How to Day Trade Cryptocurrency

What You Need to Know


How to Day Trade Cryptocurrency – What You Need to Know

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Day trading

Have you ever wanted to learn how to day trade cryptocurrency? Do you hear about all the people who have become crypto millionaires and think: that could be me? If so, you are not alone in this. Cryptocurrency day trading is a craze that has not only excited the financial markets but quite literally taken it over.

However, according to a study conducted by the University of California at Davis, only 1.6% of all day traders make good money. While that percentage might seem extremely low, these profitable day traders make profits that run into the millions of dollars. Which kind of makes day trading something worth looking into if you have an appetite for risk.

There’s no doubt that day trading crypto is one of the most commonly used trading strategies today. That’s mostly because people have been day trading stocks for years, and the same principles can transfer to the crypto market, although it calls for a little customization.

In this guide, you will learn all you need to know about day trading crypto. You will also learn the associated risks and take a good look at the kind of indicators that might help you make a profit.

What Is Day Trading Crypto?

Sometimes referred to as “intraday trading,” day trading is a strategy that allows traders to enter and exit trading positions on the same day. The idea here is that traders use different strategies, sometimes algorithmic cryptocurrency trading, to try and take advantage of the price volatility that occurs throughout the day to make a profit.

Predicting these price changes (whether an asset like Bitcoin will go up or down during the day) makes all the difference and earns day trader’s money. This term originated in stock trading, where traders made profits or losses on intraday positions and never left their positions open overnight.

The essence of it all is to try and buy an asset at a lower price and sell it at a higher price within the same day. Because day trading occurs within the very same day, it’s inherently a short-term trading strategy. In this case, traders can hold their assets for as little as a few seconds before selling them again or as long as a few hours but always within the same day.

Here are some quick examples of day trades that might help clarify the point:

Example 1:

A cryptocurrency trader, let’s call him John, hears on the news that a big brand corporation intends to stop accepting Bitcoin as part of its payment options. John knows that this news will have a negative impact on the price of Bitcoin within the day.

He, therefore, decides to sell whatever Bitcoin assets he has on his portfolio at the current price before the prices fall. By doing this, he shields himself from the inevitable loss that comes with a price drop.

That’s a one-day trading strategy.

Example 2:

On the same day, John hears that a big U.S Bank intends to start using Ripple (XRP) for international payments. He knows that this will inevitably make XRP more valuable in the market.

He quickly buys about 1,000 XRP at the current price of $1.60, anticipating that the price will rise as the news pervades the crypto market.

At the same time, lots of other people hear the same news and decide to do exactly what John did; buy up as much XRP as they can. This creates a surge in demand and, with it, an inevitable rise in price as XRP assets get scarce.

Twenty minutes later, the price of XRP has skyrocketed and is now trading at $1.93.

John knows that this rise won’t last forever, and the market will quickly correct as the euphoria of the news dies down.

He decides to sell all his 1,000 XRP at the new price of $1.93, making himself a tidy profit of $0.33 per XRP, totaling $330 in just 20 minutes.

Example 3:

John has been studying the charts associated with the cryptocurrency Ethereum. He knows that the price has been steadily going up and doesn’t look like it will stop.

He decides to buy $1,000 worth of Ethereum.

As the day goes by, the price of Ethereum goes up by another 20% which means that John’s $1,000 is now worth $1,200.

However, that upward trajectory slowly begins to correct, and the prices start falling steadily. The price is now down by 5% within another hour to make John’s $1,000 worth $1,140.

He decides to sell at this point pocketing $140 in just a couple of hours.

These examples show you a simplistic representation of day trading crypto. It’s also important to note that these are examples of successful trades. The crypto market, just like the money market, is often as unpredictable as it gets. This volatility means that John’s predictions could have very well gone the other way and made him a loss.

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Example of a Loss:

John thinks that since Ethereum prices have been steadily rising, they will keep rising at least for the next few hours. So he buys $1,000 worth of Ethereum, hoping to make a profit shortly.

Unfortunately, the upward turn quickly takes a nosedive, and before John realizes it, the prices have dropped by an impossible 30%.

At this point, his $1,000 is now worth $700, losing him $300. He can either decide to sell at this price and take a hit of $300, or he could decide to wait a little longer and hope the prices come back up within the same day.

The problem is that the prices keep going down, and by the end of the day, John has lost more than 40% of his investment.

Since the trades have to be closed within the same day, he decides to sell at $600, losing $400 within the same day.


Crypto Day Trading Methods

To day trade cryptocurrency, you need to understand how cryptocurrencies work, what affects their prices, and how the different trading platforms and crypto exchanges work.

While there are many methods used in day trading, the two most common methods are speculation and chart analysis.

Let’s take a quick look at both.


This is the kind of day trading strategy that most day traders use, especially the one’s just learning the ropes. One example above gives you a clear picture of what day trading cryptocurrency on speculation is and how it works. When John heard that a major U.S Bank was getting involved with XRP, he speculated that this news would help boost the price of XRP.

That, however, didn’t have to be the case. The prices could have stayed where they are or maybe even gone the other way as scandals about the said bank come to light. However, John went with the odds that a big brand name bank would give the market more confidence in XRP, driving the prices up as more people want to get in on the game.

Chart Analysis

Another common trading strategy when day trading crypto is chart analysis. In this approach, the trader studies the charts associated with the specific crypto asset price movement in which they are interested. The idea here is that the trader can reasonably predict whether the prices will go up or down based on historical data from the chart.

For the most part, unless there’s a major shakeup in the market, the crypto prices will hold the same steady pattern, and that’s what the chart analysis strategy tries to predict. This method calls for a bit more technical analysis than speculation.

How to Actually Make Money Day Trading Crypto

As simplistic as these two methods seem, there’s a lot that goes into actually making money as a crypto day trader. For the most part, you will need a very deep understanding of the crypto market and some experience. That’s why most day trading platforms offer beginner traders a bonus with which they can try their hand before actually putting in real money.

To be a successful day trader, you would need to use:

  • Technical analysis of the market as well as the assets you intend to trade
  • Be ready to trade in large volumes; the higher your trading volume, the more likely you are to realize a reasonable profit
  • Study chart patterns and price actions
  • Know all the necessary technical indicators that could point you in the right direction
  • Learn extreme risk management as opposed to “just going with your gut”

Finally, you need to master at least one or two cryptocurrency day trading strategies that you can rely on to consistently make money.

Crypto Day Trading Strategies

There are several cryptocurrency day trading that traders use to better their chances of making a profit. Here are a few that you might need to learn:


Scalpers take advantage of the many market inefficiencies, gaps in liquidity as well as bid-ask spread to make money. This is very much like crypto arbitrage, where the trader will look for the small price differences in the many crypto exchanges.

Once a price difference is identified, the trader will then quickly buy crypto assets such as Bitcoin at the lower price, transfer them to the exchange with better pricing and quickly sell them at the higher price. This entire process takes minutes, if not seconds.

Successful scalpers tend to trade on futures contracts and margins. With this kind of strategy, the percentage price targets are often much smaller, and therefore trading in larger volumes is the order of the day.

Range Trading

Successful range traders keep an eye out for price ranges that may occur within the market. They then create strategic trade ideas based on these ranges. This particular strategy involves a lot of candlestick chart analysis and paying close attention to support and resistance levels.

For example, if the trader realizes that the price range stays between specific support and resistance level, then the smart move would be to buy an asset at the support level and then sell the asset at the resistance level. They could also choose to short the resistance level and simply exit the trade at the support level.

The overall idea behind range trading cryptocurrencies is that the edges of this particular range will hold until the range is eventually broken. These edges are what are termed support and resistance levels.

In short, traders assume that the upper edge of the range (the resistance) will most likely push the prices down, while the lower edge of the range (the support) will most likely push the prices up, which keeps the price within that range.

However, since the crypto market is prone to volatility, the more times the price touches either edge, the more likely it is to break the range. That’s why savvy day traders set up “stop-loss” measures wherever the breakout is confirmed.

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High-Frequency Trading (HFT)

High-frequency trading (HFT) is a kind of cryptocurrency trading strategy used by “Quant traders” (quantitative traders). This kind of trading involves a lot of algorithm development and the use of trading bots that can enter and exit a lot of crypto trading positions over a very short period of time.

In this case, these trading bots enter and exit trades in milliseconds (much faster than humans can). These milliseconds of advantage depending on the volumes in play could mean millions of dollars in profits for high-frequency firms.

What You Need to Know About Day Trading Cryptocurrency

If the idea of making quick money day trading crypto sounds grand to you, then there are a few things that you need to know if you are going to learn how to day trade cryptocurrency:


This is part of the crypto trading game and is the main reason why people make money. It’s also the main reason why people lose money. In crypto trading, volatility occurs when prices move erratically up and down quickly.

While this kind of volatility occurs in all markets, the chances that a company’s stock will move up and down extremely within 24 hours on the stock market is very rare. This is mostly because the companies on the stock exchange have been in operation for years and are relatively stable.

However, cryptocurrency is just in its infancy, and many of these coins are just now getting invented. It’s not uncommon to find price differences of up to 50% within the same day. For example, in 2018, the price of a crypto asset called e-Coin increased by 4000% within the same day.

Losses Are Part of the Game

Just recently, Bitcoin took a nosedive and lost almost 30% of its value due to an announcement by Elon Musk that Tesla will no longer accept the crypto coin as part of its digital currency portfolio or payments. This came at a time when Bitcoin was on a bullish run, and anyone predicting that it was only going to go up took a hit.

Losses are part of the game. No matter how skilled you are, there’s a good chance that you are going to lose money on a crypto trade at some point.


Day trading crypto can be very lucrative, and if you aren’t careful, you could end up losing all your money while riding a high. Say, for example, you decide to invest $1,000, and on the first day of trading, you make $400.

It’s only natural to assume that your days are going to be as good. As such, you will have an increased appetite for risk and want to make even more than the next day. Say $600 or even $700, which means you will risk more of your money.

The better you do, the more you will stake until the day things don’t go as planned. Savvy day traders set targets that they stick to religiously no matter how good of a roll they are on. For the most part, this target is about 1%. This means that they never risk more than 1% of their bankroll on a trade, and once they make 1% profit, they call it a day. This might seem little, but depending on the volume, 1% could be thousands of dollars.

Learning how to day trade cryptocurrency isn’t as complicated as it may seem at first. Of course, the better you get at it, the more you will want to learn, the more complex strategies, and the higher the volume you will want to trade. Yes, you can make very good money day trading crypto. On the other hand, you could go broke if you don’t employ the right strategies and practice prudent risk management.



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