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Learning crypto day trading strategies is a great way to earn a profit with cryptocurrency market. With the proper strategies and knowledge, you can take advantage of the volatility of cryptocurrency to profit. Before you start crypto day trading, however, there are a few things to make sure you know, including some great strategies.
Before you get started with crypto day trading, familiarize yourself with the requirements. Luckily, there are not many beyond common knowledge. You will need to own at least some cryptocurrency and have a trading platform in mind to use.
Technically, you can start day trading with any amount of cryptocurrency. That being said, your potential for profit increases as your investment increases. Just remember that your risk will also increase.
What Should I Know About Day Trading Cryptocurrency as a Beginner?
As a beginner, you want to at least know a few basics before you start crypto day trading.
You should always start with a small investment while you gain your footing. Remember that while larger investments increase your potential profits, they also increase your risk. The golden rule is to only invest what you can afford to lose. Because cryptocurrencies are so volatile, this is especially important.
That volatility is another thing you need to know before you start crypto day trading. You need to mentally prepare yourself for high fluctuations in cryptocurrency values. Cryptos can drop 80% overnight or rise the same amount. With some experience, you can take advantage of that volatility. In the meantime, you need to learn how not to panic and to keep your crypto invested through the fluctuations.
No matter the crypto day trading strategies you choose, you will also have to know what is going on in the world. To do well, you have to track the various factors that affect crypto prices as well as the prices themselves. This takes dedication and constant effort.
How Are Trading Strategies Different for Crypto?
The various trading strategies aren’t significantly different from the stock market for crypto. In fact, you will notice that a lot of the best strategies for crypto trading are based on trading traditional financial markets. The main difference is that the instruments are more volatile and may have less liquidity. There is also less regulation of crypto trading than trading stocks or another instrument type.
Is Day Tading Crypto Worth It?
Day trading is a risky investment strategy where traders try to profit from short term price movements. This strategy is used when markets are volatile and prices go up and down quickly. However, day trading has been associated with high risk and losses. If you invest too much money into one trade, then you may lose all of it.
Day trading cryptocurrencies such as Bitcoin, Ethereum, Litecoin, Ripple, etc., is a great way to make money from home. However, it requires a lot of patience and discipline to succeed at day trading. If you want to become successful at day trading, you need to learn how to trade properly, and also be able to identify when a cryptocurrency has reached its peak or bottom.
Crypto day trading will typically involve using a range of tools to ensure you make educated trades. The following are just some of the types of tools you will want to use.
- Cryptocurrency exchange. This is the platform you will hold and trade your cryptocurrency on.
- Crypto wallets. Storing the crypto you aren’t actively trading in a wallet is more secure than storing it on an exchange.
- Charting tools. These give you a visual representation of price fluctuations. They also feature indicators, drawing tools, trend lines, and more. They are crucial for technical analysis.
- Expert technical analysis. This is technical analysis completed by experts. It can give you a starting point for your own analysis and save you time.
- Market data. This is the information about prices for various cryptocurrencies. It is essential for knowing when to trade.
- These tools combine all of the cryptocurrency news in one spot, so you won’t have to search numerous websites.
- These calendars combine all of the cryptocurrency-related events. Those include hard forks, block halvings, air drops, and more.
- Crypto network statistics. These let you confirm the statistics about the Bitcoin network, including the number and speed of transactions.
- Trading bots. Using trading bots lets you trade 24/7. That way, you can trade even when you are asleep.
- Portfolio trackers. If you have crypto investments and trade on various platforms, a portfolio tracker can give you an overall view of your investments.
Best Indicators for Crypto Day Trading
As a crypto day trader, it is crucial to follow several indicators as a part of technical analysis. The following are the most popular among crypto traders. These indicators can be used with TradingView.
Bitcoin Strength Indicator (BSI)
This indicator is designed to showcase “on-chain sentiment,” short-term trends, and long-term market strength.
In addition to providing a comprehensive view of the current state of the Bitcoin network, the Bitcoin Strength Indicator (BSI) is an incredibly useful tool. A single number, ranging from 0-100, indicates how healthy and robust the network is at a given moment. Anyone interested in understanding Bitcoin’s stability and security can benefit from this.
The higher the BSI number, the more secure and reliable the network can be. On the other hand, a low BSI may indicate a higher level of stress and instability. Bitcoin’s health and performance can be measured over time using this useful indicator.
Bollinger Bands (BB)
A crypto day trading indicator borrowed from other types of trading, Bollinger Bands let you know if a crypto’s price is within its normal range or if it shifted. It can also help with long-term price movements.
John A. Bollinger developed Bollinger Bands (BB) as a technical analysis tool in the 1980s. A moving average of price action over an extended period of time is used in the middle band of the BB to divide the trading range into three bands. In addition, the lower and upper bands create two standard deviations away from the moving average, which provide traders with insight into support and resistance levels.
The Bollinger Bands are widely used by traders – especially day traders – as they provide a comprehensive overview of price movements and can detect trends when prices move outside one of the bands or inside both simultaneously.
Fibonacci Retracements use the Fibonacci sequence to identify points of support and resistance. After an impulse wave, the market typically retraces approximately 61.8 percent of the move before continuing in the same direction (up or down) as before. Most commonly, it is used with stocks, commodities, and currencies, but it can be applied to any asset trading on an exchange. Investing with Fibonacci Retracements requires spotting when the trend resumes its original direction – because timing is crucial. Consequently, Fibonacci Retracements have become a popular weapon in many a trader’s arsenal!
Moving averages are a type of lagging indicator, meaning they give you feedback after a price has already moved. While the most popular types of moving averages are simple and exponential, they can also be weighted or smoothed.
Exponential moving averages are particularly popular for shorter time frames, making them perfect for crypto day traders. This is because they weigh recent data more heavily than older data, so they respond to changes more quickly. Simple moving averages are then more popular for longer periods of time.
On-Balance Volume (OBV)
On-Balance Volume, or OBV, is a technical trading tool used by investors to track the accumulation and distribution of securities. In the late 1960s, Joseph Granville hypothesized that volume precedes price changes in stocks.
When an asset’s volume is higher than the past average for a particular time period, it means that large traders are getting involved and the price will move soon.
When security prices change, OBV produces a cumulative total volume reading. It is possible for analysts to predict potential changes in stock prices by comparing this changing volume with trends in pricing behavior. When making investment decisions, OBV essentially provides investors with an objective way to measure momentum and quantify demand for a security.
Relative Strength Index (RSI)
The RSI is a type of momentum indicator. It shows values from 0 to 100 and indicates changes in price.
Read: Crypto RSI Trading Strategy
If a crypto has an RSI of under 30, crypto day traders consider it to be oversold. If it is above 70, it is likely overbought. While most people use 14-period RSIs, day traders commonly use versions with five or seven periods.
This indicator compares Bitcoin’s closing price with its and highs and lows over the period. The value ranges from 0 to 100. If it is below 20, the crypto is oversold, and if it is above 80, it is overbought.
Technical Analysis Basics
The most important thing to understand about technical analysis for your crypto trading strategies is how to read a candlestick chart. The limits of the main rectangle of the candlestick are the crypto’s opening and closing prices for the day. If it is green, it rose in value, and if it is red, it dropped in value. The wicks extend past the main rectangle until the highs and lows of the day (or time period).
You will also want to have a basic understanding of technical indicators, like those mentioned above.
You should also understand trend lines. These let you know which direction a crypto is moving. The good news is that most charting programs will include trend lines, so you don’t have to calculate them.
Support and resistance levels are also important to understand. Support refers to when traders want to buy the crypto. Essentially, support lines indicate when traders think the value of the crypto is low, so they think it is smart to buy. Resistance levels do the opposite and show a lack of demand but a large supply. Resistance indicates people think the cryptocurrency is overpriced.
Crypto day trading strategies also require you to understand trading volumes, as these let you know how strong a trend is.
Market caps are also important and show you a crypto’s stability.
Best crypto to day trade
Cryptocurrencies such as Bitcoin, Ethereum, Ripple, Litecoin, Dash, Monero, Zcash, etc., are digital currencies that use cryptography to secure transactions instead of relying on central authorities like banks. These cryptocurrencies are often used for payments, which means they are volatile and prone to price swings. This volatility makes them great candidates for day trading. However, these cryptocurrencies also have high transaction fees and slow confirmation times, making them less suitable for long term investing.
Volatility is important in the crypto market for two reasons:
- It helps to keep prices from getting too high or too low.
- It allows traders to profit from price swings. The higher the volatility, the greater the chance that a trader will be able to earn money trading cryptocurrencies.
Learn more: Best Crypto for Day Trading
What’s the Earning Potential Statistically?
Some traders will tell you that there is no limit to your earning potential once you gain experience and understand strategies. Statistically, some experienced traders can earn 100% to 200% of their investment every month.
Difference Between an Indicator and Strategy
When discussing the best strategies for trading crypto, you will also notice mentions of indicators. But there are important differences between these.
Indicators provide you with data, and then you create strategies using the data. In more detail, indicators are the data or analysis that you get from looking at charts and figures. You then combine that data and analysis from several indicators to create a strategy that includes when you will buy and when you will sell.
Crypto Day Trading Strategies
With that basic knowledge in mind, it is time to take a look at the best strategies for trading crypto.
RSI Divergence Crypto Trading Strategy
As the name implies, this strategy uses the RSI indicator. We already mentioned that an RSI above 70 is overbought and one below 30 is oversold. The RSI divergence strategy is even more specific and helps prevent false results. The strategy essentially has you look for differences between the RSI indicator and the price. They typically have similar movements, but if the market is changing, they may not. You look for these differences so you know when to trade.
With scalping, you use high trading volumes to your advantage. There are several methods in scalping crypto trading strategies. The most important element is to exit trades just seconds after opening them. The goal is to exit a trade before the market sentiment changes. Many scalpers compound this by trading more frequently than normal with the use of bots. To put the speed of scalping trades into perspective, consider that some scalpers make 10 to 20 trades every single minute.
Read: Scalping Crypto
While scalping can be a good strategy, it is best for those with more crypto to invest. That is because each scalp delivers a small ROI. Because these returns are so consistent, you can invest more and multiply that small ROI by hundreds of thousands, seeing fairly large profits.
Arbitrage is the process of buying a cryptocurrency on one platform or market and then turning around and selling it somewhere else where you can do so for a profit. The difference between what you buy and sell it for is called the “spread.”
Arbitrage is particularly popular for crypto day trading because the market is not unregulated. That lack of regulation means that there are numerous exchanges, and they tend to have reasonable differences in prices.
Read: Crypto Arbitrage Trading
If you want to use arbitrage, you will likely choose to have a balance on several exchanges. That is because it is not feasible to buy crypto, transfer crypto to another exchange, then sell the crypto before the price changes. Before using this strategy, you also want to account for trading fees.
Dollar Cost Averaging (DCA)
With dollar cost averaging, you divide up your initial investment into a cryptocurrency instead of making it all at once. You choose a time and day to make your deposits and then only invest in crypto at those times. This effectively lets you pay the average price for a crypto over time, protecting you from market volatility. This method can also be automated.
Read: Bitcoin DCA
Golden Cross/Death Cross
With this method, you look at two moving averages, the 50 MA and 200 MA. These are moving averages over the past 50 and 200 days, respectively.
- You get a convergence or golden cross if the 50 MA goes above the 200 MA. This is a signal to buy.
- You get a divergence or death cross if the 50 MA goes lower than the 200 MA. This is a signal to sell.
Keep in mind that while day traders may use this method, it is best for longer-term trading.
With range trading, you pay attention to the typical range that a crypto’s price stays within over time. With range trading, you look for oversold and overbought zones. Overbought zones show that buyers fulfilled their needs already and the crypto will sell off, and oversold zones are the opposite.
This trading strategy commonly uses indicators like the RSI and Stochastic Oscillator.
Other Opportunities to Earn Crypto
For those who want to take advantage of crypto day trading but are overwhelmed by the knowledge required or don’t have the time, there are other opportunities. Haru Invest, for example, handles everything for you. You just need to buy your BTC, USDT, or ETC, and deposit it in your Haru Invest account. Then, the expert team at Haru takes care of the trading for you, using a combination of the best strategies for trading crypto.
You can view recent Haru Invest performance figures to get even more confidence in this method and its potential for profits. To provide an idea of the latest performance figures, consider the data from June 1 to June 15. The BTC account had a biweekly return of 1.0216% (24.86% annualized). The USDT account had a biweekly return of 0.6333% (15.41% annualized). The ETH account had a biweekly return of 0.8071% (19.64% annualized). If you look at past performance figures, you will notice they are similar as well.