How To Use Cryptocurrency For Day Trading?

Day trading crypto follows a pretty simple concept tied down by three points – following through the market fluctuations, catching the right investment momentum, and making quick & calculated moves. Unlike day trading, where being patient is key, most crypto day trading strategies focus on deep marketing understanding, agility, and instinctual ability to interpret market data. So, without a solid approach, it’ll be impossible to survive here. 

Let’s talk about it. 

Understanding How Day Trading Works 

Source: ResearchGate

As the image implies, the fundamental nature of crypto day trading is pretty similar to any other trading method you’ve used before. You buy coins when their price is low and sell them as it goes higher and higher. But there’s a catch – you have to be mindful about the timing. 

Source: ResearchGate

For example, firstly, you need to observe the coin’s pricing for at least half an hour and check what is the lowest price point it has reached during the timeline. Once you see the price to be close to the lowest point, invest in it and hold it for some time. And finally, sell the coins when you see the price going up again. 

As the issue of cryptocurrency price volatility makes it difficult to predict prices, it’s important to have an idea about what your entry and exit points would be. For example, if you are buying the coins at $0.15 each, sell them when their price reaches $0.50.

Yes, it’s possible that you’ll not be able to get more money if the price keeps on rising, but you can also avoid the risk of losing a part of your investment. 

Different Day Trading Strategies And Their Shenanigans 

Yes, day trading is quite popular among crypto traders, and they’ve come up with different variations of the same too. I will talk more about them here, but before that, you need to understand something – each of these sub-strategies has its own risks and gains. So, it’s important to learn more about them and follow one strategy at a time.

With that being said, let’s talk about momentum trading first. 

In this case, you’ll have to start by identifying the trends in the market and finding out assets that are on the rise. And then you can buy and sell them after defining your entry and exit points.

Scalping, on the other hand, usually doesn’t focus on a single cryptocurrency. Instead, it trades in different coins and makes small profits from short-term price fluctuations. This type of day trading is extremely fast-paced and requires you to use indicators like the Relative Strength Index to identify your entry and exit points. 

How Do You Manage Risks In Day Trading Crypto?

Day trading, sometimes, can feel like you’re walking on a tightrope – if you don’t sell the coins in this instance (for example), you’ll suffer heavy losses. That’s why knowing how to manage your emotions and risks can be a great idea to save your investments from the brutal swings of the market. So, let me help you a little with this aspect as well.

Firstly, even if you feel like you’ve found a “sure thing” and want to make the most out of it, never put all your fruits in a basket. Following the 1-2% rule or diversifying their portfolio is great for the day trading crypto beginners to avoid market volatility while earning. 

Secondly, using a stop-loss order for every trade you make can help you have an emergency exit if the trade somehow goes south. Finally, it’s important to keep your emotions in check too.

Crypto Day Trading Tips And Techniques 

Yes, going with your gut feelings or making lucky guesses is, indeed, a part of day trading and can make you successful in some cases. Nevertheless, if you want to make regular earnings through these strategies, learning how to read the market would be invaluable for you. 

When it comes to day trading, choosing the best crypto trading platforms suitable for it is very important. As it’s too high-paced, you have to work with an exchange like Coinbase, which has a secure wallet and is able to make safer and faster transactions.

In addition to this, you’ll also have to learn how to do technical analysis to decode the body language of the current market. Tools like moving averages, price charts, RSI, and Fibonacci retracements, can help you predict whether the prices will move up or down in the future. While the results provided by these tools aren’t perfect, at least you won’t have to run blind with them. 

How Fibonacci Retracement Works (Source: StockEdge) 

Also, you have to follow the current market news to learn more about what might affect the price of cryptocurrencies in the future. For example, if the USA government were to impose a new rule on who can trade crypto and who won’t be able to do it – it’d lead to a tank in the price of digital assets massively. Also, if you don’t follow the news, how would you know if Elon has tweeted about Dogecoin again or not? 

The Bottom Line – Day Trading Crypto Is Not Rocket Science 

But it’s definitely not the right fit for an average Joe. You have to research a lot in the market and use the right tools to decide on the coins to target and the ones to avoid. So, take your time, try to adapt to the market, and believe in the market more than your guts.