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What is crypto day trading - meaning, definition & guide to start

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Cryptocurrency trading is an exciting new area that many people are keen to master. There are, of course, many different ways to do this. Some people prefer the tried and true long hold approach, but what if you’re interested in a faster method of profits? In this article, we’ll quickly go over the day trading meaning and how you can get started yourself.

What is crypto day trading and how does it work?

Cryptocurrency day trading defined as a style of financial trading where an investor looks to enter and exit positions multiple times over the course of a single day. Exactly how many trades you want to make is up to you, but ideally, you’ll be looking for small price bumps which will allow you to sell for a profit. While these may not seem like much as first, in the long run, they can add up to substantial gains for investors.

Some investors also use arbitrage to create these profit-taking opportunities. This is when you purchase an asset on one cryptocurrency exchange and then sell it on another one for a higher price. If you’re quick about it, this can be an easy way to make fast money.

How and where can you start day trading?

Day trading can be done on any exchange, but arbitrage between exchanges can be one of the best ways to make a profit for yourself. By using Bitsgap, you can trade between multiple exchanges quickly and easily.

This allows for Bitsgap traders to have fast access to more resources than those trying to day trade on just one exchange, and the earnings from this can be significant. Getting started with day trading cryptocurrencies is as simple as finding an asset you like, making a purchase and then trying to flip it for a profit by the end of the day.

What tools can be used?

Bitsgap offers investors a wide variety of tools which allow them to get started in the exciting field of day trading cryptocurrencies. For starters, you can use the arbitrage tool to look for quick profit opportunities. Moreover, secure your open orders by assigning stop loss & take profit positions.

The platform can also automatically analyze your performance to give you insight on where you have made more or less profit. If you’re not yet ready to play with real money, then you can also use the demo trading tool to practice your skills without exposing yourself to any risk.

Can I start day trading crypto with only 100 dollars?

One of the best things about cryptocurrency is that you can begin trading with nearly any amount of money. Crypto coins and tokens are not required to be held in full amounts, and this means you can trade anything with even a very small investment.

If however, you would prefer to hold entire tokens or coins, then you can look to smaller market cap assets that are more in your price range. There are hundreds of promising projects that are still very affordable.

Is day trading cryptocurrency worth it?

Day trading is a skill, just like anything else. If you take the time to learn how it’s done, then it can be a very lucrative pastime or even a full-time venture. Of course, this means you’ll need to be willing to learn how the process works and be prepared for eventual losses.

Nobody wins on every single trade, but the goal is to have more wins than losses. Good traders know how to judge risk, and they don’t bet the farm on a single trade.

Cryptocurrency day trading vs swing trading vs HODL

Crypto day traders enter and exit positions several times within a 24 hour period. These traders are normally looking for small gains on a day to day trading activity which add up when they are taken advantage of several times.

A swing trader is usually looking for a bit larger of a cashout target. These traders may hold on to assets for several weeks or months to take advantage of news items which could produce massive profits.

A trader who plans to ‘HODL’, is doing so with the intention of making a large sum of money on one trade after perhaps a couple of years or more. If you really believe in the potential of a project and you’re not interested in chasing short-term profits, then this is the method for you.

How is day trading taxed?

Day trading will be taxed at a higher rate than buying and holding. This is because the tax rate is different for assets which are held for less than a year. Any profits you make day trading will be taxed at your regular income tax rate by your local government.

When saving money for taxes make sure you calculate the entire amount, because your day trading activities, even if only part-time, could bump you into a higher tax bracket, and you could end up being further in debt to the government than you think!

The good and bad of crypto day trading

Day trading can be an excellent way to both make short-term profits and to add to your portfolio. Even investors who typically are only interested in engaging in long-term holding can use cryptocurrency day trading to easily double the size of their holdings while they wait for long-term gains. These day to day fluctuations may seem small, but they can add up to a lot of extra coins or tokens over a few months or so.

Of course, you can’t expect every trade to be a winner! Everyone makes a bad move on occasion, and if you don’t know how to manage your risk properly it can be a costly mistake. There is also the risk of you exiting a position just in time for it to go on a bigger run. Missing out on larger gains by chasing smaller profit bumps can be a painful experience, but it’s a risk day traders take.