Introduction

Day trading is one of the most widely used trading strategies. Day traders are active in most financial markets such as stocks, forex, commodities, and of course the cryptocurrency market. However, is cryptocurrency day trading really right for you? How do day traders make money? Should you engage in day trading?

Unfortunately, we cannot directly answer these questions, but this article will explain the essential knowledge to participate in day trading.

What is day trading?

Day trading is a trading strategy that completes buying and selling within the same trading day. Trades are completed within the same day, and this strategy may also be called intraday trading. The goal of day traders is to use intraday trading strategies to try to profit from the price movements of a financial instrument.

The term "day trading" comes from the stock market, which is open only on weekdays of the week. In order to take advantage of intraday price movements, day traders never hold positions overnight.

How do day traders make money?

Successful day traders have a deep understanding of the markets and a wealth of experience. They usually construct trading strategies through technical analysis (TA) and identify opening and closing points based on trading volume, price trends, chart patterns and technical indicators. As with all trading strategies, risk management is the key to successful day trading.

Fundamental events take a long time to play out, so day traders do not consider fundamental analysis (FA). Even so, some day traders use "trading the news" as a base strategy. This involves finding high-volume assets based on recent announcements or news content, as well as taking advantage of temporary spikes in trading activity.

Day traders aim to profit from market fluctuations. Therefore, volume and liquidity are very important for day trading. After all, day traders need good liquidity to execute fast trades, which is especially critical when selling. It only takes one trade with a large slippage and a day trader's account will suffer serious losses. Because of this, they often choose highly liquid markets.

Some day traders only focus on one trading pair, such as BTC/USDT. Others build watch lists from which to select trading targets based on technical or fundamental attributes (or both).

Day Trading Strategy

Ultra-short-term trading

Ultra-short-term trading is A common strategy among day traders requires taking advantage of small price movements that occur in short-term investing, including gaps in liquidity, bid-ask spreads, and other market inefficiencies.

Ultra-short-term traders usually choose margin trading or futures contract trading to amplify profits through leverage. Since the price target percentage is smaller, it makes more sense to choose a larger position. In fact, this is a common scenario with most day trading strategies.

However, leverage trading needs to follow risk management principles. Successful short-term traders will pay close attention to margin requirements and reasonably manage position sizes according to the rules. For a simple formula for calculating position size, please read "How to Calculate Position Size in Trading"

Straight-term traders can Use order book analysis, volume heat maps, and a host of technical indicators to determine where to buy and sell on each trade. However, considering the fast transaction and high-risk characteristics, ultra-short-term trading is more suitable for experienced traders. Extensive use of leverage also carries hidden risks, and a few bad transactions can cause rapid losses in the trading account.

Range trading

Range trading is a relatively simple strategy that involves a lot of K-line chart analysis and looking at support and resistance levels. As the name suggests, range traders look for price ranges within the market structure and then construct a trading strategy based on the ranges. For example, if the price fluctuates between support and resistance, they can buy support and sell resistance. Conversely, short the resistance level and exit at the support level.

Range trading is based on the assumption that the advantage of the range maintains the support and resistance levels before the range falls below. This means that the advantage of the low range may push the price up, and the advantage of the high range may cause the price to fall.

However, the longer the price reaches the support and resistance levels, the greater the chance of falling below these two points. Therefore, range traders keep a close eye on the opportunity for the market to break below the range. Generally speaking, this means placing a stop after a range breakout is confirmed.

To learn more about this topic, please read "The Fundamentals of Support and Resistance Explained".

Range trading is a relatively straightforward strategy that is suitable for beginners to get started. Range trading is closely related to candlestick charts and support and resistance levels. It also involves momentum indicators such as the Relative Strength Index (RSI) or the Exponential Moving Average (MACD).

High-frequency trading (HFT)

High-frequency trading is an algorithmic trading strategy often used by quantitative traders. It requires the development of special algorithms and Trading bots to quickly buy and sell many positions in a short period of time. How short is the time exactly? Typically only a few milliseconds. With millisecond-level transaction speeds, high-frequency trading institutions outperform other companies or enterprises.

They will build HFT algorithms and implement sophisticated and complex trading strategies. While on the surface it is an attractive day trading strategy, high-frequency trading is actually much more complex. High-frequency trading backtests, monitors and frequently fine-tunes algorithms on a large scale to respond to changing market conditions. Therefore, you cannot leave all the work to a trading robot and sit back and relax.

In addition, it should be noted that high-frequency trading is highly professional and the threshold is very high, making it difficult for ordinary traders to grasp high-quality information. Why is this so? The reason is quite simple. If successful trading houses and hedge funds share high-frequency trading strategies with individual investors, these strategies will no longer work.

There is one more thing worth noting about trading robots. If someone develops a trading robot that generates high profits, why don't they just use it instead of selling it? Therefore, you must think twice before buying a high-frequency trading robot.

Developing HFT robots requires an in-depth understanding of complex market concepts and the accumulation of extensive knowledge in the fields of mathematics and computer science. Therefore, high-frequency trading is more suitable for experienced traders.

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How to start day trading in cryptocurrencies Travel

If you want to participate in day trading, where should you start?

Please read the "Comprehensive Guide for Beginners to Cryptocurrency Trading" to learn more about essential trading knowledge and investment for retail investors Tips for readers. If you have mastered the basic concepts, it is recommended to log in to the Binance Futures test network for simulated trading. This way you can try out the trading system and avoid real financial losses.

Which online trading platform is ideal for day trading cryptocurrencies? There is no standard answer, the decision is yours! However, the Binance ecosystem is not to be missed – we offer hundreds of trading pairs, margin trading, quarterly and perpetual contracts, leveraged tokens, real-time market data and much more. Visit Binance to exchange fiat currencies for cryptocurrencies and start trading.

Can day trading be my livelihood? means?

Day trading has the potential to create high returns, but you must carefully consider the following points before participating. Day trading is demanding and requires quick decisions and execution, putting traders under tremendous pressure. This strategy carries high risks, and traders must have a deep understanding of the market. Of course, traders must keep an eye on the market for a long time, and it is difficult to slack off.

Can you face the risk of losing money and bear all the pressure? You must carefully consider whether day trading is compatible with your personal investment goals and personality.

If you're not sure whether day trading is right for you, read the Beginner's Guide to Cryptocurrency Trading Strategies. In this article, we cover a number of strategies that active traders can employ (such as swing trading). Mastering these strategies will help you establish your own trading style.

Summary

Day trading is a widely used trading strategy in the world of stocks and cryptocurrencies. Day traders use intraday trading strategies to tap profit opportunities from market fluctuations, usually holding positions for no more than one day.

Day traders use technical analysis, chart patterns, and technical indicators to determine trade timing. Some of the most widely used strategies include scalping, range trading, and high-frequency trading.

Want to learn more about day trading? Please visit our Q&A platform Ask Academy, where members of the Binance community will patiently answer your questions.