Day traders work the price movements in the underlying commodity in the short time period, which could be minutes or lesser. Most of the Bitcoin Day Trading experts use two strategies to earn profits. The first is margin trading also known as leveraging. This means the traders borrow money on a short-term basis to speculate on the price movement of this currency. The loan is repaid when they exit their open positions.
Generally, traders exit their positions when the price of the commodity increases to more than their buying price. The potential to earn profits with this strategy is not very high. The risk of losing your money is significant. If the price of the currency falls below your purchase price, you can lose up to ten times the movement in the price. This is why margin trading is very risky and although a profitable strategy it comes with great inherent risks and can be an extremely expensive option.
The second strategy used for Bitcoin Day Trading is short selling to make profits from a downward movement in the price. Commonly, traders buy Bitcoins and sell when the price increases to earn profits through the price differential. If you want to earn from the price of the Bitcoins reducing, you will need to hold the currency. With this strategy, you sell the commodity first and then buy when the price reduces further. Although, this is the simplest way to short-sell, you will need the equivalent amount of the underlying in your trading account.
In actual short selling, traders actually borrow the currency, sell it, and then buy it when the price reduces before returning the Bitcoins to the lender. This can be done using different methods and you may not actually borrow the currency although the effect remains the same. Traders can leverage their short sales in the same manner as their long positions.