The stock market, where transactions can take place only during business hours, is where the phrase “day trader” originates. This suggests that day traders close their positions after each trading day to take advantage of any intraday price fluctuations.

Can You Day Trade Bitcoin?

Absolutely. It’s more of a matter of whether you can day trade cryptocurrencies as it is of how you can do so successfully.

The primary objective of day trading Bitcoin is to capitalize on fluctuating prices. The short-term price swings that day traders seek are more easily achieved in the volatile cryptocurrency market. It is unusual, for instance, for the value of blue chip stocks or other traded commodities to increase by 10% in a single day.

Such cost increases are typical in the cryptocurrency market. To generate profitable trading ideas, day traders must employ effective day trading tactics and familiarize themselves with fundamental and technical analysis. Day traders in Bitcoin can use indicators such as chart patterns, Bitcoin price action, volume, and other pricing data to assist them in choosing when to enter and exit trades and where to allocate capital.

Volume, support, and resistance are the three primary concepts in day trading. You can copy-trade cryptocurrency by renting intraday trading bots or trading on your own.

When and How to Day Trade Bitcoin?

We know the viability and potential success of day trading in Bitcoin. How does crypto day trading work, then?

To maximize their profits, day traders in cryptocurrencies like Bitcoin often try to predict when the market will be the most volatile or liquid. Since most Bitcoin investors are corporations and other large entities, it is best to avoid trading on the weekends when the market is closed (volume will be lower).

And given we’re discussing quantities here, an overview of auction market theory could be instructive. The asset’s stated price, the duration determining the pricing opportunity, and the volume - help determine any auction or market’s success. Volume matters most.

Skilled day traders will generally focus on value first, as this is the guiding concept of auction market theory. Inefficient markets, like the current bear market, seek equilibrium or efficiency by correcting the imbalance that caused them. When market participants have different opinions on the correct value of an asset, the market trends either higher or lower until it reaches a new equilibrium point. When this happens, market volatility decreases, and equilibrium is restored.

Successful day traders often use auction market theory, market and overflow dynamics, and volume profiles.

Avoid the FOMO trap when trading

Traders that rush into the market without carefully considering their entry points are more likely to run into difficulties, which could result in losses. Trading due to fear of missing out is usually a bad idea that leads to bad deals that might be prevented with discipline and excellent trading tactics.

Be wary of excessive trading

Rapid idea changes and excessive trading can lead to costly mistakes. Bitcoin day traders can prevent overtrading by keeping their rational trading apart from their emotional trading. Successful risk management, an efficient trading strategy, and clear analysis will help them achieve this.

DO NOT risk more than you can afford to lose in the market

Limiting your exposure as a Bitcoin day trader will help you prevent catastrophic losses. Success requires measured risks, but only risk what you can afford. Traders should risk no more than 1% daily to avoid losing too much.

Caution is the name of the game

Day traders in Bitcoin should avoid trying to time the market at all costs manually. Trading Bitcoin manually will always be quicker, more efficient, and more accurate than using a crypto trading bot. One study found that algorithmic trading may complete a transaction in under 10 ms. Although the time it takes to blink is only 300 milliseconds, we use the phrase “in the blink of an eye” to describe something that happens very quickly. Therefore, there are more viable options than engaging in manual day trading.

Conclusion

One common strategy for making money with Bitcoin is day trading. However, it calls for extensive study and close monitoring of your trading strategy and portfolio. It can be risky, but if you follow this guide, you’ll know what to think about as you move forward.

McClatchy newsroom and editorial staff were not involved in the creation of this content.