How to Day Trade Cryptocurrencies Without Losing All Your Money In the Process

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By Jacob Maslow

With the cryptocurrency reaching new heights in the past months, both long-term investors and day traders have entered the crypto market.


While long-term traders see the potential of holding their coins for extended periods, numerous investors are now seriously considering cryptocurrency day trading as the more lucrative option:


  • Cryptocurrency has high price volatility and trading volume.
  • The Crypto market is open 24/7.
  • Multiple trading opportunities occur in a period of a few hours.
  • Trading of cryptocurrencies allows for massive trades with minimal overhead.


In truth, trading Bitcoin (BTC) is now considered more rewarding than any other traditional asset, including stocks, gold, & oil. Since BTC is highly volatile compared to other assets, multiple trading opportunities come up in a single day–creating potentially lucrative outcomes.


Day Trading Cryptocurrency means entering and exiting market positions in less than 24-hour periods.


Put simply, day traders use strategies and analysis to predict market movement and make profits only within a few hours, sometimes as fast as a few minutes or seconds. This is called intra-day trading.


Well-researched day traders can successfully exploit short-term price movements and volatility to maximize their profit.


Since the crypto market allows multiple intra-day investment opportunities, it can be made into an extremely lucrative career. That being said, it is also a high-risk business.


Financial analysts recommend investing no more than 1% of an investment portfolio on a single trade.


What does it take to be a crypto day trader?


Successful day traders know that thorough research and understanding of the market is critical to pull a sizable profit. Before engaging in the market, investors must have a solid plan established–based on meticulous technical analysis that considers volume, chart patterns, price movement, and other technical indicators.


Day traders will aim to profit on market volatility. High liquidity is critical for these lightning-speed changes in positions. A few seconds delay in a single trade may cost a day trader thousands of dollars.


Potential Earnings


While it is certainly a risky business, this strategy has the potential of being significantly profitable and lucrative.

An essential factor to consider in your earning potential is if you are an independent trader or work with an institution such as a bank or a hedge fund.


Day traders that work in an institution have access to advantageous information and tools. On the other hand, individual traders have limited access to platforms and software while risking their own capital.


It is hard to estimate potential earnings as it will depend highly on your starting capital. An ambitious estimate would be a capital return of 100 to 200 percent per month.


A Few Notes Before Getting Started


Before diving into crypto day trading, be sure that you have a firm understanding of how the market works.


  1. Watch out for relevant news


Crypto trends are sensitive to relevant news such as institutional support, hacking,  and government regulations. Take advantage of the current news to make appropriate decisions on your portfolio.


  1. Practice different methods of analysis


Technical analysis of previous price charts is necessary to recognize patterns and successfully predict future price movements. This will give you a considerable edge when making intraday transactions that require rapid decision-making and execution.


  1. Do your research


There is no shortcut or magical solution for successful investments.


It is also crucial to study trading performance and metrics. To make sound predictions and informed decisions, it is necessary to carefully consider the number of active/inactive wallets and the current trading volume.


Before making your first trade, remember to consider these cryptocurrency characteristics:


High Volatility

Day trading can be a very lucrative business due to high price volatility. Since cryptocurrencies are a new asset class, significant price movement can occur within a short period.


Before making a move, be sure to have made a thorough reading on price volatility.


High Liquidity

Before choosing to trade Bitcoin or an altcoin, ensure that you have done a thorough analysis of its liquidity.


High liquidity will allow investors to make instant changes to their market position. Missing the right timing due to low liquidity can lead to substantial slippage and massive losses.


Crypto Day Trading Strategies


It is critical to develop the instinct for recognizing rapid profit opportunities. Unlike the traditional investor looking for long-term growth prospects, intra-day traders should learn to leverage solid strategies for rapid, short-term gains.


Here are time-tested strategies to ensure capital gains:

Swing trading calls for a combination of day trading and position trading, focusing on technical analysis. Investors should be on the lookout for resistance or support levels, then try to recognize bearish and bullish trends on the brink of reversal before striking the market.


The right timing is key for the successful execution of this strategy. While the Swing strategy may promise massive returns, it is also highly risky. It may be better left to investors with more market experience.


Scalping involves taking advantage of small price movements within a short time frame. These may occur as gaps due to liquidity, the bid-ask spread, or any other price discrepancies.


Investors who use this strategy often trade on margin or futures contracts to increase their leverage. Proper assessment of margin requirements and position sizing is key to using this strategy effectively.


Order book analysis and volume heatmaps are common tools for analysis.


This is an extremely fast-trade and high-risk strategy and may be best for experienced investors.


Range trading is a straightforward strategy that may easily be applied by beginners. It involves a simple candlestick chart analysis and the consideration of support & resistance levels. Support and resistance are key concepts to exercise proper risk management.


Traders will most likely buy the support level and sell under the resistance level. Range traders anticipate when the market breaks out of range; setting- up a stop-loss limit is necessary to prevent any significant losses if prices suddenly drop.


Crypto day trading requires rapid decision-making and execution. The process may be stressful and demanding due to the high risk involved.  A deep understanding of the market and thorough risk-assessment is necessary to become a successful investor.


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