When it comes to trading cryptocurrencies, some may want to know what day trading strategies are transferable to these currencies. Day trading crypto is a great opportunity for those to potentially gain 5% to 10% in returns.
However, these profits are only possible for those who have the right strategy for it. In this article we lay out our top strategies to apply when it comes to day trading crypto.
Quicklook: Best Crypto Day Trading Strategies
- Scalping: Best for Short Term Profits
- Dollar Cost Averaging: Best for Passive Risk-Averse Investors
- High-Frequency Trading: Best for Fast Trades
- Range Trading: Best for Active Traders
- Technical Analysis: Best for Experienced Investors
Table of Contents:
- 5 Best Crypto Day Trading Strategies
- 3 Best Day Trading Crypto Platforms
- What Is Crypto Day Trading?
- Are There Crypto Day Trading Rules?
- Day Trading Crypto Vs. Stocks
- Is Day Trading Cryptocurrencies Right for You?
- Frequently Asked Questions
5 Best Crypto Day Trading Strategies
Here we recommend our top 5 day trading strategies for cryptocurrencies for investors at all different levels.
Best for Short Term Profits
This technique is used, and recommended, by a vast amount of cryptocurrency traders. In short, this strategy is utilizing and leveraging using high trade volumes to your advantage.
However, the most crucial aspect of scalping is the exiting of these trades just a few seconds after creating them. Since scalping is very high-paced, many use bots to sometimes achieve this goal.
To quantify how fast investors need to be using this technique, scalpers make around 10 to 15 trades per minute. By continuing to repeat this process – investors can take advantage of the smaller price changes within the market.
- Profiting off of small price changes
- Doesn’t require technical knowledge
- Extremely fast paced
- Some platforms cannot work at the accurate speed to achieve scalping
Dollar Cost Averaging
Best for Passive Risk-Averse Investors
This strategy is commonly used by investors since it avoids any short-term price speculations. Essentially, this strategy is dividing up your investment into your chosen cryptocurrency, rather than making a lump sum payment.
Investors make smaller frequent payments on the asset they wish to profit off of. Due to this, it is a great option for more passive investors and those who wish to eliminate short term price speculations.
- Less hands on due to frequent automated payments
- Eliminates price speculations and creates less risk
- Less return on profit than doing a lump sum payment
- Could lose majority of money if frequent payments are used in a bad investment
Best for Passive Investors Who Want Fast Trades
This strategy utilizes bots and algorithmic patterns to execute highly profitable trades. In short, this strategy is very similar to scalping; however it is an automated system that executes these trades.
Since the bots can execute these small trades at an extremely fast pace, it is a great option for those who want to be a more passive trader while utilizing the scalp strategy.
- Hands-off experience while getting the benefits of scalping
- Going at an extremely fast pace so the investor can gain more return on profit
- Don’t have control over trades
- Has been argued as unethical by financial institutions
Best for Active Traders
This strategy works under the assumption that a cryptocurrency’s price fluctuates within a certain range. How investors dictate this range is by utilizing candlestick charts to find the support and resistance levels.
Once these investors find the range, they purchase the crypto after the price hits the support level and sell when this price hits the resistance level.
- Easy outline of when to buy and sell
- Takes advantage of low volatility markets
- Investments can outgrow these ranges
- Pinpointing the exit and entries of these investments can be hard
Best for Experienced Investors
This strategy utilizes a combination of mathematical indicators and chart patterns to speculate the price’s movement. Investors utilize potential indicators such as RSI (Relative Strength Index), MACD (Moving Average Convergence Divergence) and much more. These indicators help set guidelines for investors to avoid taking risky investment choices.
- Show early signals of price movement – making rational and factual trading decisions
- Provides short-term market and visual indication
- Market can be volatile and unpredictable making some of these indicators inaccurate
- Can be too vague for beginner traders
3 Best Day Trading Crypto Platforms
In order to fully utilize these strategies, here are some of our recommendations on what crypto platforms day traders should use to have great investment opportunities.
This highly accredited trading platform gives investors a vast amount of opportunity. Etoro offers access to 15 different cryptocurrencies and a low account minimum for those who are beginning their investment journey.
It is known for its social or copy trading features on this platform. Depending on the investors location, eToro also allows for investors to take part in crypto to crypto trading pairs.
- Small account minimum of $25, $50, or $200 depending on whether you want to use eToro’s Copy Trader
- Social trading
- Only offered in 41 states
- Does not provide a wide range of cryptocurrencies
This cryptocurrency platform has over 50 cryptocurrencies for investors to choose from. Depending on an investor’s experience level, they can choose from Coinbase or Coinbase Pro, which can better cater to their investment goals. This user-friendly interface has highly liquidated options and is a highly secure trading platform for investors.
- High Liquidity and has a wide variety of cryptocurrencies to choose from
- User-friendly experience and highly responsive customer support
- Complex fee structure for those who are not Coinbase Pro
- Does not offer crypto future or margin functions
This platform has been widely popular and used by investors who are just starting out on their investment journey. Robinhood has no fees or account minimums and has a very simple interface to use. This platform offers 7 of the most popular cryptocurrencies and provides real-time data on these coins.
- No account fees or minimums
- Simple to use and beginner-friendly
- Only offers 7 cryptocurrencies
- Does not provide educational resources
What Is Crypto Day Trading?
Crypto day trading is the act of buying and selling cryptocurrencies throughout the market open and close to gain profits. These investors utilize fast paced and short term trades used to instantly gain a return on their investment.
Since the crypto market is highly volatile, this type of trading style could be a highly beneficial option.
Are There Crypto Day Trading Rules?
Since cryptocurrency is not regulated by FINRA or SEC, there are currently no rules regarding these types of trades. Unlike stocks, traders will have to keep in mind day trading limits.
Day Trading Crypto Vs. Stocks
There are pros and cons when it comes to day trading stocks and cryptocurrencies. Stocks are highly regulated since investors are essentially buying a share of a company whereas cryptocurrency is not attached to an institution.
However, the stock market has been around longer than crypto making the market more mature and less volatile. Stocks may be a better option for those who are more risk averse than cryptocurrencies.
Is Day Trading Cryptocurrencies Right for You?
Now knowing the top 5 strategies and trading platforms you can execute them on, it is up for you to decide whether day trading crypto is the right fit for you. Utilizing these strategies can drastically improve your return on investment and allow you to become more knowledgeable in the cryptocurrency realm.
To know if your investment needs and financial goals are best aligned with day trading cryptocurrency, consult with your financial advisor for long term planning. Read more here about how to get a financial advisor.
Frequently Asked Questions
Cryptocurrency taxes are similar to trading other securities and stocks. Day traders will have to pay capital gain taxes on the profits they get from these trades.
That is up to the trader and how much they are comfortable investing with. Some recommend to start investing in smaller amounts (around $100) when starting out prior to making large investments without guidance.
Some indicators used in crypto day trading are Bitcoin Strength Indicator (BSI), Bollinger Bands (BB), and Relative Strength Index (RSI).
Currently the crypto with the most volatility is Tether (USDT), Bitcoin (BTC), and Ethereum (ETH). However, these coins’ volatility can change over time.