The Benefits and Risks of Day Trading Crypto

The cryptocurrency markets are always moving. People trade and send crypto to other users at every hour of the day. On the Binance exchange alone, $11.5 billion worth of crypto is traded daily.

The question is, will there be room for you to make a profit in some of those trades?

Day trading crypto is a great way to make extra money on your own terms, but it’s not all fun and games. Keep reading to learn what to expect when trading cryptocurrency and the pros and cons you’ll see when day trading.

What Is Day Trading Crypto?

Day trading cryptocurrency is a trading strategy that uses daily price fluctuations in cryptocurrency to make short-term trades. Your goal is to monitor pricing charts to find downward trends and buy when you believe a cryptocurrency’s price will go up. You want to trade back to your original cryptocurrency within a few minutes or hours to make a successful trade.

Of course, a few different ways to go about day trading exist. Below are a few methods for you to consider.


Scalping is a day trading strategy for crypto traders who want easy wins that give less profit. Your goal is to look for tiny fluctuations in pricing during the day and make quick trades that take advantage of those prices.

This method often uses bots since the timing for the trades is so small. But using bots leads people to be able to handle hundreds of transactions per day using this method.

Range Trading

Range trading is a strategy that takes advantage of stable markets. Instead of looking for considerable swings in the market, you look for markets that have stable highs and lows.

Stable highs and lows make it easier to enter and exit a trade. You know the common points where entering a trade makes sense, which makes this strategy a safer bet if you don’t want to take on more risk.

Some of the things you’ll need to learn about and monitor for this strategy are support levels and order volume. These indicators will help you find profitable trades.

Technical Analysis

The trading of technical analysis is for people who are good at monitoring charts and spotting price trends. It’s a strategy based on statistics where you use historical data for cryptocurrency and coins to predict where the price will move in the future.

Using science offers traders a way to make more informed choices and reduce the risk of trading. There are countless indicators you can learn about in technical analysis to optimize your trading strategy. Here are a few for you to consider:

  • Moving average convergence
  • MYC
  • Relative Strength Index
  • Bollinger bands
  • Moving average

Sentiment Analysis

You can’t always rely on historical information and pricing charts to make intelligent cryptocurrency trades. Things change fast in the crypto world, which means news can significantly impact the sentiment about a cryptocurrency.

That’s why you need to pay attention to the news when trading cryptocurrency in the short term. A good news event can cause a run on coins that significantly increases the price. On the other hand, bad news will cause the price to crash.

Sentiment analysis uses that fact to make smart day trading decisions. Keep your news sources up to date to know when to buy and sell your holdings.


Arbitrage is the process of taking advantage of the price differences between the same asset on two different exchanges. Even though cryptocurrency’s price stays stable across most cryptocurrency exchanges, that doesn’t mean there won’t be slight differences.

Arbitrage traders take advantage of those slight differences by purchasing a coin on one exchange, sending it to another exchange, and selling it for a profit. You need to account for the price difference on the exchange and the trading fees you’ll get when making those trades.

Arbitrage is another trading strategy you can use automated bots for. You need to be quick to take advantage of some of these price differences, so a bot may be the only way to get some of those trades.

High-Frequency Trading

High-frequency traders use sophisticated computer algorithms to monitor pricing on various cryptocurrency coins. These algorithms are extremely quick and can enter and exit trades in milliseconds.

These programs don’t only stick with a single exchange when analyzing trends. They look at the pricing information for a cryptocurrency on several exchanges at once.

This is information bots can use to come up with predictions and make profitable trades. If you’re good at algorithms and math, high-frequency trading is a great choice.

Pros of Day Trading Crypto

There is a lot of advantage to getting started with trading crypto for short-term gains. You don’t have long to wait to see profits, so you can quickly optimize a winning strategy. Here are some of the benefits you’ll see when short-term trading.

High Rewards

Yes, there are a lot of risks when trading cryptocurrency. This is even more true when you’re trading on a short-term basis. It’s difficult to predict what the market will do during the day.

But at the same time, you open yourself up to even more profit when you trade using short-term trading methods. You can see much more profit quickly when you go this route.

In order to see more profit with medium-term and long-term strategies, you have to wait and hope for the best. Short-term trading allows you to see high rewards in a much shorter time frame. 

Strategy Testing

One of the most significant issues with medium-term and long-term trading is waiting to see if your strategy works. You’re relying on written guides and other traders to confirm that your strategy is sound. But that doesn’t mean you’ll always see success.

The great thing about short-term trading is the ability to see quick results. Since you’ll make trades every second or every few hours, you have plenty of time to test your trading strategy.

This testing will help you hone your skill faster and begin spotting trends sooner. As a result, you can become much more experienced quickly. That will help you see more profit in the long term.

Constant Trading

One problem with traditional markets is that they close. You only have a limited window to trade on weekdays. If you already have a job and want to start trading, you won’t have a good way of doing so.

The same isn’t true with cryptocurrency. There are no trading windows on crypto markets. Exchanges stay open during all hours and every day of the week.

That gives you plenty of time to practice trading. This means you can learn how to become a trader without sacrificing your traditional job. Ultimately, that leads to less risk for you if you would have had to give up your current employment to find enough time to practice trading.

Easier Entry

It’s not easy to get involved in other trading strategies. Forex, for instance, has some barriers to entry. Many Forex exchanges have a minimum deposit you need to get started.

The same isn’t valid for cryptocurrency. For most exchanges, the only thing you need to do is verify your identity. From there, you can deposit as much or as little money as you wish.

That means anyone can quickly get up and running on a cryptocurrency exchange. You won’t need to jump through any extra hoops to get started.


One of the biggest pros of investing in cryptocurrency is transparency. The blockchain technology cryptocurrency is based on is transparent. You can look at a blockchain explorer to see every transaction on the chain.

That means there’s not as much guessing when it comes to cryptocurrency. You don’t know what happens behind closed doors with traditional stocks and currencies. That means you may not have all the information required to make successful investments.

That may be true to some extent with cryptocurrency, but it isn’t nearly as big of a deal. You can see if something bad is happening on the blockchain and make preparations to avoid making bad trades.

Cons of Day Trading Crypto

With all the cryptocurrency benefits of short-term trading, it’s easy to overlook some of the downsides. Keep reading to learn when it doesn’t make sense to trade crypto in the short term.

More Risk

Yes, there is more potential for profit when you trade crypto short-term. But that additional profit doesn’t come without risk. Since there is so much volatility in the crypto market, you can expose yourself to much more risk if you make several bad choices without a win.

As a result, you can quickly lose your trading money when doing short-term trading. If you start this process without enough knowledge and risk management, you’re more than likely to lose all your trading money when beginning this type of trading.

Steep Learning Curve

Cryptocurrency markets don’t behave like traditional markets. Cryptocurrency is a technology before anything. Coins that are worth value are added on top of that technology to add value and encourage investment.

Because of that, many other factors play into how a cryptocurrency performs. You can use traditional financial instruments to monitor coin prices. But you can also learn about the technology to see if it’s good to determine if a coin is worth buying.

That leads to a more significant learning curve for day traders. You’ll need to study hard to learn enough for successful day trades.

Lack of Regulation

Many people consider the lack of regulation a good thing for cryptocurrency. It makes sense if you look at things from an innovation perspective. You don’t have government entities getting in the way of progress.

However, that’s also a double-edged sword. Since there’s no government insight into these markets, it’s easy for bad actors to take advantage and manipulate things.

It also means that exchanges aren’t held to the same level of scrutiny as traditional financial institutions. They can leave themselves open to insider trading or hacks that cause funds in the exchange to get stolen.

Unless you have your funds off the market or available with a Bitcoin ATM, you risk losing your money. Check for more information about how to store your holdings in a safe place where you can easily access them.

Constant Attention

One of the biggest problems with day trading is the attention it requires. Even if you’re running bots to make your trades, you must constantly monitor them to ensure they’re working correctly.

That can be troublesome if you don’t enjoy staring at screens and charts all day. It’s even worse if you need to monitor an asset for longer than you expect.

The same isn’t true with medium and long-term trading. Since you’re holding assets for longer than a day, you don’t need to constantly sit in front of a screen to execute your trading strategy.

You’re Ready to Start Your Journey of Day Trading

It’s not an easy decision to start day trading crypto. You’re wondering if you have enough money to get started and are smart enough to read charts and make good trades. It’s not unwise to question your choice for getting started and consider other ways of trading cryptocurrency.

Luckily, you now have the information you need to start trading cryptocurrency with success. Remember the guide above when determining if you want to day trade the crypto market.

Do you want more information to help you make other investing decisions? Learn more financial tips by checking out the latest posts on the blog.


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