Crypto day trading strategies that work will help you make money trading in digital currencies.
Whether you’re new or experienced in day trading crypto, mastering these strategies can mean all the difference between success and making losses.
Discover some of the best day trading cryptocurrency strategies in this guide and master them to navigate the crypto markets like a pro.
Crypto Day Trading Defined
Day trading crypto is all about buying and selling cryptocurrencies within a single trading day.
As a day trader, your goal is to make multiple trades within a day, capitalizing on market fluctuations.
This approach is the opposite of position trading, where you hold onto assets for months or years, hoping that their values will surge.
As a day trader, you require an in-depth understanding of several key aspects, including:
- Liquidity and trading volume.
- Order types and execution speeds.
- Leverages and margins.
- Technical analysis.
- Market trends.
- Risk management.
This market is highly volatile. Cryptocurrency prices can swing dramatically within no time.
It implies that day trading cryptocurrency can be very lucrative if done right with the appropriate strategies.
Without that, it can also be relatively risky.
Essential Crypto Day Trading Strategies
1. Scalping
This method helps you make quick profits, hence considered one of the top crypto day trading strategies.
It involves making multiple small trades throughout the day by holding positions for a few minutes or even seconds before releasing them.
Traders normally take advantage of minor price movements, continuously making profits from small price fluctuations.
As a trader, you want to choose a trading platform with low transaction fees, such as Coingate, Kraken, Binance, or Robinhood.
Additionally, you need to pay attention to tiny but frequent swings, a great way to accumulate profits and lower your exposure to market volatility.
On top of that, it’s in your best interest to choose high liquidity pairs like BTC/USDT or ETH/USDT. Such pairs execute faster with reduced slippage and lower market manipulation risk.
Lastly, use leverage carefully to boost gains without forgetting the increased risk posed.
2. Momentum Trading
Momentum trading is another powerful day trading cryptocurrency strategy. It involves identifying cryptocurrencies whose prices are moving strongly in one direction and entering trades. The movement can be either up or down.
You may use various technical indicators to confirm price movement trends.
The RSI and MACD are some of the most reliable technical indicators for this purpose.
For starters, RSI stands for “Relative Strength Index” whereas MACD is an abbreviation for the phrase “Moving Average Convergence Divergence”.
In addition to leveraging technical indicators, you need to stay informed about the events and trends that could trigger price movements.
Further, always exit before the momentum reverses to avoid losing profits.
Last but not least, avoid emotional trading by setting clear entry and exit points so that you aren’t guided by emotions.
3. Breakout Trading – One Of The Top Crypto Day Trading Strategies
Breakout trading is a fantastic crypto daytrading method that allows you to catch big moves early. Here, you are supposed to enter a trade as soon as an asset breaks through a key support or resistance level. Breakouts normally lead to significant price movements.
In breakout trading, you need to enter trades early and set stop-loss orders to manage risk.
Apart from that, you need to know how to spot key support and resistance levels using historical price data.
In addition to that, you should take profits gradually while the price movement favors you.
4. Range Trading: Profiting from Sideways Markets
Sometimes, prices move within a specific range without significant upward or downward movements. This happens because not every market is trending.
Range trading can be a good day trading cryptocurrency strategy for such scenarios.
To execute this strategy effectively, leverage RSI and other technical indicators to confirm oversold or overbought conditions.
In case of unexpected breakouts, set tight stop-loss orders. Doing so will help protect your funds from big losses. It will also enable you to avoid emotional trading, which can quickly ruin you.
Additionally, identify assets trading between consistent support and resistance levels to predict price movements effectively and make informed trading decisions.
Lastly, buy near support and sell near resistance, minimizing risk while maximizing profit potential.
5. News-Based Trading
The markets are often sensitive to news events because of traders’ emotional and speculative reactions.
Major announcements, such as new partnerships or regulatory updates can lead to sudden price crashes or surges.
Stay updated with news affecting the markets and react fast.
Always confirm news authenticity before making trading decisions.
Reacting to mere rumours or fake news can lead to significant losses.
Incorporating Risk Management into Your Crypto Day Trading Strategies
No matter how good your crypto day trading strategies are, risk management is the key to long-term success. Without it, a few bad trades can wipe out your account. Here are some crucial risk management principles:
1. Set Stop-Loss and Take-Profit Levels
Never enter a trade without defining your stop-loss (the price at which you’ll exit a trade to prevent further losses) and take-profit (the level where you’ll secure profits).
2. The 1% Rule Is Part Of The Top Crypto Day Trading Strategies
Avoid risking more than 1% of your total capital on a single trade. This prevents major losses even if a trade goes against you.
3. Diversify Your Trades
Don’t put all your funds into one trade. Instead, diversify your investments across multiple crypto assets. This strategy will enable you to minimize risk.
4. Avoid Emotional Trading
Trading with your emotions as opposed to strategies leads to impulsive decisions and losses. To avoid chasing losses, follow your strategies to the latter.
Best Tools for Day Trading Cryptocurrency
Implement your day trading crypto strategies using the proper tools.
1. Crypto Charting Platforms
Crypto charting platforms provide interactive charts with technical indicators and real-time data, allowing traders to analyze price movements, track trends, and identify trading opportunities.
According to CoinLedger, TradingView, CryptoWatch, and Coinigy are some of the top charting platforms available. TradingView and CryptoWatch come with both paid and free versions whereas Coinigy is strictly a paid charting tool.
2. Market Scanners
- TradingView offers a market scanner called “Crypto Screener”, which helps you find trending coins.
- CoinGecko provides CoinMarketCap, a market scanner tool that enables you to track price movements in real time.
3. Leverage News Aggregators
Various platforms serve as news aggregators, compiling all the important news and updates in the cryptocurrency industry and putting them together in one place. As such, you don’t have to check out different websites for information such as insights into market trends and so on. For example, CoinDesk, CoinTelegraph, Reddit, Twitter, and Telegram often serve as crypto news aggregators.
Common Mistakes to Avoid in Crypto Daytrading
Avoid the following mistakes while learning essential crypto day trading strategies. Otherwise, they could cost you money:
1. Ignoring Fees
Exchanges charge fees on every trade with some exchanges being notorious for charging very high fees.
For example, while their services are top notch, Coinbase, Bitstamp, and Gemini impose relatively higher trading fees.
Always pay attention to fees when choosing a cryptocurrency exchange.
2. Overtrading Can Ruin Your Crypto Day Trading Strategies
Contrary to what you might think, more trades do not equate to more profits.
Executing too many trades can lead to unnecessary losses due to lost trades and high trading fees.
3. Trading Without a Strategy
If you jump into cryptocurrency trading without a clear strategy, you are setting yourself up for a major disaster.
Before you begin, make sure that you have the right crypto day trading strategies.
4. Forgetting About a Trading Journal
Always document your trades. That way, you’ll be better able to analyze what works and what doesn’t and make the necessary adjustments accordingly.
5. A Bad Platform Can Ruin Your Crypto Day Trading Strategies
There are many scam crypto exchanges out there, including Garantex, Tride, Quebecoin, and Halkbit. Without doing proper due diligence, it’s easy to fall for one and lose your hard-earned money.
Report A Scam
Speaking of which, have you fallen victim to a dubious exchange? If so, go to this page, or send an email to scamread@scamreader.info to report the scam and seek help.
Final Thoughts On Crypto Day Trading Strategies
Master these crypto day trading strategies to navigate the volatile but profitable markets and make a lot of money.
Whether you prefer breakout trading, scalping or momentum trading, the most important thing is to stick to your approach, manage risks effectively, and continuously refine it.
Day trading crypto is not a guaranteed way to make money, and success doesn’t happen overnight.