I have been constantly daydreaming about my best friend.
That seems weird. Why do you do that?
I don't want to have sex with her because of many psychological reasons
It's fine to have daydreams. But don't get too caught up in them.
I am afraid to lose her as a best friend if I ask her out so dreams is all I have.
Well I hope that you can confess one day but for now it is not hurting anything to have daydreams. At least it is keeping your mind occupied.