Day Trading Cryptocurrency Strategy Guide : 25 Interesting Facts

Are you planning to have a living through day trading crypto? Then, the first thing that you need to do is to develop expertise to create a solid day trading cryptocurrency strategy. Remember, the day trading arena is a blood bath and a zero sum game. Most of them looking to make a profit by putting you through a loss.

So, if you think you can earn money through day trading and make a living exclusively out of it, then go for it. But, it is generally advisable to do your full time job and start day trading on the side. In some time, your day trading cryptocurrency strategy will become stronger.

So, after a point of time, you can evaluate if you go full time day trading cryptocurrency, will that bring more profit than what you make in your full time job? If yes, that’s a no brainer, quit! If no, sharpen your strategy until you get the right signals where you can shine better with experience.

Contrary to popular beliefs, you can make a stable income out of your day trading cryptocurrency strategy. Just that it will take some time to become strong enough to cash in.

Day Trading Cryptocurrency Strategy
Day Trading Cryptocurrency Strategy

Most Cryptocurrencies settle instantly or near instantly making crypto high frequency trading possible. Believe it or not, Cryptocurrencies have huge unrealized potential.

Crypto exchange developers work to increase scalability and privacy enhancing functionalities. That’s why it is never too late to start sharpening your day trading cryptocurrency strategy.

However, you need to put in a lot of effort and preparation to make it work. In crypto day trading, positions open and close on the same day. So, you will need a good level of smartness, self discipline and day trading cryptocurrency strategy.

Quick Intro to Day Trading

In simple terms, day trading is buying and selling stocks, cryptocurrencies, or any similar financial instruments within the same trading day. The game is about taking advantage of small spikes and falls in the price of the financial instrument. Being consistent in this effort can lead to profits in the long term.

Day Trading entails a lot of risk since you are playing smaller moves on a smaller timeframe charts. Most traders use 4H chart as the maximum level to trade. Some even use as low as 15 minutes or at an extreme level 5 mins chart. You will learn through experience which chart options work for you better.

The best tip I can give you is to start paper trading initially and test your day trading cryptocurrency strategy and see if you make profits. Finally, move on to real day trading betting your money after you have sharpened your day trading skills and strategy.

Not very long ago, day trading was the task of professionals working in financial sectors only. But with the advent of the Internet and many trading platforms, beginner and part-time investors have the chance to participate in day trading as well. But, remember day trading is full of emotions. It can be overwhelming for beginner investors if they do not have a well thought-out crypto day trade strategy.

Cryptocurrency Day Trading

The day trading in cryptocurrency is ideal because this particular financial instrument varies a lot during a single trading day. A cryptocurrency day trader jumps on every opportunity he/she gets to make quick profits. They do not leave the trading to over-night changes, as they prefer to work with the volatility during the day.

Day Traders in Cryptocurrency use several tools and mechanisms to play through the market that work for them along with their day trading cryptocurrency strategy. For instance, they use technical analysis to create ideas and strategies for their trade. To identify the entry and exit points for their cryptocurrency, they look at data from various charts, use technical indicators price action and volume.

Day trading in this highly volatile market requires a lot of skills and emotional handling. But it all comes with a lot of learning combined with experience.

Cryptocurrency markets are available 24/7 and they never close. Generally, good crypto traders target only their traditional stock market time when they trade full time. Otherwise, when the volume is low, volatility will be really high.

Crypto day trading is a risky proposition, so learn how you can limit losses before you start. Continue learning and you will master it. Similar to heavy loss, you will also be rewarded with huge gains in Crypto.

 

Bitcoin Day Trading

There is a lot of potential in Bitcoin day trading because not many traders do it. Developers are working continuously to improve forecasts, make bitcoin trading more secure, and increase the overall scalability of the product. It is time to start as soon as you can, but before that, you will need some experience in Bitcoin trading and also practice a great lot of self – discipline.

Bitcoin is a secure network and its blockchain may not be as fast at this moment, but Crypto exchanges keep the blockchain ticking with enormous day traders. All the improvements like Bitcoin Segwit or layer 2 solutions like Lightning network have slightly improved Bitcoin’s throughput since its origin. But, there’s a lot of improvement that needs to go in.

Although, this shouldn’t stop you from day trading bitcoin since it is the most liquid market in cryptocurrencies and most of them will be onboarded to Crypto through Bitcoin.

 

Altcoins Day Trading

It is vital to understand Altcoin. It is usually an alternative to the very popular Bitcoin. Altcoins can refer to any of the cryptocurrencies such as Ethereum, Ripple, and Loopring. Although, Ethereum is no more an Altcoin in my opinion. It is more like Bitcoin, Ethereum and Altcoins for me. But, for simplicity, let’s keep it to this level.

Altcoin day trading is trending these days because people who adopt great day trading cryptocurrency strategies have earned a lot from it. It is thanks to the free operation model of altcoins that contribute a lot to its volatility. There is really risk high in day trading low market cap altcoins just like in penny stocks in stock market.

 

Stablecoin Day Trading

Although there are a lot of different variations in Stablecoin, the value of them is usually close to the value of $1. You can use the inefficiency and volatility in its price in the market to peg a price that provides returns. Some strategies in stablecoins day trading are safer, but having said that, the element of risk will always be there.

Think of Stablecoin trading similar to Forex where people trade with large movements for a small movement in price. If you just major exchanges like Coinbase, you will always see 1 USDC = 1 USD. Or, at least so far, they haven’t been fluctuating for adoption. But, we don’t know how long it will be like that. Because, stablecoins move a few percent up and down similar to other cryptocurrencies.

Day Trading Crypto Tips for Beginners

According to studies, 95% of intraday traders fail. If day trading in crypto was easy, everybody would be doing it. Remember, it’s a zero sum game. Person with the best day trading cryptocurrency strategy will make loss to 100 newbies at the same time.

Although there is no sure–shot way to achieve success, following some principles can help you get started in this high–voltage world. Choose these in your initial day trading cryptocurrency strategies for cryptocurrency to avoid pitfalls:

 

Understand Growth and Growth Potential in Crypto Coins and Tokens

To begin with, learn. Spend a lot of time learning about blockchain. If you want to make investments that make sense and may work in your favor, you need to understand the value. In reality, very few people in this world know about cryptocurrency trading though they tell that they know. Not many can understand the depths of this area of knowledge. It is vital to know about Blockchain because it is the underlying concept of cryptocurrencies.

There are thousands of coins and tokens available to trade in the market. In the beginning, it is always safer to invest in those coins which appear at the top of the market value. They find themselves in that place because their volatility is lesser and they are here to stay for the long term. If you choose smaller altcoins, you may get higher temporary gains but the risk will also be more.

 

Embrace Volatility

This factor separates investing in real assets and virtual assets like cryptocurrency. Volatility is when the price of a financial instrument rises or falls rapidly and depending on when the trader takes action, might result in profits or a huge loss.

In traditional stock trading, the prices do not change a lot within 24 hours. Even if they do, the degree is not as severe as cryptocurrencies. A typical cost of a cryptocurrency may change by 10% – 50% in a single day. There have been cases where the price of the cryptocurrency has increased by 4000% in one day; only for it to return to its original value.

After a point, you will naturally learn to surf the waves (volatility) with your paddle. But, until then, keep going strong.

 

Understand Blockchain Network and Crypto That Moves Value

One important parameter to gauge while trading cryptocurrencies are the Bitcoin price. Most of the prices depend on this. In simple terms, if the price of Bitcoin increases, the cost of altcoins reduces.

To understand such nuances, you have to have good knowledge of blockchain. Combine that with the motive you have got with the trade. Make sure you have a purpose that is crystal clear for which you are starting trading in general and on that particular day. Remember, it is better to not gain anything on a day or strings of days instead of enduring losses. Also, in a nutshell, cryptocurrency trading follows the zero-sum principle, which means, for every win for you, someone else loses.

 

Practice Crypto Day Trading Using Demo Account

The best way you can get the feel of the cryptocurrency trading environment is by using a demo account. Through this, you can practice day trading cryptocurrency strategies using a live market environment. Also, this is a great chance to work with the different technical features of the software platform or exchange you are using. Through a demo account, you can access charts, crypto signals, etc., and learn how to influence them to your trade.

The best advantage of using a demo account is that even if you fail, you do not lose any money. So, go ahead, sign – up for a demo account, and put yourself into practice. Note that no matter how much planning you do on paper, you will only be able to see if it works when in a real environment.

Day Trading Cryptocurrency Strategies

There are several day trading cryptocurrency strategy expert traders used to gain maximum benefit within the duration of a single trading day. The following strategies must help you choose the one depending on whether you are just starting out or if you have some experience. Note that different strategies work for different people, so test one, before you do the ‘real’ trade with them.

 

Crypto Swing Trading

Swing Trading is an ideal day trading cryptocurrency strategy for traders just beginning out. This is seen in many other forms of the market too, such as forex, stocks, and cryptocurrency. The basic principle is to make use of the price moves that happen within a short or medium period.

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‘Swing trading’ essentially refers to capturing the swings in the market which happens over several hours, days, or even weeks. This day trade crypto strategy works best in markets that are trending. It is because, in a time frame, trending markets see swings in prices.

 

Crypto Range Trading

There are some cases where the value of a cryptocurrency stays within a range for some time. This happened with Bitcoin where the range of $8601 and $10210 was maintained for 30 days. Compared to the average volatility of cryptocurrencies, this range is pretty stable at close to 9% back and front.

Range traders pay attention to two zones: Overbought and Oversold. The former means that a lot of buyers have fulfilled their needs and at some points, the assets will sell. Oversold is the other way round. The traders find these zones and make their purchases to their maximum advantage. Chart indicators provide a lot of information about these zones and can help you effectively identify them.

 

Scalping Cryptocurrency Trading

Scalping is a popular day trading cryptocurrency strategy but requires a lot of attention and skills. Traders place very short-term sales and make profits by leveraging the short-term price differences in crypto assets. These differences can mainly occur due to gaps in liquidity and market inefficiency.

Those who do scalping often have a lot of trading volume at the end of the day because they open and close trades within very short durations. Many traders also use crypto trading bots to achieve this gush of buying and selling at specific points.

 

Trading on Crypto Volatility

Volatility can be a friend or a foe, depending on how well you execute your plans. The first advice when trading on the volatility will be to be careful. Reduce the amount you trade if you find the market too volatile.

Trading on the volatility means you capture the highs and lows of the price and play as it moves higher or lower there by either making good profits or good loss. While this sounds exciting, do not jump to every opportunity. Patience is the key.

People bet on volatility in the future markets just like how experts trade on VIX in traditional stock market. You need to learn how to trade along with huge volatility to make huge profits.

Crypto Arbitrage

The real truth about crypto markets is that they are not fully efficient. Arbitrage stems from this inefficiency where you can take advantage of the price differences across different financial products and markets. This can also happen in Crypto because of fiat currency value valuation between two fiat currencies.

In Arbitrage, the trader trades between markets or products and take advantage of the changes between them. Since the volatility in cryptocurrency price is huge, the opportunities to do arbitrage are aplenty.

 

How Do Crypto Arbitrage Opportunities Arise?

  • Liquidity: Different trading volumes for a particular Crypto asset happens on a Crypto exchange which results in different level of supply and demand. That brings in arbitrage opportunity based on Crypto Liquidity. This will not happen on established exchanges.
    Crypto price fluctuates less than on major exchanges than on new or smaller exchanges. If you want to take advantage of Liquidity arbitraging, head over to small crypto exchanges.
  • Fiat Currency Value: If you are a citizen of two countries or a citizen and a resident on another, then you can trade cryptocurrencies in two different fiat currencies. You can cash in on fiat currency arbitraging with executing crypto trades that makes you a profit in one desirable fiat currency.
  • Geography: You can do Geo-Arbitrage based on the time zone and do trades when it easier to trade and then wait for the harder time to trade to do another.
  • Listing: There is usually a pump in crypto price when they get listed on major exchanges. So, all you need to do is to move the newly listed crypto to that crypto exchange and take advantage of listing arbitrage opportunity.

 

Cross-Exchange Arbitrage

Cryptocurrency exchange markets are not as regulated as stock exchanges are. So, the prices will vary across different crypto exchanges. The prices of a particular crypto exchange depends on the supply and demand of the users trading in that crypto exchange.

Although, this is reducing lately with advanced crypto analytical tools and better price oracles being available to control the fluctuation. Also, natural market correction occurs when the price difference is high.

 

Cross-Product Arbitrage

It is possible to notice price differences between cryptocurrencies within the same exchange. The trader may move from one trading pair to another, making use of the difference in amounts and thus making small profits. For this to work, you will need multiple entry and exit trades between different cryptocurrencies. More experienced traders do arbitrage using statistics where they model historical data to better use discrepancies.

Day Trading Cryptocurrency Strategy
Best Day Trading Cryptocurrency Strategy

 

Crypto Day Trading Tips

There are several factors you must keep in mind before starting with cryptocurrency day trading. Here are the most important ones:

News Moves Crypto Markets

Whether it is on cryptocurrency or traditional stocks, news has a significant effect on their prices. It is because the news can change the mindset of the investor; this results in bearish or bullish trends.

For instance, in 2018, there was news of cryptocurrency regulations becoming stricter. This prompted many investors to immediately sell – off their crypto assets before the price crashed down. So, stay in constant touch with news that could potentially affect the market prices.

 

The Hype Over Announcements and Launches

Not only does the news announcement affect the price, but even speculations can. Investors who lived through 2000 know how the dot-com boom created volatility in the market.

Investors who work on speculation to predict their trades buy and sell quickly that affects the market adversely and causes temporary swings. Some cash-rich investors known as ‘whales’ can have an impact on the market depending on the trades they make out of speculation or hype.

 

Become a Master of Technical Analysis

Technical analysis is the only way you can win against the volatility of the market. Using various technical indicators, you can get insights into the past performance of some type of crypto that can help you make better future predictions.

Most software and trading platforms have technical tools integrated into it that you can use while trading. Some of the technical tools are candlestick charts, trend lines, support and resistance levels, trading volumes, market caps, RSI, moving averages, etc.

Combine technical analysis with other methods for the best results. As you gain more experience and confidence in trading, you may even develop an intuition to make decisions.

 

Understand the Fundamentals of Crypto

To become good at anything, understanding the fundamentals is very important. Cryptocurrencies follow almost similar fundamentals of a currency, that is, they are units of measurements, store value, and are used as a medium of exchange.

Cryptocurrencies are digital versions of these coins obtained through cryptography. Understand how they work, their history, regulations, etc. Go through cryptography terms so that you can read the technical descriptions of your trade better.

 

Do not Trade on Margin or At least Too Much Margin

Buying on margin means you take a loan to get cryptocurrency. This is different from investing funds from your trading account. While margin trading can enable you to get more cryptocurrency assets than you could, it comes with its risks and downsides.

To begin with, taking a margin trading loan generates interest. If you do not pay the interest on time, the level of debt increases. Given the high volatility of the crypto markets, taking a loan to trade is a risky move unless you are sure to make good profits to pay off the debt.

 

Limit Capital Risk

Well, there will always be some element of risk no matter the form of investment you make. Capital risk refers to the risk of the investor losing a portion or all of their investment capital.

The best way to limit capital risk is either invest lesser amounts of money unless you are confident about trading with cryptocurrencies.

Second, make sure the money you are investing in does not affect your general livelihood if you lose all of it. Do not use the money you need for fulfilling your daily life needs.

Day Trading vs Investing in Crypto

Long term investors in cryptocurrencies are popularly known as ‘HODLers’. Some of them wait for years for the price to ‘rocket’ before they can sell and become millionaires. While, it is not, of course, a wrong form of investing, one must be realistic in predictions.

If you look at it as a whole, day trading and investing follow its motives, goals, and constraints and one must not compare one with the other. While day – trading might seem more ‘controllable’ on your money, it requires much more skills, research, and time consistently to excel.

The ideal way if you are a serious crypto trader is to invest in both long-term and short-term cryptos. Find out the right period and the apt price to get in, if you are investing for the long-term.

Difference in Time Commitment

Crypto Day trading needs your daily commitment for a minimum of two solid hours to twelve hours. Crypto is 24*7. You can spend as many hours as you want. But, remember productivity is more important. Typical best time to buy crypto and not to miss trading is the opening and closing of traditional stock market based on the research.

Day traders should also spend time reviewing their trades each day and at the end of each week. Since Crypto trading is on all the time, you need to take in other countries trading patterns too, rather than just concentrating about the US market. If you already have a full time job that you don’t want to leave, then day trading may not be the right thing for you.

To invest for long term, you can do necessary research at any time without any urgency, after your full time job or on weekends. You just have to spend couple of hours here and there to make you are making sound investment for long term. Then, you will not constantly tinker your portfolio based on daily crypto movement. You believe in a crypto coin and make long term investment.

Investing in crypto suits for someone who want to set & forget the investment for some time.

Personality Traits and Skills

Day trading requires a lot of time commitment to research and prepare a day trading cryptocurrency strategy that works for you. Even after forming the initial strategy, you need to constantly keep learning and refining your strategy to keep winning. If you deviate from your plan, there are other traders who are waiting to out trade you.

Firstly, you need to be disciplined emotionally to make profits in both Day trading and investing. You need to follow your conviction and strategy to open and close trades. Emotion doesn’t work and most probably will lead to poor results.

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Secondly, you need a lot of patience. For day traders, it means not entering every trade thinking it as an opportunity to make money. Also, for day traders, don’t be too restless after making a trade to have it go your way. Just watch calmly what happens and improve your strategy from the movements. On the other hand, investors should not get too worried about the daily movement of crypto. Winning the war is important, not just the battles. Set your charts to show weekly candles or monthly candles and chill out.

You don’t need to be book smart or street smart person to make money. If you are someone who can keep acquiring more crypto market knowledge and associate them with the crypto market price movement, your win is closer than you think.

Crypto Day Trading Vs Crypto Investing : Which Offers You Higher Return?

This will be comparing obviously apple to orange. Because day trading and investing are not the same. So, the returns are not the same. Day trading needs huge time investment, where as long term investing requires very less time from you.

But, you can make multiple thousands or hundred thousand dollars in long term investments based on the time frame with good portfolio performance. In day trading, you will see lower numbers in profit. It’s the same with percentages. It’s better to check annualized profit % or monthly profit % in both techniques to keep parity. In long term investing, you will not be able to get so much return over long time. Risk equals reward in Crypto day trading.

Unfortunately, a crypto day trading account can also lose heavily because of the volatility in crypto. So, placing tight stop losses are necessary.

Most long term investors don’t have to worry so much. They can just plough in capital in top cryptocurrencies like Bitcoin and Ethereum and wait for them to appreciate with adoption and network effect.

It happens over a long time though. There is no easy money without taking risk. Skilled and Active investors who constantly update themselves with the latest happenings in crypto space can easily outperform the average investors. So, it makes sense to stay close to the developments in Crypto space. But, since investment is generally made for years together, compounding effect is also seen more slowly.

As time goes by, it becomes harder to invest additional capital on short term trades. In that case, doing long term investing in tandem with short term trading may the right strategy to average out portfolio returns.

 

Advantages of Cryptocurrency Day Trading

Let’s take a quick look at some of the advantages of Day Trading Cryptocurrency Strategy

 

More Opportunities to Trade

Since this trading style is faster–paced, you get more trading opportunities within a specific intraday time frame which can be as short as 15 minutes and extending up to 4 hours.

But note that because of the shorter – time frames, there can be more rush in the market which can result in losses if you do not set up strict stop – losses. Gauge the average volatility of the asset you are buying to decide the stop – loss amount.

 

More Day Trading Cryptocurrency Strategies

You can implement a wide array of trading strategies across day-trading. The common ones being scalping, arbitrage, and swing trading.

To counter the market being insanely volatile, you can also use technical crypto bots during the day-trading to make trades in specific situations. This way, you do not miss out on a potential profit.

 

Get Faster Results

In day trading, you open and close trades in a single day. This means that you get your daily results instantly which means you can gauge your profit or loss ratio daily. This data is useful when you have to compare different strategies or trade with unfamiliar cryptocurrency assets.

For example, Day traders may make 0.5% to 3% every day on an average on their capital investment. On the first instance, these may not sound like high numbers but when you turn them into monthly profits, they will be around 10% to 60% per month.

 

Faster Compounding of Money

For a day trader, he/she receives their money, at the end of the day even if it is a profit or a loss. If it is a profit, you can use the surplus to trade the following day and generate more profits. Like this, you can compound the money way faster than long–term investing who have to only stick with their investment no matter it is positive or negative.

One advantage of day trading is it can compound gains quickly over time. For instance, if your initial investment is $100,000 and start to make 5% per month, then the following month your capital explodes to $105,000. If you have a solid day trading cryptocurrency strategy and make 10% again next month, then you will have $110,250 to invest.

Compounding grows the capital in portfolio every day since profits (if profits made) are locked in every day. Gaining more on top of prior gains is the game top day traders play to balloon up their portfolio.

 

No Risk of Overnight Fluctuations

One of the main reasons for overnight major fluctuations in price is any news that directly affects the cryptocurrency or the ecosystem as a whole. As a day – trader, since you’re cash out at the end of the day, you are protected from such sudden losses. Therefore, you can frame your trades as per the openings on the following trading period.

 

It’s Easy to Start

All you need to start day trading (from a technical point of view) is a trading account and a good internet connection. This is good for beginner traders as well and for them to learn, there are tons of information available on the Internet for free.

Work with different day trading strategies in crypto and find out what works best for you. Day – trading also allows you to start with less capital to give you protection against major losses.

Disadvantages of Cryptocurrency Day Trading

Timing in Day Trading Needs to Be Perfect

This is a specific skill – set needed for day traders. It is a disadvantage for those who take their decisions and commitments slowly. You need to be able to analyze the market quickly and execute trades with confidence and speed. Your decisions must be accurate and fast, which is not exactly the style of trading of many people.

 

It is more Emotional

Cryptocurrency day trading involves a lot of fast-paced action. You might lose in this flurry of things to do every day that can increase your stress levels and deteriorate your health.

Further to add to that, if you consecutively face profits or losses, you might come under pressure which can affect the way you execute future trades. Keeping emotions and stress levels in check is a big challenge in cryptocurrency day trading.

 

Limited Potential for Profit

Since the trades are held for a shorter time frame, day trading can only generate profits up to a limit when you compare the same to long – term investing.

In day trading, traders also close their trades at the end of the working hours regardless of whether they make a profit or loss. Although this is beneficial to reduce the risk of overnight fluctuations, profit margins become limited.

 

More Market Noise

Since you have a shorter time frame with your trades, there is more market noise during the trading hours. This noise refers to unexplained fluctuations in the price without much news or technical reasoning.

This is a real problem to cryptocurrency day traders, and the only way to get out of it is to increase the stop–loss level margins. Adjust the stop – loss considering the resistance and support levels giving enough leverage for the market to perform.

Crypto Taxes for Day Trading

Cryptocurrency has been growing in popularity over the last 3 – 4 years. Many governments across the world are now paying closer attention to this less regulated asset. The government has released tax guidance and even long–time cryptocurrency investors have been receiving tax warning letters. This mini-guide will help to clear some cloud over cryptocurrency and taxes.

According to the guideline issued by IRS, Bitcoin and other forms of cryptocurrencies should not be treated as currency but property, and they are taxable. Consider this as similar to owning a plot of land, gold, etc. Similar to how stock traders do, you are supposed to file your net gain or loss, failing which, the government will consider you as tax fraud.

 

Crypto Taxes – Detailed Guide

Taxing for crypto trading is a combination of two: income tax and capital gains tax. Depending on the activity you do in the cryptocurrency market, you have to pay either one or both of these taxes.

  • Capital Gain is the difference between the selling price and buying price along with the fees.
  • There is no tax liability when you buy crypto. So, if you have them, it’s fine. But when you sell crypto, you have to pay taxes. Depending on how much you bought it and sold it for, your capital gain is calculated. Further, depending on how long you have held that cryptocurrency, you will pay tax at short – term or long – term tax rates.
  • If you trade one crypto for the other, it is a taxable event. According to the IRS, these are two separate transactions. One is the selling of your initial cryptocurrency for a particular value. The second is the buying of your final cryptocurrency at a particular value. You have to pay tax for the first half, which is the selling of your initial cryptocurrency.
  • Know that if you use cryptocurrency to buy something online, you will pay tax with the same rules as to when you sell cryptocurrency.
  • If you earn some coins from any mining service, it is considered as your income and is taxed as Income Tax.
  • If you are getting paid in Bitcoins or any other form of cryptocurrency, it is an income. You have to pay the Income Tax.
  • But if you want to gift cryptocurrency to your family/friends, it is tax–free up to a value of $15,000. If the gift exceeds that value, you have to fill out Form 709 for a gift tax return.

Crypto Bots to Trade Cryptocurrency

There are two factors in cryptocurrency that someone limits the potential of humans to execute accurate and effective trades. One, all cryptocurrencies are volatile. That is, their prices fluctuate within seconds or minutes. Traders have to be quick to take action or they face losses. Second, cryptocurrency trading happens round the clock, and all through the week. But of course, traders cannot be awake all the time to trade. To solve these two inefficiencies, crypto bots come into the picture.

These crypto bots conduct trades and execute transactions instead of human traders. One can find a wide range of free crypto bots in the markets as well as paid versions. But for the former, and to some degree, even in the latter, the trader has to have some knowledge in coding. More often, traders just choose the bot they want and then have the code developed by a specialized developer.

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You can program bots to perform trades using different day trading cryptocurrency strategies and execute trades at specific times or events. But remember, most of the bots out there are built only to provide marginal profits. If you want to fully utilize the tool, you need to have a deep understanding of codes and currency markets. If you want to go one step further, you can learn how to develop a crypto trading bot and build custom crypto bots that works for your strategy.

Though there is a debate about whether cryptocurrency markets should allow bots since they can drive the market. It is still a useful tool for traders who cannot fully commit to trading or have limited trading experience. But for those crypto traders who have done enough work, will not require the use of a bot to execute their plans.

Crypto Day Trading Risks

Day Trading is a profession of its own. Many people do it full-time and many businesses have risen from it. But for every trade, there are risks. Let us have a look at some of them:

 

Addiction

So many people consider trading like gambling. It gives them euphoria that they can earn thousands of dollars without stepping their foot out of the door. This addiction can make you take wrong and forceful decisions out of greed and can also negatively impact your health if you face a string of losses.

 

False Information

Since the crypto market is a new field, much of the information running around it is based on speculations. Therefore, a beginner trader may fall into these and choose the wrong trades to execute. It is vital to find reliable sources of news and contact trustworthy people who have been trading profitably for a long time.

 

Capital Loss

Cryptomarkets are already volatile and on top of that, day trading is harder since it requires in-depth knowledge, discipline, and timing sense. Most of the traders lack in this consistently which makes them lose a lot of money upfront.

 

Stress

Day trading, as mentioned above, is a career of its own. But this job requires you to be in front of the screen for extended periods, which can negatively affect your physical health. The rise and fall of prices so rapidly can contribute to an increase in your stress levels.

Firstly, as they say, where there is a reward, there is a risk. Although you may not be able to eliminate many risks, you can do your part to minimize them. For instance, read and understand a lot about the crypto – world before day trading. If possible, test your trading skills using a demo account.

Secondly, do not use all your funds in one transaction. Divide your funds into smaller pieces and spread them out in different directions. To begin with, do not start crypto – trading with your life savings. Keep a separate fund for trading, even if you lose all of it, will not affect your livelihood.

Use a lot of technical indicators, study price patterns, and decide your entry criteria. Build your day trading cryptocurrency strategies, test them, and re-test them. Escalate your investments only when you are comfortable and experienced in crypto – trading.

 

Psychological Factors in Day Trading

Emotions play a significant role in trading, especially with instruments such as cryptocurrencies. A lot of experts claim that the skill to handle emotions is what differentiates between a successful trader and one who loses money consistently.

But yes, emotions are one of the hardest things to manage for a human. But you can start by first understand the different emotions and being conscious about it the next time you sit down to trade.

 

Take Responsibility for Your Wins and Losses

Accountability is important. When you do trading, you might either feel that it is your lucky day or the day when everything seems to come crashing down. Do not let these two overwhelming emotions cloud your thinking.

There are good days and bad days. If you see more good days, it means your day trading cryptocurrency strategies are working well. If not, maybe you need a rethink.

Understand that it is you and only you who can drive your move. When you keep the focus on your strategies, the scope of improvement is much higher.

 

Limit Your Greediness

You can say a trader is greedy when he/she no longer cares about risk management in their trading. According to general rules as determined by top experts, the risk must only be 2% of their total trading account balance.

But some consider this is gambling and go all the way risking their money. It is okay to be ambitious, but not greedy. Be realistic in your expectations and respect the volatile nature of the cryptocurrency market.

 

Improve Trade Discipline

Cryptocurrency day trading involves a lot of activity during the trading days. You have to make maximum hay in a particular trading day; so you need to read through charts, test and re-test your day trading cryptocurrency strategies, go through analytics, see historical data, etc.

When the trading day ends, there would still be work done to analyze and plan our future trades. All this requires discipline over the long – term. Make sure you are committed to this activity without a doubt. The moment you lose discipline, the control over your trades reduces drastically. You may witness some unwanted results.

 

Develop a Winning Attitude – Zero-Sum Game

The best way to develop a winning attitude is to be confident about your trades. And the best way to ensure that is to put a lot of effort in the back–end, doing researches, making strategies, trying and testing them. Combine that with the understanding that losses happen because the market is highly volatile. Be optimistic, but do not assume that you will win.

 

Accept Risks but Limit Them

You can never eliminate risk in stock or cryptocurrency trading, even if you have the best day trading cryptocurrency strategy. But, you can trade in a way that the riskiness of the trade does not affect you practically and emotionally.

Make sure you choose your day trading cryptocurrency strategies in such a way that even if the volatility hits, you do not lose a lot of money. One historical way traders do this is to invest small amounts in multiple places, rather than dumping all of them in one place even if it shows a rising curve.

 

Frequently Asked Questions (FAQ)

What crypto tokens or coins are best for day trading?

The criteria for judging if a coin is good for day trading or not is its volatility. Apart from these, other factors such as trading volume, recognition, and development activeness. The best day trading cryptocurrency according to many experts is Bitcoin, Binance Coin, Ethereum, Tether, and Tron.

Just look for a high enough 24 hour volume crypto and large market capitalization in a good exchange and then trade. If you trade a low cap crypto coin, then you will be in for surprises with huge price fluctuation and may end up in huge losses.

 

How much money can you earn through cryptocurrency day trading?

The money you make from day trading depends on multiple factors like your initial capital, risk preference, experience, duration of trading, the cryptocurrencies you choose, the exchange you choose, emotional quotient, etc.

There are cases where people have made hundreds of dollars a day in profit, while some have lost equal or more value. If you systematically approach day trading covering all potential risks and bringing it down to a minimum, you can make more money through cryptocurrency day trading.

Final Verdict – Best Day Trading Cryptocurrency Strategy

There is no single best strategy for day trading cryptocurrency. It depends on many personal and skill factors for every trader. But there are some common factors/questions you can consider to build your own day trading crypto strategies.

Day Trading Cryptocurrency Strategy
Day Trading Cryptocurrency Strategy

Firstly, you must understand how much risk you can take and the amount of money you can lose out on every trade if the price goes down. Two, do not be emotional in your trades. Accept wins and losses practically and work to make your trading skills better.

Secondly, ensure that you know and use technology tools to analyze your past trades and predict your future trades. The more facts and data you have on the table, the more it can support you to make a good trade, although there will still be some degree of uncertainty or risk. Work with all these factors, test your trading skills and your day trading cryptocurrency strategy, refine it, and continue this iteration till you become an expert. But throughout do not put a lot of capital at stake.

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