1. What to buy?
Day traders try to make money by taking advantage of tiny price movements in coins (shorting). They often use large amounts of capital to do so. When deciding what to buy — like BTC — a typical day trader looks at three things:
Liquidity. A liquid token allows you to buy and sell it easily, and hopefully at a fair price. Liquidity is an advantage that comes with low spreads, or the difference between the bid and ask prices of a token, and low slippage, or the difference between the expected price of a trade and the actual price.
Volatility. This is a measure of daily price range – the area in which day traders operate. Greater volatility means greater potential for profit or loss.
Volume. This is a measure of how many times BTC (coins) are bought and sold in a given period of time. It is often referred to as the average daily volume. High volume indicates a lot of interest in a major coin or altcoin. An increase in a coin's trading volume is often a precursor to a rise or fall in price.
2. When to buy?
Once you know which tokens you want to trade, you need to determine your entry point for the trade. Tools that can help you do this include:
Crypto News Service: News affects BTC trends, so it is important to subscribe to services that alert you when news that may affect the market is released. For example, Binance Square is the best way to get first-hand news instantly.
Intraday candlestick charts: The candlesticks provide a raw analysis of price action. More on these later.
For example, buying in an uptrend is not specific enough. Instead, try something more specific and testable: buy when price breaks out of the upper trendline of a triangle pattern where the triangle was preceded by an uptrend (there was at least one higher swing high and higher swing low before the triangle formed) on the two-hour and two-minute charts prior to the two trading days.
Once you have a specific set of entry rules, scan more charts to see if your conditions are occurring on a daily basis. For example, determine if a candlestick chart pattern indicates that price is moving in the direction you expect. If so, you have a potential entry point for your strategy.
Next, you need to decide how to exit your trade.
3. Decide when to sell?
There are various ways to exit a profitable position, including trailing stops and profit targets. Profit targets are the most common exit method. They refer to taking profits at a predetermined price level. Some common profit target strategies are:
Keep your hands off and strictly enforce the strategy Strategy Description Scalping (Very Short-Term): Scalping is one of the most popular strategies. It involves selling almost immediately after a trade becomes profitable. The price target is any number that means you will make money on the trade. Scalping involves shorting BTC after a quick rise.
This is based on the assumptions that (1) they are overbought, (2) early buyers are ready to take profits, and (3) existing buyers may be scared off. Although risky, this strategy can be extremely rewarding. Here, the price target is the time when buyers start to step in again. This strategy involves profiting from the daily volatility of the coin. You try to buy at the day's low and sell at the day's high. Here, the price target is just on the next sign of a reversal. Momentum This strategy usually involves trading on positive news or looking for a strong trending move supported by high volume. One type of momentum trader buys when positive news is released and rides the trend until the trend shows signs of reversal. Another type will exit the price spike. Here, the price target is when the volume starts to decline. Just like your entry point, define exactly how you will exit the trade before entering. The exit criteria must be specific enough to be repeatable and testable.
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