All You Need To Know About Day Trading And Its Working


The common perception about investing is that it is not a get-rich-quick scheme. However, professional investors acquire the ability to collect significant returns within 24 hours of trading or lesser. One such trading technique is Day Trading and you can read all about it in this article.

What is Day Trading?

Day trading is a type of short-term trading strategy that seeks to earn profits within 24 hours duration leveraging small market movements. Day traders usually depend on technical market analysis to identify daily price movements and changes.

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Profit generation in day trading is usually marginal therefore Day traders undertake leveraged trading positions. Day trading requires extensive market knowledge and command on market analysis. Day trading is usually done on a commercial scale rather than the retail sector.

How Does Day Trading Work?

It is important for Day Traders to have a detailed overview of the market activity. Day traders reference market fundamentals but they keep a closer watch on price movement based on predictive models using technical analysis.

Day trading positions are not held longer than 24 hours. An extensive amount of hedging and risk management goes into Day Trading. At the same time, Day traders often rely on HFTs or High Frequency Trading meaning that they tend to place various bets in the market at a given time.

Day Trading is considered a highly competitive and risk-prone trading strategy. On account of its high risk exposure, Day Trading has the ability to generate massive results. Another factor that increases risk of Day Trading is using leverage.

It means that Day Traders can borrow funds, create a collateral account, and conduct trades in hopes to pay off the debtor and make sufficient profits.

In case of any unfavourable price changes, Day traders can lose the collateral value and suffer from losses. However, without placing massive bets it is not fruitful to generate substantial profits.

Here are some of the most commonly used methods of Day Trading:

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Types of Day Trading Based on Market Analysis

Price Trend Trading

Day Traders try to ascertain the ongoing price trend that is likely to consolidate. In this method, traders depend on relatively simpler trend-lines and channels analysis to confirm the direction of the asset movement for the trading duration.

Breakout Trading

Breakout Trading involves identifying selling or buying pressure for a given cryptocurrency following breakouts. Traders take into account the order books summaries, and bid ask spread analysis to make profitable trades.

Counter-Trend Trading

Day Traders also identify the counter price trend options. It is based on trend-reversal patterns and indicators but also considered riskier in comparison to trend-following techniques. 

Types of Day Trading Based on Trading Strategies


Scalping entails creating various trading positions and closing them on intraday basis. In this method trading period can range from one to five minutes.

High-Frequency Trading

High-Frequency Trading or HFTs are based on trained algorithms and software to perform numerous trades based on market inefficiencies and for short-duration.

Swing Trading

Swing trading positions can remain active for a few days and the traders monitor day-by-day market changes. Swing traders can retain their trading bets during the weekend and other non-business days.

Position Trading

Position trading is a mid-term trading strategy that can spread up to a month or even years in some cases. Position traders depend on market fundamentals if they are planning to extend their reserve holdings.

Range Trading

Range Trading is done based on the support and resistance price levels. Day traders are able to make a profit based on the resistance or support prone price movement projections.


Arbitrage is leveraging the minute price differences between various crypto trading platforms. Arbitrage traders usually leverage secondary markets and margin trading positions to generate sizeable returns from their trading endeavours.

Risks Associated with Day Trading

Here are some risks that are associated with Day Trading techniques:

Professional investors and brokers advice against Day Trading on account of high risks involved in the process.

Success rates for day traders are dangerously low in comparison to other tamed investment strategies such as index, holding, DCA, and trading etc.

Day traders can go into losses because they do not have a lot of time to keep track of minute details such as total trading costs, transaction charges, and other expenses involved.

Day traders can lose their collateral account during margin trading on account of sudden or unexpected market developments. Therefore, they should have proper hedging positions to counter the risks.


Day Trading offers massive trading rewards but it involves considerable risks. Therefore, Day Traders require the right tools, experience, training, and market knowledge to turn a profit.

Despite of all completing all the necessary pre-requisites for Day trading, ensuring success in this field depends heavily on luck and requires rigorous discipline.

Author: Isacco Genovesi

Isacco writes news articles, reviews and guides about cryptocurrencies including technical analysis, blockchain events, coin prices marketcap and detailed reviews on crypto exchanges and trading platforms.

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