When it comes to day trading, there are many different options that you have to choose from. Some of them are traditional, like stocks and options, and others are more modern, like cryptocurrency.
In fact, over the past several years, crypto has become a popular asset to trade when day trading. But because there is less profit than traditional stocks and options, many people wonder if day trading crypto is worth it.
Most experts, including the ones on our team at Capitalist Exploits, say that it is worth it, as long as you understand the guidelines and tools available to you. So we’re going to look at that and some pros and cons of crypto day trading and a few of the best cryptos to invest in.
Is It Profitable?
When you’re investing, there is no form of asset that is 100% foolproof. That being said, if you are dedicated to day trading crypto, and you really dive deep into researching and require the skills that you need, you can make it more profitable than risky. The other aspect of this is really looking at the fact that day trading is the idea of buying and selling in short timeframes to garner profit.
When you’re dealing with crypto, these profits are going to be smaller, which means you’ll have a smaller bank to play with. When you are working with fewer funds, you inevitably will earn less money. However, you can be profitable in doing this if you stay up to date on all the market insights and utilize them to make your final decisions.
Metrics to Watch
The biggest thing to make day trading of crypto worth it is to understand how to analyze and watch the metrics to ensure you’re investing in a currency that is going to yield high results. This means that you have to understand certain metrics to hedge your risks, and here are the ones that our team thinks are the most impactful in regards to this.
Liquidity & Volume
When looking at the metric, you want to pay attention to volume and liquidity, especially when you’re day trading crypto pairs. In regards to crypto, volume refers to how many of these pairs had been traded in any given 24 hour time frame. On the other hand, liquidity is looking at the available capital in that specific market.
Understanding that the higher the volume of pairs that are sold means that there is a bigger level of liquidity can help you use a trading strategy that works for you. But if you’re someone that’s looking for a lower price of entry, then looking at smaller cap cryptocurrencies could be the option for you. It all just depends on what you’re looking for and the level of dedication you have to day trading crypto.
Taking a look at the volatility of whatever cryptocurrency pair you’re looking to purchase can also play an important role. However, one thing to note is that cryptocurrencies are way more volatile than even stock markets. For those looking to optimize this metric, you’re going to want to understand that the smaller the market, the more volatile the cryptocurrency.
If you’re more experienced, you might be able to be successful in trading in more volatile crypto but for those just starting out, going with one that is a little more stable is a better choice.
When you’re looking at the spread, you want to try to find a cryptocurrency that offers a tight one. This is especially true when you’re looking at day trading because this is the difference between the bid and ask prices. You want to make sure that you’re looking at gains that are greater than the spread to make day trading crypto worth it.
It might seem counterintuitive to look at new cryptocurrency as a big opportunity for you. But when you’re day trading when a new cryptocurrency is launched, it often has a pretty favorable price. So watching exchange listings to see if anything new is coming up can be a great metric to watch.
Announcements & Developments
Though not specifically a metric, watching the current crypto market and any big projects that are about to be announced can help you find the right crypto to invest in to make your whole day trading worth it. This can go either way; if it’s a positive announcement or development, it could be great, and if it’s negative, it might indicate it’s time to sell.
Pros & Cons of Crypto Day Trading
Maybe one of the best ways to really determine if day trading crypto is worth it for you is to look at the pros and cons of the process. So we have made a small list below to help you out.
- Day trading in crypto is open to anyone who has access to an exchange.
- You can buy a fraction of any given crypto, so the price of entry is lower than many other investment options.
- The cryptocurrency market is open all day, every day.
- Technology that activates blockchains and cryptocurrencies is decentralized and requires no middleman to complete the process, making the transaction fees and taxes very inexpensive.
- The simplicity of beginning to trade can lead to some pretty big losses for inexperienced traders.
- Being open all day, every day means that you have to consistently look at charts and analyze data to keep up with everyone else.
- The decentralization of the process and lack of government guidelines means there is no protection for you.
Best Crypto for Day Trading
If you want to make day trading in crypto worth it, you have to understand which are the best cryptocurrencies to trade in. There is a wide range, and more are being found every single day, but the following are some of the more popular and best for day trading.
- Bitcoin – Almost everybody in the world knows what Bitcoin is. It might be the most popular and accepted worldwide. This cryptocurrency has the highest level of liquidity and trading volume across the board, making it have tighter spreads. Though just like the rest of the crypto, Bitcoin is volatile, and you will have to be very dedicated to ensuring profitability when it comes to investing in Bitcoin.
- Ethereum – Ethereum is very similar to Bitcoin regarding familiarity and acceptance. It is a large-cap cryptocurrency that has huge volumes and good liquidity. This cryptocurrency is the second largest only behind Bitcoin, which means it has high market capitalization levels. Unlike Bitcoin, though, Ethereum can be traded against U.S. dollars as well as other alternative digital currencies.
- Dogecoin – In 2021, if you were into crypto, you were probably looking to trade in Dogecoin. Though still a good option to invest in, it has begun to level out and become more of a bearish cycle-based cryptocurrency. It is still one to follow and a great investment if you’re looking to make crypto day trading worth it.
- BNB – This option is a good choice for those who are a little bit more of an investor that looks more on the upside and looks for undervalued cryptocurrencies to invest in. The currency itself is backed by the Binance exchange and is easily one of the highest assets when it comes to market capitalization.
When it comes to determining whether day trading cryptocurrency is worth it to you, it depends on what you’re looking for. Along with that, you have to factor in your dedication and intentions when it comes to trading this asset. It can be very profitable, and it can be very risky, but if you’re looking to invest in potentially the future of currency, then crypto may be the way to go.
Only time that will tell where crypto ends up in regards to day trading. One of the best ways to do that is by checking out our newsletter, Insider Weekly.