Strategies to start day trading in cryptocurrency

To make a profit, daily trading is an investment technique that depends on numerous transactions of one or more stocks during the day. While typical buy-and-hold investors are concerned with a company's long-term profitability, day traders seek to capitalise on more rapid profit opportunities.

For profit on short-term price changes of stocks, commodities, and other commodities and currency, successful day traders depend on a variety of resources and tools, such as stock screen or trading simulator software.

Trying to profit from price differences and fluctuations in a short amount of time may be challenging, and the risk involved with day trading is significant.

The crypto markets have recently become a major destination for day traders. Crypto markets, unlike regular markets, never close. Day trading cryptocurrency does not need a brokerage or margin account, making it much easier to conduct in short-term transactions than in the stock markets.

Although cryptocurrency is a new and interesting business, it does have risk for individuals who want to invest in it. And, with thousands of new cryptocurrencies appearing on exchanges and trading platforms, anybody considering investing in a cryptocurrency should also consider the market's volatility and speculative character.

A day trader should have a full grasp of crypto as well as trading concepts, irrespective of the market. Only invest what you are prepared to lose. Here's all you need to know to get started day trading cryptocurrency if you have immaculate risk management skills and steel nerves.

The cryptocurrency markets have recently emerged as a popular destination for day traders. Unlike traditional markets, crypto markets never close. Because day trading cryptocurrencies does not need a brokerage or margin account, it is more simpler to perform short-term trades than in the stock markets.

Although cryptocurrency is a new and exciting business, it does carry some risk for those who choose to invest in it. With hundreds of new cryptocurrencies appearing on exchanges and trading platforms every day, anybody thinking about investing in a cryptocurrency should also consider the market's volatility and riskiness.

Depending of the market, a day trader should have a thorough understanding of crypto as well as trading ideas. Only invest what you can afford to lose. If you have impeccable risk management skills and steel nerves, here's everything you need to know to get started day trading cryptocurrencies.

1. Select a trading platform

  • The first decision a day trader must take is which platform to use. Because US-based traders may only choose domestically regulated crypto-trading platforms, this is an important issue to consider while looking for the best platform.
  • When it comes to choosing the best platform to buy and sell cryptocurrency, exchange liquidity, asset liquidity, and fees are at the top of a trader's list. Because of the volatility of the crypto market, the value of digital assets may fluctuate rapidly. Traders who want to maximise profits in this market must act quickly.
  • When choosing where to do crypto trading, the first option isn't necessarily the greatest. The choices and variations between the various crypto exchanges might be overwhelming for beginning crypto day traders.

Here are the important factors to consider while searching for the best trading platform:
  1. Years in business: The longer an exchange has been in operation, the more stable and trustworthy it is.
  2. Supported cryptocurrencies: Understanding what cryptocurrencies are ready for trading ahead of time may be a useful tool when deciding which platform to use. Day traders interested in cryptocurrencies may find a smaller exchange with more supported cryptos and trading pairs to be more useful than a bigger exchange with fewer possibilities.
  3. Fees: Transaction fees are charged by exchanges when buyers or sellers complete a transaction. To monetize their company, all bitcoin exchanges charge consumers a transaction fee. The transaction cost base might vary depending on the exchange's strategy, such as charging no charge for transactions of $10,000 or more to find that the positive trading.
  4. Deposit methods: Just like a brokerage, customers must fund their exchange account with capital. Many exchanges accept bank deposits and wire transfers, but just a handful accept credit card funding, PayPal transfers, and even gift card transfers.
  5. User reviews: One of the best ways to decide which exchange to buy is to visit various crypto forums and study user opinions.
  6. Liquidity: The liquidity of an exchange, also known as exchange liquidity, refers to the speed and ease with which an exchange may convert one asset into another without affecting its price. The best cryptocurrency exchanges are extremely liquid, which means they can purchase or sell assets very instantly and with a small difference between the bid and ask price.
Helpful Tip: For traders searching for a more extensive analysis of crypto exchanges, Cryptowisser and CoinMarketCap are reliable tools for comparing various platforms based on liquidity, trading volume, and supported cryptos.

A number of internal variables impact exchange liquidity. High trading volume for listed crypto assets, the volume of active traders on a certain exchange to complete orders, minimal fees that encourage makers to open positions, and a range of funding options that attract more traders to the platform.

Another factor for potential traders is if the exchange of their choice makes it reasonable and simple (or even feasible) to transfer their funds off-platform to another crypto wallet of their choice. If your trading day is shortened, your exchange should make it simple to transfer money – from your account to off-platform wallets.

Choose your investments wisely:

Once you've selected a platform, it's time to decide what you want to invest in. Market volatility is a necessary thing for crypto day traders. The same market condition that scares away long-term investors provides possibilities for day traders to profit. Volatility and liquidity are two components that a day trader must have in order to effectively engage in the crypto market.

Tally Greenberg, Allnodes' head of business development, feels that becoming a successful crypto day trader needs more than just reading the charts. "Knowing what the blockchain performs, as well as its network size, governance, and protocols, will help you to evaluate the overall state of your potential investment," Greenberg explains. "As a result, be prepared to study a lot and stay up to speed on blockchain updates for your selected assets."

Greenberg believes that having a technical understanding of the technology and team behind a cryptocurrency project gives traders a competitive advantage. Greenberg highlighted careful thought when asked how a day trader should choose which currency to trade. "One popular cryptocurrency method is to invest in the top 15 to 20 cryptocurrencies by market capitalization. But, even in this case, I would continue with care "Greenberg adds. "Not all of the coins on this list make perfect sense, and you'll need to do a lot of study to figure it out for yourself. Day trading in cryptocurrency is a high-risk activity. Invest no more than you can afford to lose. However, if you take day trading with the same seriousness as any other profession and study all there is to know about the skill and the assets you are trading, you will be profitable."

Analyze asset liquidity, volatility, and trading volume when deciding where to invest.

The ease with where an asset may be turned into cash without affecting its price is referred to as asset liquidity. When the trader executes the deal and the exchange honours the order, the price of a crypto asset can vary. Slippage is the difference between such prices, and in the crypto markets, a few minutes may represent the difference between a large profit and a big loss

A lack of liquidity may be disastrous for the whole cryptocurrency market, producing slippage and raising the chance of a flash collapse. When a major market sell order passes out the top purchase bids in the order book, a flash crash happens. Traders try to leave their jobs as quickly as possible, and with no purchase orders present, the asset's price might collapse. In the past, flash collapses have resulted in exchanges reimbursing impacted consumers for millions of dollars in damages.

Volatility is a day trader's best friend when it comes to understanding and accounting for it. The unpredictability of crypto price fluctuations is referred to as market volatility. The news cycle, economic statistics, and research reports are all factors that influence market volatility. The same circumstances have a huge influence (or none at all) on specific crypto assets in the crypto markets.

When compared to more popular and well-known cryptocurrencies such as bitcoin or ether, volatility is greater among altcoins with small market capitalisation.

The total number of cryptocurrencies exchanged during a certain time period is referred to as trading volume. The trading volume of a cryptocurrency is a measure of overall market interest. A cryptocurrency with a big trading volume has more liquidity. In the same way, a cryptocurrency with high liquidity frequently has a higher price. While the cryptocurrency market is incredibly liquid and volatile, not all cryptocurrencies are made equal. Crypto day traders should carefully examine an asset's trading volume to see if it can be sold soon and at a higher price than when it was obtained.

The cryptocurrency market is still in its development, and the originality of the blockchain technology that enables cryptocurrencies creates crypto-specific market challenges. One example is the link between the price of bitcoin and the price of every other cryptocurrency. If there is a massive migration of Bitcoin miners from a certain nation, for example, the price may fall as a result of miners dumping bitcoin. When the price of bitcoin falls as a result of falling prices, the altcoin market tends to follow suit.

Finding a crypto asset with high liquidity and volatility is a good place to start when searching for the best crypto to day trade. The choice to participate should not be based just on these two parameters, but also on additional variables relevant to the cryptocurrency in question. How does it become mined or minted? Is there a lot of interest in the coin? When should you terminate your losses if the price of the currency does not increase by a particular time?

Select a trading strategy:

Day traders use a variety of strategies to gain on short-term changes in the cryptocurrency markets. A successful crypto day trader should develop a winning strategy based on the research, as well as well-thought-out strategies for when to join and leave positions.

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Certain websites allow aspiring day traders to monitor and copy the most successful traders on the platform. Some of the most common trading methods in the crypto day trading game are listed below.

Arbitrage in cryptocurrency happens when a trader purchases a cryptocurrency on one exchange and instantly sells it at a higher price on another platform.

Arbitrage possibilities may be enabled by cryptocurrency pairs. When the price of a crypto pair consisting of a lesser-known altcoin and Bitcoin fluctuates from one exchange to the next, arbitrageurs can profit by exploiting the value discrepancy. While arbitrage is a complex financial process that is generally automated by price-monitoring software, it helps to keep digital asset values steady across exchanges.

Nota bene: Crypto trading pairs are assets that can be exchanged directly on an exchange. When the price of a crypto pair consisting of a lesser-known altcoin and Bitcoin fluctuates from one exchange to the next, arbitrageurs can benefit by utilizing the value discrepancy. While arbitrage is a complicated financial process that is generally automated by price-monitoring software, it helps to keep digital asset values steady across exchanges.

Trading bots:

A trading bot is a software tool that allows investors to buy and sell financial products at scheduled intervals or when predefined conditions are satisfied in order to optimise earnings. Crypto trading bots are intended to increase earnings while reducing losses and risk.

Crypto trading bots can automate the process of monitoring price changes, exchange fees, and chances to profit from deals in the near term. Bot trading software has been a fixture of brokerages trading on stock exchanges for decades. Traders that are familiar with software programming and APIs might think about leveraging this to their advantage as a day trader.

The long straddle:

The long straddle also known as the buy straddle, option straddle, or simply straddle, is buying both a put and a call order. A long straddle has call and put orders on the same cryptocurrency, strike price, and expiry date.

Because of the volatility of the crypto market, the long straddle is a popular strategy in crypto trading. A crypto day trader using this method is betting on a change in the price of a crypto asset. The day trader profits whether the price increases or falls in the long straddle. If the price does not change, the trader will lose money.

When a derivative contract is executed, the strike price is the fixed price at which it may be purchased or sold.

Trading in the ranges :

Range trading takes full advantage of sideways (or non-trending) markets by finding steady high and low prices, which are displayed on charts as resistance and support levels. Day traders that use range trading methods establish a time period during which they will purchase a crypto asset when it is oversold (at a low price) and sell when it is overbought (at a higher price) in order to profit.

Online screeners can assist crypto day traders to choose proper crypto asset to range trade. Range trading, like the majority of other trading strategies, may be used outside of the cryptocurrency industry and is adaptable to other markets. Crypto day traders like range trading because it has well-defined entry and exit points, which may help to cover losses. The range trader avoids losses based on negative news cycles or market situation by generating small profits over a short period of time.


Scalpers, known as the trading strategy with the quickest turnaround, use huge quantities of liquidity to profit on minor price fluctuations. This investment approach might include purchasing and selling bitcoin or altcoins over a few hours and cashing out on small percentage profits at the end of the day - or putting up a bot for high-intensity and frequent trades based on signals or technical indicators.

Scalping cryptocurrency is common among day traders because to its ease of automation for bots, minimal risk, and possible return. Trading bots can reduce the anxiety and tension associated with trading. Because scalping positions are smaller, traders may review their profits or losses at the end of the day rather than investing for the long term. Because of market volatility, traders may consistently make small profits over time, which can add up to can provide in the long term.

Technical assessment
Technical analysis (TA) is the analysis of financial data points such as historical price and volume statistics in order to identify statistical trends in the markets. TA offers traders with a methodology for identifying trading opportunities and benefiting from them.

As long as there is previous trading data, technical analysts may apply their strategy to any market or security. In the crypto world, TA may be used as a guideline to assess how previous performance determine future profits or losses.

The use of TA in the crypto markets is a subject of debate among traders. Many people believe that the lack of global laws and the large number of cryptocurrency exchanges make it incompatible with technical analysis. Other traders believe that indicators such as the relative strength index (RSI) are useful. The RSI indicator assesses the link between a cryptocurrency's price and its real demand. The RSI indicates whether an asset or security is overbought or oversold, and it may help traders map entry and exit locations depending on momentum.

The Money Flow Indicator is another major oscillator used by technical analysts in cryptocurrency (MFI). The MFI, in combination with the RSI, may be used to identify if the price of BTC is trending towards a bullish or bearish divergence.

Technical analysis in crypto must be done in combination with other tactics. Crypto day traders should be aware of and use TA, but they should do it in combination with the news, fundamental analysis, correlation arbitrage, and other market factors. The focus on creating a thorough plan for when to join and exit positions is the best feature of technical analysis.

Day trading cryptocurrencies has its advantages and disadvantages.
There is a significant possibility of loss, but also a huge potential gain, when investing in cryptocurrencies. As a new class of digital content, crypto is vulnerable to vanishing, and investors should constantly keep this in mind.

In order to be ready for the new tax rules and regulations that will be implemented in the coming years, traders should set aside some time to learn about them. For example, short-term capital gains tax does not exclude cryptocurrency. Any cryptocurrency traded for less than a year is taxable as marginal income for day traders. Include your cryptocurrency winnings in your financial statements, either online or through your accountant.

For Pros:
Cryptocurrency can be traded freely by anyone who has access to an exchange. Cryptocurrency markets are open to all retail investors and day traders without extra barriers to entry, such as validating your identity and funding an exchange account. You may buy and sell portions of any cryptocurrency, even if you don't have $60,000.

The crypto markets are open all year round, 24 hours a day, 365 days a year. There are no restrictions on trading in the crypto exchanges since they are open 24 hours a day, seven days a week. From 9:30 a.m. until 4 p.m. ET, the New York Stock Exchange and the Nasdaq are open for trading. The ease of trading whenever it's convenient for you is one benefit of having access to the market round-the-clock (rather than suiting the market).
Since they are decentralised, cryptocurrencies and the blockchain technology that underpins them allow for payments to be processed without the involvement of a middleman. The lack of taxes and fees levied by the government makes cryptocurrency transactions very affordable for day traders using a centralised exchange.

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