7 Proven Crypto Day Trading Strategies [2024 Guide]

Did you know crypto day trading is one of the easiest and most lucrative ways to make money from the cryptocurrency market? However, as crypto day trading requires an in-depth knowledge of blockchain technology and crypto to avoid unnecessary losses, you’ll need an intuitive trading plan and a winning game if you want to succeed in the challenging world of crypto.

This article can help you resolve all doubts and ambiguities related to crypto day trading, and learn about the most effective crypto day trading strategies.

What Is Crypto Day Trading?

Crypto day trading is a short-term trading strategy involving purchase and sale within the same reading day, but it’s a high-risk venture made possible by the distinct liquidity and volatility in the crypto markets. Nowadays, many day traders are learning how to profit off small moves in the market and making a profit by taking advantage of the coin price volatility.

To do this, you need to have a proper day trading cryptocurrency strategy (or at least a general crypto trading strategy) and an understanding of technical analysis, because you’ll need to read crypto chart patterns, volumes, price action, and other indicators to recognize purchasing and selling opportunities and make profitable investment decisions. Investors also need to keep up with all the updates and news related to the developers that could affect the prices.

 How To Start Day Trading?

Can you day trade crypto even if you’re a beginner? If you have a high degree of objectivity and self-discipline, you can! Here’s some advice on what you need to do if you’re a beginner in the crypto world:

1. Be Aware of All the Ins and Outs of the Market

To become successful, traders must be aware of all the ins and outs of the cryptocurrency market. First, buy Bitcoin or some other cryptocurrency that’s likely to rise in price over the next few hours, and then sell it for profit. We know this sounds simple, but keep in mind that cryptocurrency trading is anything but—it’s risky and demanding, and it requires deep knowledge, discipline, and reliable strategies for crypto day trading to succeed.

2. Open an Account in a Suitable Trading Exchange 

The next step is to open an account in a trading exchange such as Bitstamp or Binance that meets your day trading needs. The crypto markets are fragmented, and trading operates under many different rules worldwide, meaning you need to choose a crypto trading platform that your country supports.

Also, to ensure a smooth trading exchange, you should consider:

• User Experience
• Commissions and Fees
• Security and Authenticity
• Number of Supported Cryptos
• Funding Methods Supported

Since Bitcoin is the best cryptocurrency to invest in right now, we advise you to choose Bitcoin day trading.

3. Deposit an Initial Investment Capital

Investing in cryptocurrency takes just five minutes from start to finish. However, you should ensure you’ve done plenty of research before deciding on which cryptocurrency to invest in. Once you’ve chosen a dependable crypto exchange, it’s time to deposit a starting capital and start your journey. In theory, it takes only a few dollars to invest, since most crypto exchanges have a minimum trade of $5 or $10, but you’ll still need an effective day trading strategy to succeed.

Crypto Day Trading Strategies

What’s the difference between trading and gambling? The answer is—an effective strategy. Day traders devise a winning strategy fund on research with well-laid plans. Depending on your competencies and the nature of the market, you can apply different day trading crypto strategies.

1. Scalping

Day traders choose scalping crypto because of its:

• Potential profitability;
• Ease of automation for bots;
• Low risk.

Day traders leverage scalping strategies not to get big wins, but to build up dozens or hundreds of little wins. Since scalpers use large amounts of liquidity to take advantage of small price changes over a short period,  scalping is a trading strategy with the fastest turnaround.

The time horizon can be a few minutes or even seconds, but sometimes it can take hours. Traders look to capitalize on increased trading volume and make profits by keeping up to date with the current news and future events likely to trigger price movements. Scalping is one of the best crypto day trading strategies because traders can set up a bot for frequent and high-intensity trades according to technical indicators or signals.

2. Range Trading

Range trading capitalizes on non-trending markets by identifying stable high and low prices, represented on candlestick charts as resistance and support levels. “Resistance” is a price above and “Support” is a price below the current price. When the price ranges between the resistance and support level, traders can purchase at the support level and then sell at the resistance level. Day traders using this strategy for day trading cryptocurrency buy a crypto asset when it’s oversold, and sell when it’s overbought to make profits.

Volume is an important part of range trading since analyzing trends in volume helps validate patterns to decide if the timing is right to use a range trading strategy. It’s believed volume precedes price, so when you want to confirm any trend, keep in mind that volume should increase in the direction of the trend.

3. High-Frequency Trading (HFT)

HFT is a type of algorithmic day trading cryptocurrency strategy used by quantitative traders who develop algorithms and use trading bots to quickly enter and exit a crypto asset over a short amount of time. High-frequency traders use computers programmed to host sophisticated algorithms to take advantage of price changes that occur in seconds or even milliseconds. The systems constantly monitor and analyze cryptocurrencies across multiple exchanges, and identify trends and other trading triggers.

This strategy is well-suited for advanced traders since developing such bots requires a strong knowledge of computer science and mathematics and an understanding of complex market concepts. However, you can combine HFT with different crypto day trading strategies for beginners by instituting specific trading logic.

4. Technical Analysis

Technical analysis is a strategy used to predict the possible future price movement of a security currency based on market data. Technical analysts can apply their statistical trading strategy to any financial market with historical trading data, evaluating future revenue or losses in crypto-based on past performance. Technical analysis provides day traders with the science to find possibilities to trade and make profits, enabling them to detect short-term trading patterns and trends essential for day trading.

To maximize your chances of earning a profit, you should use some technical analysis indicators. At the moment, the best indicator for day trading crypto is the Moving Average Convergence Divergence (MACD).

5. News and Sentiment Analysis

This strategy is similar to technical analysis because it involves predicting, but with one significant difference—it’s based on human reactions and actions rather than price trends. With this strategy, day traders try to predict whether demand will rise or fall for some cryptocurrencies by analyzing various information sources to understand the social consensus on the currency and predict people’s actions.

This data’s sources are mainstream and industry news outlets and social media posts. Some sites try to track the sentiment on the most used cryptocurrencies by reviewing Twitter chatter, as more positive tweets about crypto likely indicate the market is heading upwards, while more negative tweets indicate the market will experience a downward trajectory.

6. Arbitrage

Arbitrage is one of the best strategies for day trading crypto that involves buying a coin on one exchange and making a profit by selling it on another at a higher price. When the price of a crypto pair, including  Bitcoin and a lesser-known altcoin, varies from one exchange to another, day traders can profit by taking advantage of the price disparity across the two markets. The difference between what they purchase and what they sell it for is called the “spread.”    

To use this strategy, you must have accounts on exchanges that show a large difference between prices. Arbitrage is not a simple financial mechanism, but if automated by crypto tax software, it will keep the digital asset prices stable between different exchanges. Arbitrage is particularly popular for day trading crypto because the market is not unregulated, meaning countless exchanges tend to have decent differences in prices.

7. IFC Markets

IFC Markets is a leading provider of Forex and crypto CFD that allows trading in several styles with:

• Low fixed spreads;
• Over 6000 financial instruments;
• Instant order execution;
• No hidden commissions.

Day traders have the freedom to build their financial instruments and their best strategies for day trading crypto, taking advantage of the low minimum volume requirements and 1:8 leverage. Crypto CFDs are derivatives that let day traders speculate crypto without owning the underlying coins, so they can go big if they think a cryptocurrency’s value will rise, or small if they think it will fall. The cryptos are traded as pairs against regular currencies.

Another good thing about crypto CFD trading is that you don’t need to have a Bitcoin wallet or an account on a Bitcoin exchange to trade.

Key Takeaways

Things to Avoid while Day Trading

Can I day trade crypto without making huge mistakes? This is a common question, as day trading seems appealing since you can make a big profit in a short period. However, you need to be careful and have a well-made strategy to succeed as a day taker, and not make rush moves on the crypto market that will cost you big.

• Trading FOMO

Jumping on the bandwagon to make profits off the trading strategy others are profiting from could make you enter a position before analyzing it properly to decide if it’s a good investment. When led by FOMO, trading probably won’t result in a positive return on investment, as these are most often unwise trades you could have avoided with discipline and a good trading strategy.

• Overtrading

Trading too much and changing ideas quickly can end in unnecessary losses. Well, how to day trade crypto without the unnecessary losses? To avoid overtrading, you should always have a risk management strategy and a good trading plan in place. Avoid overtrading by distinguishing between emotional and rational trading decisions and backing up them with straightforward analysis.

• Trading More Than You Can Afford to Lose

To avoid huge losses, use only what you have! To profit, you need to risk, but decide how much you can risk—never trade using more capital than you can afford to lose. No matter the period, day traders shouldn’t risk more than 1% of capital within a single trade. By using the daily risk maximum of 1%, you’ll ensure you won’t risk more than you can afford to lose. Apart from devising day trading strategies for crypto, you should pay extra attention to a daily risk maximum.

• Not Doing Enough Research on Your Own

A common mistake is entering the trade without thorough research. Some day traders buy signals from self-proclaimed expert crypto traders on social media platforms like Facebook, Telegram channels, Twitter, and even WhatsApp groups. As a crypto trader, you should do your research and analyze different strategies for crypto day trading, making sure you have basic trading skills and know-how to conduct a fundamental and technical analysis to avoid being misled by the so-called experts’ signals.

Conclusion

Crypto day trading can be a lucrative, but also a high-risk strategy involving constant purchase and sale of cryptocurrencies in pursuit of short-term profit. If you’re interested in day trading, you must understand the crypto market, have detailed trading strategies, know where you plan on trading, and stick to your entry and exit points.

Undoubtedly, it’s one of the most high-risk ways to interact with cryptos, so you need to understand the details of how to day trade cryptocurrency to see long-term profits.