Day Trading: Advantages vs Disadvantages
Cryptocurrency investors who want to maximise their profits but do not want to make long-term crypto investments go for day trading. Day trading is a crypto trading strategy that focuses on intraday profits via trading crypto bought on the same day. It plays with and takes advantage of the volatility of the crypto market; thus, high-profit returns are to be expected but also carry much larger risks.
In addition, the success of day trading – like in any kind of investment – all depends on the execution of the day trading strategy, which has been well fitted to the traders’ skills and knowledge of trades.
Day trading can be challenging, especially for novice traders who might enter the crypto market expecting large profit gains without any experience of trading strategies, proper knowledge, and skills-set, along with a well-thought plan of the investment funds. Huge losses and rough finances can happen to seasoned traders, so think about the chances it might happen to novice traders.
You may think that the huge gain is worth the risks or may think otherwise; however, to help you decide whether to consider making day trades or to overwrite this strategy with other more well-fitted strategies for you, this article will list out the advantages and disadvantages of making day trades.
Advantages of Day Trading Crypto
- 24/7 market
The opportunities to make trades within the day are open any time of the day and making this day trades are possible any day of the week. This is one of the most attractive aspects of crypto trading; it allows you to gain profit 24/7.
- Volatility is the norm.
People shy away from crypto investments due to their volatility; however, in day trading, volatility means opportunities for higher profit gains. Thus, day traders go for markets that are currently highly volatile, for that is how you make profits in day trading.
- Unregulated
Compared to the stock market that is heavily regulated, crypto trades regulations are close to none. Since crypto markets are decentralised, you won’t have to worry about third-party mediating your transactions and asking for costs for it – although you still pay transaction fees in every trade you do – you won’t have to worry about your non-existent experience, even the size of your accounts and age do not matter as well. We can say the barriers to overcome in crypto trades are much lesser than that of the other asset class.
- Transparent and open data
The blockchain technology of the cryptocurrency world allows you to view all transactions happening in the market; thus, the data you need to analyse which crypto market to go for is out in the open. The order book for all kinds of transactions can be viewed even if you are not signed in to your account.
In addition to that, crypto exchange platforms you sign up for, such as Immediate Edge, even come with a range of technical tools to help you analyse the market trend to help you decide which trades have the better opportunities for profit to go for.
- Immature market
The cryptocurrency market is much easier to get into compared to other investment asset classes; thus, there is an abundance of newbie investors who flock to the market. This can play out as a crucial factor when making trades too, a large number of novice traders means having a little more knowledge and experience in trading can make you act quicker when getting in and out of trade positions which can result in profit gains as well.
Disadvantages of Day Trading Crypto
- 24/7 market
The 24/7 crypto market can be a double-edged sword; too, when making day trades, you look into crypto markets which are currencies fluctuating on a high and low and have enough liquidity. These two conditions are much harder to come by than you expect, thus when making day trades, especially when the crypto market is boring, it can just leave you staring at your screen and waiting for the opportunity for trades to come by.
- Unregulated
This is another factor in day trades that can serve as a disadvantage, too, especially if you take managing your crypto-assets for granted. Since there is no central authority to help you when you mess up, the blame is all on you when this happens; thus, when making day trades, especially when you are making high-volume trades, you must take extra caution on where you put your investments and how to manage these.
Another factor you should watch out for in an unregulated market is when you sign up for an exchange platform, and it suddenly closes, gets hacked, or even just disappears, the possibility for you to recover your lost funds is close to none. Thus, choosing a good and trusted exchange platform such as Immediate Edge should be your priority too.
News cycle
Cryptocurrency is a highly volatile market wherein even a bit of news, even the overplayed ones, can make a big difference in the market prices; news can set the crypto to skyrocket or plummet. If you are looking for easy trades, you should go for predictable price markets.
- Liquidity
Liquidity is a market condition you should consider before entering a market to make day trades. Your expected profit can be less than what you can really cash out due to the lower liquidity of some crypto assets. Thus it is really important to look into the market before entering a trade.
- A small market
There are many cryptocurrencies in existence – up to 10,000 – but the fact is that only a few of these can be traded and are stable enough to consider investing in.
In conclusion, the decision of whether to do day trading of crypto or not is all up to you. If you are interested in investing in crypto but think that day trading is not for you, there are still a lot more crypto strategies you can look into before entering the market. Just keep in mind that your success in investing is in the hard work you put into your research, plan out your strategy, and update yourself to improve your skills-set as well as how well-fitted your finances and goals are to your overall investment plan and strategy.
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