Since the rise in popularity of cryptocurrencies, the number of promising cryptocurrencies has increased significantly. Among the many options available, is Ethereum good for day trading? Yes, Ethereum is one of the best choices for day trading because of its high liquidity, strong market presence, smart contract function, and robust ecosystem. It also has widespread adoption and constant market activity, which guarantees good trading volume, allowing traders to enter and exit the market quickly.
While there are logical best choices when it comes to short-term crypto trading, you should also consider that these are general choices, and if you want to be able to actually locate profitable trading opportunities, you need market knowledge and trading skills. You can learn market knowledge and gain trading skills by researching and reading educational articles.
In This PlasBit article, we look into many other cryptocurrencies that are well-suited for short-term trading in 2024. We highlight not only Ethereum but also other good options, such as Bitcoin and Solana. Each of these cryptocurrencies is evaluated based on critical features that any suitable asset for short-term trading needs.
Top Cryptocurrencies for Short-Term Trading
To give a more detailed answer to your question, is Ethereum good for day trading? Yes, Ethereum is one of the top choices for day trading due to its high liquidity and market presence. Yet, it is not the only suitable coin for short-term trading. We have listed the best choices for cryptocurrencies that are suitable for short-term gains. These cryptocurrencies are highly volatile and have high liquidity.
· Ethereum (ETH)
· Bitcoin (BTC)
· Binance Coin (BNB)
· Solana (SOL)
· Ripple (XRP)
· Polygon (MATIC)
· Cardano (ADA)
· Avalanche (AVAX)
· Dogecoin (DOGE)
· Shiba Inu (SHIB)
Being traded in high volumes and having a strong market presence also makes these coins the best options for short-term traders.
Characteristics That Make a Coin Suitable for Short-Term Trading
When short-term trading, you are trying to use rapid price changes to make profits. So, to really understand which crypto is best to invest for the short term, you have to know what features make cryptocurrencies fast and easy to trade with, less risky to invest in, and, of course, more likely to generate profits with.
High Volatility
To make a profit, Short-term traders need big price swings in days, hours, or even minutes. This is why volatility, or the amount of price changes in a short period, is very important for short-term traders. Cryptocurrencies like Ethereum and Solana, which have large price swings, allow short-term traders to make quick profits by rapid buy and sell actions. These changes that can generate thousands or even millions of dollars often start with platform updates, changes in market sentiment, news, or even general technical developments. However, you should also note that while high volatility increases profits, it also increases risks, so you better be prepared for both bigger gains and losses.
Liquidity
Short-term traders also need to easily buy and sell their cryptocurrencies. Coins with this quality have high liquidity. Coins with high liquidity do not experience large price movements with each transaction and are also traded on most exchanges. Popular and established cryptocurrencies like Ethereum and Bitcoin have high liquidity.
News Sensitivity
As we discussed before, short-term traders benefit from rapid changes in price. One way such swings are created is news. Some cryptocurrencies like Ripple and Dogecoin have a history of experiencing huge price swings caused by public endorsements, new regulations, partnerships, or general technological developments. So, coins that respond to such events by having surges or decreases in their price generate more opportunities for profit and are the more favorable choices for short-term traders.
Lower Transaction Costs
Because short-term traders need to make rapid trades in a short period of time, like days or hours, the fees of transactions can add up and eat into the profits. However, this is not a concern for traders with deep pockets because they can trade in high volumes, where the profits easily cover the transaction fees, but for the average short-term trader, this is an important concern. Some coins like Solana are known for their low transaction fees, which naturally makes them the better choice.
Market Sentiment
Endorsements by famous and influential figures and viral social media posts that create hype and trends can positively or negatively change market sentiment. Such changes create price swings, which, as discussed before, are beneficial for short-term traders who are looking for market trends created by hype or fear. Some examples of such cryptocurrencies include Dogecoin or Shiba Inu, which market sentiment causes big swings in their price.
High Trading Volume
A relatively high trading volume enables traders to rapidly buy and sell large amounts without significantly affecting the price of the coin. Moreover, high trading volume coins such as Ethereum have relatively predictable price swings; hence, short-term trades become less risky. Furthermore, coins with high trading volume have a stable market interest, which results in recurring price patterns and familiar market trends.
To give a more precise answer to is Ethereum good for day trading? Yes, Ethereum is a strong choice considering all the key characteristics of an ideal cryptocurrency for short-term trading, such as high volatility, liquidity, and trading volume. Its significant price swings, easy trade execution, and high trading volume make it well-suited for day trading. However, traders should still be cautious of the risks involved in the volatile crypto market.
Different Methods of Short-Term Trading: Pros and Cons
You have to understand various trading methods in order to be successful in short-term trading. Moreover, choosing the best coin for day trading sometimes depends on which method fits your situation the best. This is because when using a specific method, you might not be able to trade every cryptocurrency. Additionally, these methods are not without their unique advantages and disadvantages. In addition, you, as the trader, also have your own attributes; by being aware of these methods, you can select the one that is most appropriate for your capital, goals, and tolerance for risk.
Scalping
Scalping is a fast-paced trading strategy that is used in short-term trading. When using scalping, you need to make many trades in a day with the goal of making small profits from minor price changes, changes that can be as small as one or two-tenth of a percent. Scalpers only keep positions for a few seconds or a few minutes before closing them.
Pros
· High frequency of trades
Scalping can result in consistent profits by making multiple trades within a day.
· Low exposure to risk
Since positions are held for a very short time, the risk of large market swings affecting the trade is minimized.
· Fast returns
Scalping provides almost immediate gains, allowing traders to see profits quickly.
Cons
· Time-consuming
Scalping requires constant monitoring of the market, which can be tiring and highly time-consuming.
· Small profit margins
Since scalpers target very small price movements, the profits from each trade are low, requiring a large number of trades to make meaningful returns.
· Higher transaction costs
On platforms with high trading costs. Frequent trading can lead to higher fees, which can eat into the profits.
Because of scalping’s small profit margins and time-consuming nature, it can be unsuitable for traders with limited starting capital or time. Furthermore, it is very time-sensitive and requires constant attention from the trader, which makes it the most difficult method for short-term trading.
Day Trading
This method is done by starting and finalizing all trades within the same day. When using this method, you need to profit from the small price changes happening during one day, entering and exiting trades based on events and analysis.
Pros
· High potential for profit
While scalpers are restricted to smaller price movements, day traders can capitalize on larger price swings, potentially making more money per trade.
· Less exposure to overnight risks
As positions are closed at the end of the day, day traders do not have to deal with the risks that come with holding assets overnight when they are not trading.
Cons
· Emotional stress
Day trading requires a lot of attention, and the fast pace of the market with the possibility of taking losses within a short time can be mentally draining.
· Moderate time commitment
While not as demanding as scalping, day trading still requires regular attention throughout the trading day.
If you have enough time to trade and analyze the market throughout the day but don’t like scalping because of the hassle of making rapid trades in minutes or seconds, day trading is a good option for you. Furthermore, day trading gives you the ability to profit from bigger price swings, resulting in larger profit margins.
Swing Trading
In this method, you try to find a trend and enter it in the beginning, then use that upward or downward swing to gain profit and exit before it ends. Each swing can last from minutes to weeks or even more.
Pros
· Larger profit margins
Since swing traders hold positions for a longer period than day traders or scalpers, they can capitalize on more significant price movements.
· Less time-consuming
Unlike scalping and day trading, swing trading does not require constant market monitoring. Traders can put in place stop-loss orders and monitor the developments occasionally.
· Allows more time for analysis
Traders can take the time to analyze the market thoroughly before making decisions, reducing the risk of impulsive trades.
Cons
· Exposure to overnight and weekend risks
Since positions are held for multiple days, traders are at risk of sudden market movements during off-hours when they aren’t monitoring the market.
· Less trading opportunities
The longer holding periods mean swing traders make fewer trades compared to scalpers and day traders.
According to our research in PlasBit, for traders who do not have the time to continuously monitor the market or like a less time-consuming method in general, swing trading is the better choice in comparison to scalping and day trading. However, swing traders’ holding period is determined by the lifetime of each swing, resulting in overnight holding, which is riskier than scalping or day trading.
Arbitrage Trading
This method capitalizes on the price difference of a coin across various exchanges. Arbitrage traders buy the coin on the cheapest exchange and sell it on whatever exchange the coin is the most expensive, gaining profit from the price difference.
Pros
· Low risk
Arbitrage trading is considered one of the safest trading methods because the profit is based on price differences rather than market trends.
· Quick profits
Traders can capitalize on opportunities quickly, generating fast returns.
· No reliance on market trends
Unlike other short-term trading methods, arbitrage trading doesn’t depend on market trends or sentiment. As long as there is a price difference, traders can profit.
Cons
· Requires access to multiple exchanges
To successfully execute arbitrage trades, traders need accounts and funds spread across several exchanges.
· Small profit margins
The price differences between exchanges are often minimal, so traders must make multiple trades to gain significant profits.
· Fast execution needed
Arbitrage opportunities last as long as the market takes to correct the price differences, so traders need to act fast to profit.
Scalping, day trading, and swing trading all need a good amount of technical knowledge to be executed successfully, but arbitrage can be done with minimum trading knowledge, which creates a whole different approach to trading. Furthermore, it is the safer method in comparison to the other three. This is because it relies on a simple difference in price rather than market analysis. However, to use this method, you need to have several accounts on different exchanges and also always be ready to execute trades quickly.
Technical Tools Used in Short-Term Trading
When trading, to make informed decisions that bring you closer to success, you have to use data. You can extract data by analyzing the market using different technical tools. So, knowing about such tools and their purpose is another step to trading success.
Support and Resistance Levels
Support is the level where buying interest is strong enough that prevents further decline in price, while resistance is where selling pressure keeps the price from rising higher. Short-term traders can use the knowledge of support and resistance levels to predict market behavior. For example if the price of a cryptocurrency is close to its resistance level, traders will predict a reversal and sell to not lose profits or short the crypto to gain profits. And if the price is near the support level, traders predict an increase in price, so they buy to gain profits.
Moving Averages (MA)
There are two kinds of moving averages. First is the simple moving average, which gives you the average price of a cryptocurrency over a specific period of time. The second one is the exponential moving average, which is more concerned with recent prices, this is more useful for short-term traders. By employing price data, moving averages give traders the ability to find out what trend a cryptocurrency is going through. For example, a simple interpretation is if the price of a cryptocurrency is above the moving average, it is called a bullish signal, and if the price is below the moving average, it is considered a bearish signal. So, by using moving averages, you can find out if the price of a cryptocurrency is experiencing an upward or downward trend. But remember, a single indicator shouldn’t be the only one you decide based on. You need advanced technical analysis understanding to become a profitable trader.
Relative Strength Index (RSI)
The Relative Strength Index helps traders determine if a crypto is overbought or if it is oversold. To do so, this tool measures the recent price movements. It has a score between 0 to 100; scores below 30 indicate that the crypto is oversold, and a price increase is likely. Scores above 70 show that the crypto is overbought, and a price correction is due. But keep in mind that in strong trends, the price will continue its direction even in overbought or oversold situations, so do not rely just on indicators.
Learning the workings of such tools is necessary because even if you access the data someone else extracted, you still need to have some knowledge to read and use that data correctly.
Features of Good Exchanges for Short-Term Trading
From speed to profitability in crypto, an exchange affects almost every part of your trades; this is especially true for short-term traders because they make a high number of trades in short periods of time, which increases the chance of possible errors happening because of an exchange. So, it is important to know what features make an exchange good or at least usable.
Liquidity
Exchanges with large trading volumes offer better liquidity, making them ideal for fast-paced trades.
Low Fees
Fast trading strategies involve a large amount of quick transactions and, therefore, a pile-up in trading fees, such as exchange commissions, deposit and withdrawal commissions, and network commissions. These fees can be pretty expensive for a short-term trader, and hence, a good exchange for short-term trading should offer low commissions or at least provide certain discounts for big traders.
Fast Execution Speeds
Everything is about speed in short-term trading, and a couple of seconds can create big differences in profit margins. So, a good exchange should have low latency and sophisticated systems that process orders without any delays. Delayed execution of orders leads to missing favorable market conditions. The basic expectation from any good exchange is that it should have systems designed to support fast order processing, particularly when there is extreme market volatility.
Advanced Trading Tools
Whether short-term trading or any other style of trading, to be a successful trader, you need some tools. Consequently, a good exchange should provide such tools for you; these tools include different types of orders like stop-loss orders, charting tools, technical tools, and any needed customization options. Such features give the traders peace of mind and the necessary means to make good trades.
The major things to look at when choosing an exchange for short-term trading are liquidity, low fee rates, and the speed at which the order is done. Other helpful features of exchanges involve trading tools, the security of the platform itself, ease of use regarding the navigation of the platform, and customer support. Finding an exchange that contains these major features will enable you to handle the fast-moving nature of short-term trading and realize your maximum profit.
Long-Term Crypto Trading vs Short-Term Trading
When choosing how to trade crypto, you can either go for a long-term or short-term strategy. Each has its own benefits and challenges, depending on how much time you can commit and what you want to achieve.
Long-term trading is holding crypto assets for months or years with the purpose of gaining profit based on the overall price increase in the market. The advantages are lower transaction costs and less time demands. Also, it is less stressful and does not need attention on a daily basis. However, long-term traders may lose small profits in the market and have to wait for a long time to make profits. Furthermore, they need to have the patience to stick to their positions during the period of market decline.
On the other hand, short-term trading aims for faster gains through a higher number of trades executed in a short period. It also allows you to switch between assets to capitalize on high volatility. But this style of trading will result in your time constantly being taken up by monitoring markets. Furthermore, it has higher transaction costs. As a result, short-term traders may be more vulnerable to market risks and need high technical skills for successful trading. This style is the best for people who have more time on their hands and can handle the stress of rapid choices.
In the end, whether you pick long-term trading, which needs patience and less daily work, or short-term trading, which involves more frequent trades and quick decisions, depends on your personal style and goals. Knowing what each method requires will help you decide which one is right for you.
Conclusion
In this PlasBit article, we discussed how short-term trading focuses on quick profits from rapid price changes. We also looked at the various tools and strategies traders can use to make informed decisions, as well as the essential features to consider when choosing an exchange for short-term trading.
When considering options for short-term trading, many people ask, is Ethereum good for day trading? Ethereum is a strong candidate due to its high liquidity, constant activity, and significant market presence, making it easier for traders to quickly buy and sell with minimal slippage. However, like any other cryptocurrency, it comes with risks, especially in a market as volatile as crypto.
Crypto short-term trading is considered one of the most effective strategies that traders can use, as it capitalizes on the volatility of the crypto market. However, to answer whether is Ethereum good for day trading, remember that while volatility of Ethereum gives big opportunities for profit, it also demands deliberate research, market analysis, and continuous monitoring. Without a proper trading strategy, a trader can bear huge losses if he fails to time a trade appropriately. Also, the right timing of entering or exiting a trade is important in order to maximize returns and minimize losses.
