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Crypto-day trading is also known as intraday trading and involves purchasing and selling cryptocurrencies within a day. A day trader’s goal is to earn a good profit amidst the value fluctuations of cryptocurrencies.
Cryptocurrency day trading is slightly different from conventional day trading because it has specified overlapping trading hours each day. On the other hand, intraday trading has no set time intervals within a day. As a result, it is easy to own cryptocurrencies in crypto day trading, while in-stock day trading, traders can only acquire full ownership through the right legal procedures.
This article will address the risks and rewards surrounding cryptocurrency day trading. The knowledge will help you weigh the pros and cons to decide if you are ready to invest in cryptocurrency day trading.
Risks of Cryptocurrency Day Trading
Intraday trading comes with a variety of risks that often deter crypto traders. Knowing these risks is essential, especially if you think of day trading as an option for your crypto portfolio. Here are some of the significant risks that come with crypto intraday trading.
Highly Volatile Crypto Market
The cryptocurrency market is highly volatile. Therefore, the value of cryptocurrency can easily change at any time. Volatility refers to how suddenly the cost of assets can increase or decrease. When cryptocurrency prices fall, traders selling these coins can make significant losses.
Risk of Your Exchange Getting Hacked
When you are day trading, you will probably keep your cryptocurrencies in a cryptocurrency exchange. The essence of storing crypto in exchange is reducing disruptions when transferring cryptocurrencies during day trading. However, when coins are exchanged, they are at a high risk of getting stolen after the exchange gets hacked.
Projects with substandard business systems rise in price for a while and then suddenly fall. The peak of such projects may mislead a day trader into investing in them. Eventually, the value of the project drops, and the trader who invested may suffer high losses. It is, therefore, wise to investigate particular projects before investing in them to avoid losses.
Day Trading Occurs Through Speculation
There is no assurance that a particular way of day trading will earn you money. A trader can make an illegal transaction, making them lose a lot of money. Day trading is, therefore, risky to some level.
Rewards of Crypto Day Trading
One advantage of cryptocurrency day trading is that you can practice it anywhere with the right internet connection. It thus has benefits over conventional day trading, which has a location limit.
Potential for High Returns
The volatile nature of cryptocurrency projects is not just a negative thing. When a trader invests in a cryptocurrency project which increases in value, he may gain enormous profits. For example, projects may increase their value by over 10% within a few hours.
Low Fees and Low Taxes
Exchanges that facilitate day trading, such as BitMEX exchange, also charge low fees and taxes. However, you cannot compare day trading exchanges with conventional exchanges because the latter charges its users high fees and taxes.
Crypto Day Trading Markets are Always Open
Regarding crypto day trading, markets are open 24 hours a day. Therefore, one can get more hours to day trade, unlike when trading stocks. Therefore, Crypto day trading benefits conventional day trading because it has a time limit.
Favors Both Average and Large Investors
In crypto trading, both average and large investors are favored, unlike conventional trading, which is expensive for the average investor. Therefore, the probability of success for both small and large investors is equal. Therefore, one does not need a long-term view to determine the potential success rate when crypto day trading. Instead, investors should focus on the current cryptocurrency rates when day trading because they are uncertain of the future coin rates.
Day trading can earn you high profits or cost you significant losses. Therefore, getting yourself a stable trading strategy is wise to avoid making these losses, especially if you are new to day trading.
Despite its risks, day trading is a great platform that will enable you to expand your cryptocurrency portfolio. Also, the high volatility nature of the cryptocurrency trading market allows you to make significant earnings.
Cryptocurrency day trading is available 24 hours each day. Therefore, you have more time to carry out your exchanges than in conventional day trading, where you have limited daily hours. In this case, you can make more profit because you have more time to trade. Therefore, you can weigh the risks and rewards of day trading to prepare for this exciting cryptocurrency adventure!