Follow Us

Crypto Day Trading Strategies. A How-To Guide

Crypto Day Trading Strategies. A How-To Guide

Over the past ten years, the cryptocurrency market has gone through a lot of developments. Today, this market has matured and has become quite sophisticated due to the advent of highly liquid derivatives, such as options, swaps, and futures, just to name a few. Besides, there is the easy availability of market data and research. This is one of the primary reasons why crypto trading is all the rage in the here and now.

When it comes to crypto trading, day trading strategies are quite popular. They are quite popular among traders who want to make money on a budget. In this article, we are going to talk about crypto day trading strategies. With this how-to guide, you can learn some powerful strategies and make a lot of money trading crypto. Read on to find out more.

Generally, you can make two categories of crypto market participants: investors and traders. Although both traders and investors have the same motive, which is to buy low and sell high, they use different approaches to make money.

Crypto investors are after long-term gains, which is why they have a passive approach in place. On the other hand, traders follow a relatively short time frame before they enter and exit positions. For example, if you purchase Bitcoin and intend to hold onto it for the next few years, you will fall under the category of investors.

Crypto Day Trading Strategies

On the other hand, traders don’t stick to a fixed time frame. Instead, they put together a solid strategy before they go for day trading. Some day traders go for “scalping”. This strategy allows them to make profits when there are small price fluctuations during a short period of time, which can be a few minutes.

And then there are swing traders who wait for a few days or weeks to sell and make profits. Day trading is equally popular across all types of traders partly due to the flexibility it allows.

This guide will give you an overview of day trading, which will help you find out what it is and how it works. Besides, it will talk about some effective strategies that you can follow as a day trader.

What is day trading?

The origin of “day trading” goes back to traditional markets. These conventional stock markets don’t operate round the clock. Instead, they have fixed business hours, which is why traders have to follow that daily time frame when it comes to entering or exiting their trades. In other words, they cannot carry their positions to the next day.

In the world of cryptocurrency, there is no concept of business hours. Therefore, you can involve in day trading whenever you want to. For day traders, the number of hours has no importance and they can settle their positions whenever they want to. Therefore, we can say that cryptocurrency day traders enjoy a lot of flexibility when it comes to trading.

Basically, day trading is not a trading strategy in the true sense. Instead, it is a time frame choice based on your style and mindset as a trader. Each strategy has its own set of pros and cons.

Is day trading a good choice for you?

If you are a newcomer in the world of cryptocurrency, you may be wondering if day trading is the right choice for you. The short answer is, it all boils down to your trading style and your mindset.

As said above, day trading cannot be called a trading strategy as there are no real limitations as to when you can close your positions. Instead, it is a type of self-imposed rule that you can follow as part of your strategy as a day trader.

Professional traders have a lot of experience trading cryptocurrencies. Therefore, they create their own rules and trading systems. In other words, they make a list of their desired cryptocurrencies, trading time frames, risk management techniques, profit and loss threshold, technical analysis preferences, and indicators.

Crypto Day Trading Strategies

Some traders stick to day trading because of the greater freedom and flexibility it offers. After all, due to the extremely high volatility of cryptocurrencies, it can be quite risky and stressful to carry position over to the next day.

If you follow a daily time frame, you can keep yourself safe from overnight risks and retain better control over your positions through the active management of positions during the day.

At the end of the day, you are out of your positions and all set to take a break and recharge your batteries for the next trading day. So, you can detach yourself from the market until the next day.

Pros and cons of day trading

We know that the more freedom you have, the more responsibility you will have to take. As a day trader, you can detach yourself from the market and get some rest. It won’t work for you if you don’t make a profit on a regular basis since every day cannot be profitable.

In other words, there is not much difference between day trading and a full-time job. Both require discipline, diligence, research, and consistency. As a day trader, you have a new plan in place each morning. And your goal is to use your time to look for potentially profitable opportunities.

Often, day traders choose to forgo future profits by closing positions and calling it a day.

On the other hand, day traders close their social positions the same day to be on the safe side.

In short, freedom and control are the primary advantages of day trading. However, it can be a disadvantage if you don’t close your positions at the end of the day, which can result in loss of potential profit. Ultimately, every trader has to maintain a balance between making profits and enjoying their freedom.

How to get started as a day trader?

If you have made your mind to get started as a day trader, your first step is to sign up for an account and check out different markets, suggest options, swaps, futures, and spots, just to name a few.

On a cryptocurrency exchange, there is a long list of cryptocurrencies with information about their 24-hour price changes, market capitalization, and latest prices. You are allowed to switch markets and sort this list on the basis of the categories that are available, such as Polkadot, NFT, storage, DeFi, and Layer 2. Apart from this, you can also view tokens and coins from certain sectors of the market.

Crypto Day Trading Strategies

After you have chosen a market and your desired cryptocurrency for day trading, you can just hit the Trade button located near that cryptocurrency. Once you hit that button, you will be directed to the trading dashboard, which will allow you to place your orders and check out the details of each trade.

In this guide, we are not going to talk about how you can develop a thesis for your day trading and how you can execute it. The point is that your day trading style depends on your desired cryptocurrency and your knowledge of the market.

Experienced traders keep an eye on the market fundamentals and Technical indicators to go for lucrative risk-reward scenarios. Without further ado, let’s take a look at some effective day trading tips and strategies to help you get started as a day trader.

Tips and strategies for day traders

  1. Follow the Bitcoin price movements

Although many cryptocurrencies lose touch with the broad market trend, BTC has always been the market leader and the driver of prices and sentiment. When BTC is under pressure, none of the other altcoins make any significant moves.

On the other hand, when BTC is doing well, the value of almost every altcoin goes up provided their fundamentals remain positive and the altcoins have a significant perceived value. Therefore, if you are going to get involved in day trading in the world of cryptocurrency, make sure you keep an eye on the price action of Bitcoin.

If you want to become a better trader, we suggest that you stay tuned to crypto market analysis and commentaries that are published on a daily or weekly basis. This will help you be familiar with the most recent developments. An easy way to stay tuned to the latest cryptocurrency news is to check out social media.

  1. Stay tuned to the news

Just like the conventional currency and stock markets, new stories have a significant impact on the price movements of cryptocurrencies. For example, if a major brand or company purchases or supports Bitcoin or a government announces its policies regarding cryptocurrencies, the entire cryptocurrency market including Bitcoin reacts to the developments.

If you don’t stay tuned to the news, you may have to miss out on a lot of opportunities. At times you may even suffer losses as well. What happens is that important bullish or bearish news main cause the market to move significantly in the upward or downward direction.

  1. Be aware of the time zones

Since cryptocurrencies are traded round the clock, make sure you are familiar with the popular time zones where most of the crypto traders are active.  This is quite important. For example, significant market moves mostly coincide at the beginning of the day in Asia and North America.

Therefore, it is important to be aware of these time zones, which will help you make anticipations about the market reactions to the most recent developments in the regions.

  1. Don’t put all of your money in the market

Although this is common sense, many traders invest all of their capital and suffer huge losses at the end of the day. Often, these traders get sentimental in response to the bullish trend.

For day trading, you have to invest your capital after a lot of thinking. The idea is to rotate your capital between different positions consistently in order to make a profit.

If you open new trades by allocating smaller amounts, it can help you be on the safe side in case of a potentially bad trade. In other words, you can purchase more at a lower price.

  1. Cut losses quickly

Being a day trader, you cannot hold your positions overnight. Therefore, you cannot depend upon future price recovery to protect yourself in case of a bad position. Often, in this type of situation, you can cut your losses quickly and go for the next trade.

Although you can go for dollar-cost averaging, make sure you do it in certain situations. The reason is that if you hold a bad trade and continue to write it down, it may cost you a lot of time and money.

  1. Don’t be greedy

In the world of crypto day trading, greed is one of the main factors that causes traders to suffer losses. What happens is that traders make irrational decisions when the market is bullish.

When it comes to taking profits, you must have clear rules in place. Keep in mind that no profit is small for day traders. If you don’t know whether you should exit or not, it is better that you scale out of the position. This will help you hedge against a crash and you don’t even have to sell all of your holdings.

If you don’t exit at the right time, making profits may be quite difficult for you. All do you cannot make 100% correct predictions, you can scale in and out of your positions, which is quite a practical approach.

  1. Move on

If you want to be a successful day trader, you should keep looking for new opportunities. In other words, you can’t just stick to one token or coin. Similarly, you cannot just give up just because you had a bad trade.

You should do your homework, put together a plan and then stick to it. If it works for you, you should keep following the plan. But if it does not work for you, you should cut your losses and look for another opportunity.

In short, if you want to participate in the cryptocurrency market as a day trader, we suggest that you follow the crypto day trading strategies given in this article. This will help you get started and achieve success.