Cryptocurrency day trading: what is it and how to do it?
Find out if it's possible to Day Trade cryptocurrencies!
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Cryptocurrency day trading is a well-known investment strategy among traders.
This is happening because the cryptocurrency market is booming, since in the year 2021, Bitcoin was considered the most profitable asset of the year (many others lost out to inflation).
But because they are on the fringes of the financial system, digital currencies are still viewed with suspicion by those who wish to diversify their investments, especially among those with a more conservative profile.
To help you understand the subject better, we're going to explain exactly what day trading and cryptocurrencies are.
Read on to find out more.
What is Day Trade?
Day Trade is a very short-term speculative operation in which the main objective is to profit from daily price fluctuations.
As short-term fluctuations are usually low, the day trader tends to make several transactions every day in order to make large gains.
Basically, it works as follows:
Imagine you bought shares in a company at 11 a.m. for R$ 20. Later, at 4 p.m., you sold the same shares for R$ 21.
In this case, you have just carried out a Day Trade operation and made a profit of R$ 1 per asset sold.
But how do you find the best time to buy and sell? And that's exactly what makes this strategy complex and risky.
If it were a simple strategy, all day traders would be rich. But we know it doesn't work like that, do we?
In order to understand the ideal time to buy and sell, a trader needs to have experience and knowledge of the financial market.
Technical and graphical analysis are essential for traders to make better decisions.
Even so, there are experts who claim that it is impossible to determine future prices with 100% certainty using technical analysis alone.
It's also important to create an investment strategy. As you can see, we're not talking about something simple.
Take the opportunity to also read 👉 What does it take to be a day trader?
What is cryptocurrency?
Cryptocurrency is the generic name given to decentralized currencies - which are not controlled by a government or central bank.
They are created on a blockchain network through advanced cryptographic systems, which protect transactions and user information.
Unlike the real thing, cryptocurrencies only exist on the internet. In other words, you can't store them in a physical wallet.
In recent months, cryptocurrencies have begun to attract the attention of investors, mainly because of Bitcoin, the world's most famous digital currency.
But just like any other cryptocurrency, Bitcoin is subject to high market volatility and follows the law of supply and demand: the more people interested, the more expensive the asset becomes.
There are other cryptocurrencies that are also standing out in this market, such as:
- Ethereum (ETH)
- Solana (SOL)
- Avalanche (AVAX)
- Polkadot (DOT)
What is cryptocurrency day trading?
Trade is an operation related to assets. These assets can be shares, bonds or digital currencies, for example.
In other words, cryptocurrency trading refers to the trading of digital currencies.
However, the goal is much more than just making a trade. A trader's intention is to make a profit from the asset.
When buying a particular cryptocurrency, the trader hopes that the asset will appreciate in value so that at a certain point, it will be possible to sell the crypto for a higher price.
The cryptocurrency market allows you to day trade with these digital assets.
But it is important to mention that this type of financial operation is subject to the volatility of cryptos.
In fact, it's quite common for their price to fluctuate by more than 100% in a single day. The advantage in this case is that volatility brings greater trading possibilities.
What are the best practices for trading cryptocurrencies?
Buying and selling financial assets may seem simple.
However, to really make gains, you need to create an investment strategy, have patience and, above all, control your emotions (this is extremely important for those who invest in variable income).
In this way, you can minimize the risks of losing money with cryptocurrency trading.
To help you, we'll give you some tips! Take a look:
1. choose an exchange carefully
The first step to start carrying out this type of operation is to choose an exchange with care and attention.
Exchanges are virtual platforms where you can buy, sell, exchange and store cryptocurrencies such as Bitcoin.
Make sure you choose a secure platform with a good reputation in the market.
2. Define your trading strategy
A successful trader must always seek knowledge and create risk management for their trades.
So before you start trading cryptocurrencies, you need to define your investment strategy.
In day trading, operations are carried out in just one day. In other words, on that day, you'll take advantage of the lows and highs of the market to buy and sell.
In swing trading, this period is usually a little longer, at least a few days.
There is also the buy and hold strategy. Here, the aim is to hold on to a particular asset for years before selling it.
Your strategy should be defined based on the risks you are willing to take and the time you have available to monitor changes in the market.
Remember that we are talking about variable income, which means that despite the good chances of earning, there are risks involved.
3. Study graphic analysis
A trader must study and follow the market.
It is impossible to predict the changes in any financial asset with 100% certainty. However, there are signs of trends that can be observed. This is called graphical analysis!
What is the best platform for day trading cryptocurrencies?
Digital currencies, in addition to serving as an instant means of payment, can also be used in investment or speculation techniques.
In situations like this, trading these currencies is commonly known as cryptocurrency day trading and for the magic to happen, you need a platform.
When you open an account on a platform you can do many things, the main one being the ability to follow market quotes in real time and thus be able to sell or buy these assets.
Operations are even completely decentralized, i.e. without the intermediary of banks or financial institutions, for example. In this system, what prevails is blockchain technology.
There are many platforms on the market where you can carry out these operations, but it is very important to choose a good alternative.
To make your journey as a cryptocurrency day traderBelow you will find 3 platform recommendations.
1. Binance
The platforms where the purchase, exchange and sale of digital assets such as cryptocurrencies are carried out are also called exchanges, and Binance is one of the largest cryptocurrency trading platforms.
It was founded in 2017 and is headquartered in North America, in the Cayman Islands to be precise.
Even though it is a foreign company, it allows deposits in reais, making it an alternative for Brazilian traders.
In addition to trading crypto-assets, Binance invests heavily in decentralized technologies and has even developed its own blockchain.
One of the advantages of this platform for cryptocurrency day trading is that it offers the opportunity to make loans with coins.
In this way, investors are able to monetize their portfolio. It also has a diversified catalog of cryptocurrencies.
To register and start trading, go to the Binance website.
2. FTX
FTX is also one of the best platforms for day trading in digital currencies. It is based in the Bahamas and was founded in 2019 by a group of people who knew a lot about the subject.
As such, the platform offers a great experience for investors and many advantages.
Among the advantages that FTX offers are centralized pools and guarantees in stablecoins (backed cryptocurrencies).
Find out more about the advantages and details of this exchange, access their website.
3. Foxbit
Foxbit's platform is very intuitive, making it a great alternative for beginners in the cryptoasset market.
This Brazilian platform was created in 2014. Since it was founded, it has allowed users to register for free to carry out their operations.
Among the many advantages that Foxbit offers, we can highlight, for example:
- Possibility of making deposits in reais or cryptos;
- Extensive catalog of assets;
- It can be used to receive payments in Bitcoin;
- Provides tokenization services.
Find out more about this national platform and the other advantages it offers, access your site.
Certainly, since it's a Brazilian platform, you'll feel more familiar with it.
In addition to the three alternatives highlighted in the text, the following can also be added to the list best platforms for cryptocurrency day trading:
- Coinbase;
- Kraken;
- Coinext;
- Bitcoin Market.
| Coinbase | Kraken | Coinext | Bitcoin Market |
| Easy-to-use interface and accepts fiat currencies | Transparent: offers proof of bookings | Possibility of making deposits in reais via Pix | Pioneer in Brazil and offers personalized service |
Who is the best cryptocurrency trader?
There are many specialists on the market when it comes to cryptocurrency day trading. Many of them are even content creators and influencers, and teach everything they know to their followers.
However, the man considered to be the best day trader in cryptocurrencies leads a slightly more peaceful life in contact with nature.
However, he spends a lot of time on his YouTube channel teaching his subscribers what he knows. His name is Tone Vays.
So, if you want to have access to in-depth content on the cryptocurrency market, we recommend subscribing to the YouTube channel of Tone Vays.
What are the best cryptocurrencies for day trading?
There are currently around 20,000 cryptocurrencies. There are so many that it's hard to choose between the best.
However, there are those that dominate the market, for example Bitcoin, the world's first cryptocurrency, which is offered by most brokers.
With beginners and bolder investors in mind, in this topic we list the names of the following 8 cryptocurrencies for day trading.
That way, you know exactly where to start your short-term operations. Check it out!
| 1st Ethereum (ETH) | The second largest cryptocurrency in the world, but some analysts consider it even bigger than Bitcoin. |
| 2nd Litecoin (LTC) | As well as being one of the most popular in the world, it is low cost and fast. |
| 3° Dogecoin (DOGE) | This currency is highly volatile and is considered the most expensive meme currency in the world. |
| 4th Bitcoin Cash (BCH) | It is considered a better alternative to Bitcoin, as it is faster and highly volatile, for example. |
| 5° ApeCoin (APE) | Created with the aim of facilitating payments on the network. |
| 6° Ripple (XRP) | One of the most attractive currencies for day trading, very popular with investors and traders. |
| 7° Shiba Inu (SHIB) | It's a great alternative to negotiate because it has a low value. |
| 8° Cardano (ADA) | Low price and high volatility. |
When in doubt, it's very important to know that the best digital currencies for this operating model are the most popular ones, but they also need to have a high trading volume.
How to day trade cryptocurrencies for beginners?
Well, if you're interested in the subject, you're probably wondering how to get started. cryptocurrency day tradingright?
First of all, in this text you'll find the essentials for getting started: the best platforms, cryptocurrencies, who to follow to learn more, etc.
The next step is to look for a cryptocurrency broker. We've listed some of the best exchanges on the market in this article.
After choosing the ideal platform to operate on, you need to do more research on each cryptocurrency mentioned here to decide which alternative to start investing in.
Usually, the best cryptocurrencies are those with high liquidity and low cost. Apart from that, they need to be popular, so it will be easier to trade them.
The next step is to deposit your funds on the platform to carry out the trades, i.e. buying and selling.
Choose more practical alternatives that accept different financing methods, such as credit cards and Pix.
This investment model is considered risky, so experts recommend that you start slowly and invest little.
In the meantime, it is very important to dedicate time to studying the market and everything that involves cryptocurrency day trading.
Does cryptocurrency trading pay tax?
It depends. The Internal Revenue Service determines that tax should only be withheld in cases of capital gains.
In other words, only the profit from cryptocurrency sales will be taxed, but only monthly profits of R$35 thousand or more will be taxed.
This includes the total value of monthly sales of any type of crypto-asset. So keep an eye on your earnings from selling cryptocurrencies.
It's very important to declare cryptocurrencies in your income tax return, even if you haven't reached the taxable amount.
This way, we avoid any possibility of future problems with the IRS.
Conclusion
Now you know what cryptocurrency day trading is, how it works and the main investment practices in this market.
It's a complex operation that requires discipline and experience. However, even if it's not an investment recommended for everyone, that doesn't mean it's impossible to make money with this strategy!
