Cryptocurrencies have become some of the most popular trading assets due to their liquid nature, and the fact that markets are open on a 24/7 basis. There are many methods which can be employed, and day trading cryptocurrencies has attracted countless investors. Executing short-term positions throughout the day (hence the term) can likewise provide a healthy profit margin if approached correctly.
However, day trading can also represent a risky proposition for those who might not be familiar with fast-paced dynamics. This is why it is prudent to appreciate the basics, and to highlight a handful of techniques that have already proven their merit in real-world scenarios.
The aim of this article is to examine some of the best crypto day trading strategies for novices and professionals alike. We will then discuss a handful of additional suggestions before wrapping things up. If you are new to the cryptocurrency community, the details found below could be just what you have been searching for.
We should note that the term “best” will be featured many times throughout this white paper. However, it should be taken with a grain of salt. Some approaches may work better than others. This depends on factors such as personal preferences, experience, and your ultimate trading goals. Summarily, make it a point to evaluate each, and to weigh the associated merits before adding it to your trading regimen. Let’s now get into the heart of the matter.
The best crypto day trading strategies are always built upon a trustworthy online trading broker. An online broker essentially represents the “hub” of your investment wheel while the individual “spokes” can be thought of as verifiable day trading strategies.
Note that many platforms (such as MetaTrader 4) offer a host of built-in utilities and tools. These are provided within a centralised framework, and they can be customised according to the desired settings. Having said this, some extremely popular technical indicators include:
We should likewise stress that while each method offers its own bespoke benefits, the most appreciable results will occur when one or more is used in tandem. For instance, cryptocurrency day traders will frequently employ candlestick charts alongside other indicators such as moving averages. This provides a greater level of insight that will be necessary when entering or exiting a position.
Every crypto day trading strategy will inherently be influenced by several variables. Considering the fast-paced nature of day trades, it also stands to reason that price fluctuations are more pronounced when compared to long-term methodologies such as trend-based trading.
Although human emotion is perhaps the most obvious variable, other issues must be mentioned. Examples can include (but are not necessarily limited to):
Summarily, day trading cryptocurrencies will often involve interpreting these bundles of information so that clear decisions can be made at a moment’s notice. This is one of the challenges associated with any type of day trade, and yet, this is also what makes these positions so interesting.
We have now highlighted the core principles of day trading, as well as some unique factors associated with the cryptocurrency marketplace. Let’s now delve into a host of proven strategies, and describe each in slightly more detail.
In some ways, scalping has come to define cryptocurrency day trading. Investors aim to take advantage of extremely short-term price movements; perhaps within minutes or even seconds. Therefore, it is not uncommon to execute dozens of trades in a given session. While potentially profitable, volatility can also be rife. This is why anyone who wishes to practice scalping is encouraged to open a trading demo account.
Breakout trading relies heavily on the use of support and resistance levels. The theory is that the price of a cryptocurrency (such as Bitcoin) may soon rise above (or fall below) these predetermined levels. This may signal both a trend continuation and a trend reversal, depending on the prevailing direction; one of the best times to become involved in a short-term position
This is a trend-based trading technique that follows ongoing price actions. It takes into account two major variables:
For example, uptrend investing will involve buying low, and selling high. Momentum trading is considered to be a more conservative form of day trading.
Another one of the best crypto day trading strategies involves executing positions within a certain range. This range can fall between historic highs and lows, or take advantage of specific Fibonacci levels (such as the so-called “golden” Fibonacci zone). The investor likewise assumes that cryptocurrency values will remain within this predetermined range.
Interestingly enough, news-based trading can actually be used in combination with all the approaches mentioned above. The main takeaway point here is that investors will wait for late-breaking news (such as the date when Bitcoin is expected to halve) before taking any action. This can be used in both bullish and bearish climates.
Arbitrage trading is another unique approach that involves purchasing a certain token (such as Ethereum or Litecoin) on an exchange where it has been slightly undervalued, and selling it on a different exchange for a profit. While straightforward, note that sudden price movements may impact the effectiveness of arbitrage trading.
This method assumes that one-off price movements will eventually return (revert) to a prior historical average. However, note that we may be referring to data that is only minutes, or hours old. Candlestick patterns will often be used as signals to indicate when this type of reversal may occur.
This latest technique involves the use of artificial intelligence as a means to gather, and interpret specific data sets. While some brokers employ AI-assisted trading, most investors solely utilise artificial intelligence when obtaining macroeconomic data, and evaluating possible short-term trends.
Simplicity is the name of the game when referring to beginners. Advanced strategies may lead to confusion, so it is best to adopt the following methods:
While these can be used as standalone instruments, it is often wiser to employ each in conjunction with the others. Let’s also remember that techniques that everyone should become familiar with (such as knowing how to interpret Fibonacci levels) will provide additional insight.
Those who possess a fair amount of experience may instead prefer to implement more technical solutions. Here are some suggestions:
Although these have already proven their merit, even experts should fall back to the basics when in doubt. The vast majority of technical trading charts will offer such utilities as built-in features, and they can often be customised according to personal preferences.
While the best crypto day trading strategies are partially intended to mitigate risk, it is impossible to eliminate the inherent dangers of short-term positions. This is why investors should always adopt a handful of risk management techniques. Similar to working with a regulated Forex broker, make certain that the platform has been vetted by industry experts, and boasts a highly intuitive user interface. Other suggestions include:
The final observation within this bullet list brings up another important point.
Temperance is always required; even when leveraging the best crypto day trading strategies. While the expression coined by Gordon Gekko “greed is good” may be applicable in some situations, remember that short-term positions will always present a greater degree of volatility. Set your limits, never chase losses, and exit a trade as soon as your profit margins have been satisfied.
Furthermore, remember that losses can still occur. These should be viewed as a percentage of the greater whole. Most professionals feel that a win-to-loss ratio of 70% to 30% actually represents a quite effective day trading strategy.
If you begin to feel stressed, mentally fatigued, or otherwise distraction, make it a point to step away until you return more refreshed. Trading with such emotions will almost certainly result in a loss.
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While we have briefly mentioned some indicators employed by day trading enthusiasts, it is wise to restate some of the most relevant that you are likely to come across. Let’s examine four powerful tools immediately below.
It can be argued that candlestick charts are the most useful utility at your disposal. These graphically display the current price of a cryptocurrency, the volume, high and low values, and candlestick patterns can be used to anticipate future short-term movements.
Retracements are a series of lines expressed as percentages. These lines can be used as rough guidelines when predicting where the price of an asset may be headed.
The 50% Fibonacci Retracement level is usually respected by the market, while the 61.8% is known as the “golden ratio
The RSI is another tool used by traders to highlight positions that may be overbought, or oversold. In other words, this is one of the best crypto day trading strategies for those who enjoy taking advantage of strong directional trends.
Abbreviated as OBV, On-Balance Volume indicators will clarify the directional volume of a specific cryptocurrency. During a bullish trend, greater volume may signify that a resistance level will soon be passed (leading to a breakout). Conversely, increased volume during a downtrend could be a hint that a downtrend will continue.
Assuming that you are relatively new to day trading cryptocurrencies, averting common errors is important if you wish to experience all that this ecosystem has to offer. Here are some pitfalls to review:
Furthermore, it needs to be said that the platform in question will ultimately determine your short-term trading success. The best crypto trading platforms offer plenty of tools, they provide assistance when required, and they may deal with other underlying assets such as Forex pairs, and CFDs. You will only become the best by working with the best.
Rome was not built in a day, so you should not expect to become a seasoned veteran overnight. Patience is a virtue in this respect. Knowledge is likewise power. Be sure to keep up to date with market fundamentals (particularly any news associated with major tokens such as Bitcoin). Become involved with social trading circles, as these are excellent ways to see what the professionals have to say. Additional suggestions include:
Finally, never view a mistake as a setback. These should instead be interpreted as learning experiences. Becoming a pro will take years, so be prepared for the “long haul”.
We can now see that there are major differences between how beginners should approach trading cryptocurrencies and the best crypto day-trading strategies for professionals. We will outline the primary disparities below, starting with novices:
On the contrary, here are some of the qualities that tend to define an advanced cryptocurrency day trader:
Still, remember that professionals are always open to new approaches, and the learning curve never ends.
Although there is no single approach that can be considered the most effective, the best crypto day trading strategies share features in common. They can be personalised around your trading requirements, they offer access to liquid markets, and they can be used in synergy with other techniques (so that the effectiveness will be augmented).
This will be determined by a host of variables. Initial capital outlay, how many trades are executed, the size of the position, your profit margins, market liquidity, trading volume, and your appetite for risk. However, many day traders are able to develop a sizeable nest egg with perseverance.
It is indeed possible to make at least $100 dollars in profit by day trading. In fact, some full-time traders may be able to earn well over $100,000 dollars annually. This depends on your goals, and the amount of time that you are willing to commit.
Notwithstanding day trading, what about cryptocurrency investments as a whole? The so-called “best” approach to crypto investing has less to do with a discrete strategy, and revolves more around your mindset. Those who can maintain a flexible mentality, and who do not shy away from technical concepts that may appear rather complicated at first glance are already at an advantage.
Day trading cryptocurrencies represents an excellent way to tap into short-term liquidity, and some investors are able to generate impressive side hustles. Understanding the best crypto day trading strategies represents the key to realising these lofty goals.
While this type of trading is not without its risks, there are plenty of ways to mitigate the inherent volatility. Partnering with a well-known online broker is likewise key if you wish to gain a firm foothold within a brave new world.
To learn more about day trading cryptocurrencies, or if you would like to open an account with Eurotrader, please contact one of our team leaders. Perhaps your day has finally come!
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