Whether you are a battle-tested market veteran or a newbie in the crypto space, making $100 a day simply day trading cryptocurrencies is realistically possible, and all you need is a deep understanding of market trends and the right approach towards leveraging trading tools.
In this blog, we have detailed the strategies you can adopt to successfully day trade cryptocurrencies and the capital you require to make $100 a day.
What Is Crypto Day Trading?
Day trading in crypto involves buying and selling cryptocurrencies within the same day to profit from short-term price movements in the market. Unlike holding assets in the long term to capitalize on gains, this approach takes advantage of the frequent volatility of crypto prices.
Day traders analyze market trends, use technical indicators, and execute multiple trades in a single day to make profits. This requires a sharp focus, quick decision-making skills, and a deep understanding of the crypto market. While the trading strategy can be lucrative, it is also highly speculative and could result in significant losses without proper planning.
Let’s take an example to understand the concept better.
One day, the price of Bitcoin is massively fluctuating. At 10:00 AM, it was priced at $95,000, and technical analysis hints at a potential surge in the next few hours. You take this opportunity to buy 1 BTC at $95,000, and by 1:00 PM, the price rises to $96,000. You then immediately sell the Bitcoin, making a $1,000 profit in the process.
This is the basic premise and essence of crypto day trading. Now, let’s get into the key components of the trading strategy.
Essential Components of Day Trading
Several key components are crucial in ensuring that a day trader makes successful trading decisions while minimizing their risk to market volatility, and they are the following:
1. Technical Analysis
Traders look at candlesticks formed on price charts to understand the movement of a particular cryptocurrency. Patterns like “head and shoulders” or “double tops” provide a deeper insight into potential price directions. Trading indicators like moving averages (MAs), Bollinger Bands, and Relative Strength Index (RSI) play a key role in predicting future price movements and identifying trading opportunities.
2. Market Volatility
Cryptocurrencies are infamous for their highly volatile nature. Significant price movements within short periods could either create profit-making opportunities or cause significant losses to traders. Price fluctuations can occur due to market-related news, regulatory announcements, and other major macroeconomic events. Day traders can make informed decisions by staying updated.
3. Risk Management
Day traders can limit potential losses by setting stop-loss orders, which automatically initiate a sale when the price of an asset falls below a predetermined level. Traders must calculate the size of their trading position to prevent losses on a single trade. Determine the right amount to invest in each trade based on the account size and risk tolerance level.
4. Tools and Platforms
Crypto exchanges like Binance, Coinbase, or Kraken offer advanced tools for analyzing markets, executing trades, and managing portfolios. These days, traders can employ automated trading bots with pre-set criteria to execute trades. This allows traders to capitalize on opportunities without constantly monitoring market conditions.
Common Day Trading Strategies
To succeed as a day trader, you need to develop effective strategies. Without an adequate plan, your trades could become random and emotionally driven, leading to losses. A good strategy helps you identify entry and exit points, set up stop-loss limits, and choose your appropriate trade sizes. It is also important to test and refine your strategy using small amounts before committing significant funds.
Here are some common day trading strategies for you to keep in mind:
- Scalping: Focus on minor price movements as they can return small but frequent gains.
- Range Trading: Exploit predictable price ranges before deciding to buy and sell a cryptocurrency.
- Breakout Trading: Capitalize on significant price changes when a crypto breaks past key levels.
- Trend Following: Follow the market trend and execute trades by assuming investor sentiment. This requires proper research and technical analysis.
- Mean Reversion: Traders must remember that crypto prices will always return to an average level following extreme movements.
Managing Risks In Day Trading
Risk management is a key aspect of crypto day trading, and without it, traders can suffer significant losses. This strategy involves setting limits on how of your capital can be risked for a loss on a single trade or in a single day.
Diversification is also another risk mitigation strategy, where you spread your trades across different crypto assets, reducing exposure to a single token’s volatility. Always remember that the key to making profits is protecting the assets and capital you have at hand.
Follow these practices to effectively manage your risk while day trading crypto:
- Set stop-loss orders to limit potential losses
- Only invest funds that you can afford to lose
- Allocate only a small portion of your portfolio to day trading
- Monitor market conditions constantly and adapt your risk strategies accordingly
Also Read: Crypto Fear & Greed Index: What Is It And How Does It Work?
Can You Make $100 a Day Trading Crypto?
Making $100 a day trading crypto is possible but requires a solid understanding of market physics, utilizing effective strategies, and a disciplined risk management approach. A successful trade is marked by the ability to read market conditions and implement effective trading strategies.
Technical analysis tools like moving averages, RSI, and Bollinger Bands are helpful in identifying market conditions and profit opportunities. Remaining updated on market trends and related news is highly recommended.
The amount of capital you start trading with is key to your ability to make $100 a day. However, achieving this target could be difficult with a small capital base due to limited trade sizes and higher relative transaction costs. To avoid losses and protect your capital, it is important to implement effective risk management strategies, including setting stop-loss orders and properly sizing trade positions.
Cryptocurrencies are a highly volatile asset class that is capable of creating numerous trading opportunities within a single day. However, this volatility can also increase the risk of experiencing massive losses. You must choose to day trade in highly liquid markets to be able to execute trades quickly and at desired prices, thereby minimizing slippages.
Consistency and discipline are other major factors that decide successful trading and profit-making in the crypto market. Develop an efficient trading plan and follow it through, regardless of market conditions, as this helps avoid impulsive and emotionally-charged decision-making. Make it a habit to continuously learn and adapt to market changes to achieve long-term success.
To attain a $100 profit each day, you must have a trading capital of $10,000. Target a 1% profit from your daily trades, which translates to $100. Maintain this consistency to sustain your trading income and use the base to increase your margin in the long term.
