day can be an effective strategy. This signals a change in market sentiment and indicates that it may be time to exit the trade or even signal a potential reversal day.
As for your exit strategy, you have some flexibility. However, it is advisable to take profits within the first hour or 60 minutes after your trade is triggered. According to historical simulations, the probability of success decreases when a trade is held for more than an hour.
Conclusion – Cryptocurrency Day Trading
Suppose you have read this guide on cryptocurrency day trading in its entirety. In that case, you should be able to buy and sell Bitcoin and other cryptocurrencies for daily gains. The article covers everything you need to know about day trading cryptocurrencies. Ensure you have the necessary education before entering the market, and educate yourself on all the relevant facts.
Wondering if crypto day trading is profitable? While the “holding mentality” is prevalent in Bitcoin, day trading cryptocurrencies can offer a profitable alternative. Due to the extreme volatility of the cryptocurrency market, day trading can be a simpler way to make a living compared to other trading strategies.
Additional Resource For The Topic “Additional Resource For The Topic “Is Crypto Day Trading Profitable”
* Do You Need 25k To Day Trade Crypto
* https://www.investopedia.com/articles/active-trading/053115/average-rate-return-day-traders.asp
