To make good profits in the volatile sphere of crypto, you will need nerves of steel, a winning game plan, and an instinctive trading platform. Meanwhile, you can kind this strong mindset and a good trading platform by doing consistent research. This includes why we’ve exposed you to many ways how to start day trading crypto yourself.
However, you need to know that day trading can seem very risky and demanding. Even, though it comes with the high-reward activity. Although, if you have an effective trading strategy, you will surely nail it on your way to crypto riches in no time! But you have to first understand deeply how to start day trading crypto so you don’t make unnecessary losses.
Therefore, our group of professionals has unpacked the details of good strategies and ways how to start day trading crypto. Hence, carefully read through to get the most out of this article.
What Is Day Trading?
Day trading simply includes sets of techniques employed to take advantage of short-term changes in the prices of a financial market or commodity. Thus, as the name implies, the goal of a day trader always remains to end any given trading day with their trades/holdings having a higher value than they started with. Sometimes they do this by entering and exiting the market several times in a day while looking at smaller time frames (TF).
Significantly, whether currently applied to crypto or not, it originated from the traditional financial markets. Hence, the same principles apply to crypto/bitcoin day trading. So, crypto day trading involves predicting the price movement of cryptocurrencies within a single day. Therefore, the rule of thumb includes opening and closing all positions within the same day. Hence, day traders do not hold their positions overnight.
How To Start Day Trading Crypto
The first major thing you need to start trading cryptocurrencies involves having some amount of your chosen currency in a trading exchange platform or broker. There exist numerous crypto exchanges and brokers you can choose from. Some of them include Binance, Coinbase, Kraken, Gate.io, etc. All you need to do is to register and verify an account with them and afterward fund your account with fiat currency. You can follow the guidelines on the site to do this.
Meanwhile, there are several ways you can benefit from day trading like doing arbitrage trading or trading with analysis. So, if you consider using analysis in the market, you may consider any of the below day trading strategies to start day trading crypto.
Here are a few crypto trading strategies you could use to understand how to day trade crypto in more detail.
Crypto Day Trading Strategies
#1. High-Frequency Trading (HFT)
High-frequency trading includes a day trading strategy technique where you take advantage of price changes that occur on the order of seconds or fractions thereof. The “frequency” routinely involves the order of dozens of trades per second. This may seem far beyond the capability of a human trader.
The only easily feasible way to engage in High-frequency trading includes using a piece of software called a “trading bot”. The bot continuously monitors the market on time and activities depending on the given trading logic. Then it thereby executes trades continuously provided it remains connected to the exchange. By establishing specific trading logic on bots, you can combine High-frequency trading with many other strategies.
Scalping includes a day trading strategy where you make quick profits by trading on lower time frames. You will make profits by opening multiple positions or using high leverage in the market. Also, Scalping requires large amounts of liquidity (currency) to take advantage of small price changes in the market.
#3. Range Trading
You can only practice range trading when the market appears to be ranging. This is based on the assumption that crypto prices will fluctuate only within a certain range (same highs & lows) over a given period. Whenever the price moves outside of that range it indicates that a price has taken another sequence. However, if the price falls below the lower bound of the range, may imply a better time to sell.
#4. Technical Analysis
Technical analysis of crypto day trading strategies may imply the use of a statistical trading tool/indicators to predict market movements. You may also do this by performing different statistical calculations on historical price data while attempting to uncover trends in the market. Majorly, technical trading involves the belief that past prices have some effect on what future prices will become.
#5. News and Sentiment Analysis
News and sentiment analysis is related to technical analysis with one major difference. However, we often refer to it as fundamental analysis. This involves predicting the market using human actions and reactions, rather than price trends.
Hence, with news and sentiment analysis, you attempt to predict if demand will fall or rise for a given cryptocurrency by evaluating different sources of information.
Frequently Asked Questions About How To Start Day Trading Crypto
Which Cryptocurrency is Best for Day Trading?
The highly volatile and changeable nature of crypto shows that any general pronouncements of ‘best’ and ‘worst’ may likely become outdated within a few months. However, a simple way to determine whether a given cryptocurrency looks good for day trading includes finding out whether it has high liquidity. High liquidity crypto is often associated with it, having a ‘market cap. You should also check if the chosen cryptocurrency has a high trading volume because it indicates the number of people trading it. Commonly as a food crypto, these numbers should appear in the region of several hundred million USD or more.
What Is the Tax Rate of Crypto Day Trading?
The government generally doesn’t have control over the crypto world. However, governments across the world scramble to create regulatory frameworks for cryptocurrency. For example, in the United States, the legal classification of cryptocurrency as commodities, securities, currency, or property remains somewhat controversial. Hence, the Internal Revenue Service (IRS) has already realized gains in the value of cryptocurrency as taxable.
How much can you make day trading crypto?
For sure we cannot state how much you can make in a day while day trading. This definitely depends on your capital and level of risk. However, the volatility of micro coins can gain price multiples in 1 day, thereby giving exponential returns to lucky investors. Meanwhile, note that high volatility also implies that those coins can move in the wrong direction just as quickly too.
Are there any restrictions for day trading cryptocurrencies?
There certainly exists no restrictions on cryptocurrency day trading presently.
What is the best crypto day trading strategy?
There exist many good crypto day trading strategies. It all depends on what works for you. You can try scalping, using manual technical analysis, and automated trading bots. Each of them works well and can be quite profitable.
Ultimately, learning how to start day trading crypto may result highly profitability. However, as a day trader, you have to employ intraday crypto trading techniques to take advantage of the luxuries of the crypto-verse. Furthermore, winning takes more than just learning trading discipline and learning to effectively employ a reliable cryptocurrency day trading strategy, it also needs time.
Additionally, selecting the best crypto exchange equally adds to your success story as a day trader. Given the rising number of scammers and fraudulent platforms in the cryptocurrency world, they will help protect your funds.