Crypto day trading – Good strategy or waste of time and money?

In the past, only brokerage firms, and financial institutions in general, could afford to buy and sell assets repeatedly during a trading day.

However, day trading has become accessible to everyone due to the growing popularity of trading plain and simple. Retail investors can even use automated trading systems to trade short-term.

What is day trading?

Day trading, sometimes called day trading intradayis the practice of trading short-term listed assets.

The day trader tries to take advantage of more or less weak price movements. For example, instead of buying Bitcoin at $20,000 to target its highs at $70,000, the day trader can simply sell back at $20,500.

Its gains on a trade are generally very low, but the idea is to carry out several operations during the day or the week and to capitalize on the accumulation of small gains. Day trading is therefore more difficult than buy and hold.

Day traders often use price action for their decision making. Since there cannot be enough fundamental news in a day to move prices significantly, the day trader often resorts to technical analysis to exploit micro-movements in cryptos.

In day trading, you can therefore use technical indicators and price action. But today there are several automation or semi-automation tools to help with decision-making.

Which time units used in day trading

We often show the daily chart (D1) to analyze Bitcoin for example. But when you are day trading, this chart only adds a candle every 24 hours. This is not enough actions to exploit.

In day trading, we often use shorter time units like the one-hour chart (H1) or the 15-minute chart (M15).

This shows faster price movements as well as exploitable technical setups. Basically, volume, supports and resistances are the main things that day traders look at.

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Day trading and crypto swing trading, what is the difference?

Most crypto traders do swing trading. Swing trading takes advantage of fairly prolonged movements of cryptocurrencies, for example over several days to several months. Unlike day trading which often involves cutting positions at the end of the day.

Is Crypto Day Trading Worth It?

When the market stays quiet for a long time, as cryptos often do after a bear market, retail investors get bored and tend to switch to the shorter timeframes to day trade.

Day trading has its advantages and his disadvantages.

  • For the advantages, one quotes a limited exposure to the market, it is less likely to be surprised by a big movement since you will observe the prices actively.
  • In addition, if you have developed a profitable strategy, day trading can allow you to earn regular income in the crypto markets.

But day trading has more disadvantages.

  • Since you very often exit your positions to take profits, you are almost sure to miss a good part of the long moves. Except FTX CEO, Sam Bankman, rare are the investors who have built their crypto fortunes by day trading!
  • Day trading can be time-consuming, and since you often cut your positions, the gains are limited.
  • The percentage of losing crypto traders is greater among day traders than among long-term holders.

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