Cryptocurrency Day Trading Strategies: A Beginner’s Guide

Crypto day trading is a high risk, high reward, short-term type of investing, which makes money by exploiting crypto market volatility. In this post, we’ll be examining how it works, and providing some basic tips and strategies for planning your trading, making informed, smart decisions and mitigating your risk.

How to get started with day trading cryptocurrency

day trading cryptocurrency

Your first step when it comes to entering the crypto market is to do some reading and learn about a few of the most important concepts and principles relating to digital currencies and to day trading. Once you understand how an order book works and how to evaluate a coin’s utility, you need to get to grips with day trading crypto technical analysis and become comfortable with various charting tools and technical indicators. You will also need to educate yourself on the practicalities of how to day trade cryptocurrency, from opening a wallet and navigating an exchange to implementing a strategy and using cryptocurrency day trading software.

Now you are ready to pick an exchange, with a good reputation, a high trading volume, a large number of cryptocurrencies and airtight security. Your next task is to pick a wallet and once again security is key. You also need to look for a user-friendly interface, support for a variety of coins, back-up functionality and low transaction fees.

How do day traders make money?

The crypto markets are active 24/7 and so you can be implementing your cryptocurrency day trading strategies around the clock, opening both long and short positions to take advantage of market shifts in either direction.

In order to maximize your profits, you need to keep a finger on the pulse of cryptocurrency news and use day trading crypto technical analysis tools to make informed market decisions and anticipate the market trajectory of your chosen coins.

Top day trading tips for beginners

day trading tips for beginners

While profits can be substantial, the risks are incredibly high, particularly if you are margin trading. Therefore, the most important of all day trading crypto rules is to only trade what you can afford to lose.

It is critical to accept that losses will inevitably occur, since no one is correct 100% of the time, so you need manage your risk by implementing stop-loss and take-profit orders. These are commands to the platform to automatically close your open position if it hits a pre-determined price, to protect you from losses beyond what you can tolerate on any unsuccessful trade.

Another way to mitigate your exposure is to diversify your crypto portfolio and spread your risk, with established coins like BTC, ETH and USDT, as well as a range of promising altcoins. It is also a good idea to have the largest share of your capital in a range of other types of asset, such as fiat currencies, stocks, bonds, commodities, indices etc.

Another great tip is that practice makes perfect. If you have access to a trading platform with a demo account that lets you try out crypto day trading strategies before implementing them for real, then that is ideal. If not, start small, and build up the size of your trades over time as your knowledge, confidence and experience grows.

Some common day trading strategies

common day trading strategies

The cryptocurrency day trading strategy you choose will depend on your level of experience, knowledge, time commitment and risk tolerance. Here a few, great beginner strategies to get you started.

One popular strategy is to trade on the news. This involves staying up to date on both crypto events and global news, so as to anticipate and take advantage of the volatility that occurs when market fundamentals cause a shift in sentiment.

Another common day trading strategy is trading against a stablecoin. This is great for beginners as it means you only need to focus on the fluctuations in the price of one of the coins in your currency pair.

An increasingly popular approach among beginner day traders is to use a trading bot. The primary advantage is that it is fast and efficient. Emotion won’t derail your trades and you don’t have to spend time researching crypto trends or monitoring market movements, as the bot will run 24/7 seeking out and exploiting market opportunities, on your behalf.

Is day trading Bitcoin a good idea?

Is day trading Bitcoin a good idea

As we’ve already noted, although day trading can be extremely lucrative and profits are immediate, the crypto markets are exceptionally volatile, so trading Bitcoin can be very, very risky. It is also incredibly time consuming, requiring extensive research and constant vigilance to ensure that you don’t miss your moment and that the market doesn’t make a sudden reversal.

If you want to invest your crypto virtually risk free, with no effort involved, but with a higher return than a long-term strategy such as HODLing, your best option is almost certainly crypto arbitrage.

Unlike day trading, this strategy does not leave you vulnerable to the unpredictability of market volatility. Instead, it involves exploiting temporary price inefficiencies. These are brief intervals during which a cryptocurrency is available on various exchanges at different prices at the same time. You buy the coin on the exchange where the price is lowest and then sell it on the exchange where the price is highest to make a profit before the inefficiency resolves itself.

Here at ArbiSmart, our fully automated EU licensed platform performs crypto arbitrage trading on your behalf. It identifies and exploits price inefficiencies on hundreds of coins simultaneously, across 35 exchanges, 24 hours a day. The ArbiSmart system can process a huge volume of trades at once, generating passive profits of up to 45% a year, depending on the size of your investment.

Find out more about crypto arbitrage or learn about a vast selection of other crypto, and DeFi related topics on the ArbiSmart blog.