How to Day Trade Cryptocurrency? Why Crypto Coins are Best for Day Trading?

A Beginners Guide to Day Trading Cryptocurrency

 

 

With the world going digital, cryptocurrencies are becoming more popular these days as a way to buy/sell goods and/or services. Today, the global economy is inevitably moving towards a digital eco-system and so are the payment systems. And the newest addition to the digital payment sector is cryptocurrencywhich is becoming extremely popular as a medium of exchange like normal currencies.

 

If youre planning to day trade cryptocurrency, this guide might help as weve tried to include every possible aspect you need to know to get started. Keep reading…  

 

1. Why Cryptos are Great for Day Trading?

Day trading is one of the most commonly used trading strategies as the most active markets include commodities, stocks, forex, and cryptocurrency. But are cryptos great for day trading? Should you start trading them right away? Well! There is no yesor nokind of answer to these questions but we can explain why considering cryptos can be a profitable option for day trading.

 

First, understand what is day trading?

 

Also known as intraday trading, day trading involves entering and exiting positions on the same trading day. The motive is to make a profit from the price changes in a financial instrument. The successful traders will use some tools and techniques to successfully trade cryptos. Some of the main tools used include technical analysis (TA), price action, chart patterns, technical indicators, trading strategy, risk management, etc.

 

Here are a few reasons that you may consider cryptos for day trading

 

Day trading of cryptocurrencies is a popular strategy because of the markets high volatility. Many people make a good chunk of profit through day trading.

Investing in cryptos seemed compelling as Blockchain technology is expected to revolutionize the world.

Soon, digital currencies could be used for world trade and the market is open to mass participation.

High volatility and trading volume suit trading very well and the crypto market is a relatively new asset class that leads to significant price swings.

 

Though cryptocurrency day trading seems to be a lucrative option, you need to have a firm understanding of how it works.  

 

2. Which Crypto Coins are Best for Day Trading?

 

 

Day trading isnt for everyone as there is a lot to consider before you get started. One of the most important things is determining which crypto coins are best for day trading. If youre specifically looking for a virtual trading platform aimed at making profits, then the following list might help

Bitcoin, A Clear Winner

 

Lets start with the best and Bitcoin tops the list as this is both liquid and volatile. Talking about the statistics, Bitcoin traded at $14,035.80 on November 3, 2020, and a month later it stood at $19,204.60 on December 3, 2020. It shows a swing of about 36% and it is volatile enough for day trading.

 

Tether, the Runner Up

 

Tether falls as a runner up as many traders consider USDT to be the best cryptocurrency for day trading. It is a stable coin without rapid fluctuations and there is no fear that its price will go down in the next moment. The currency has the highest 24-hour trading volume and thats why considered a good option.

 

Binance Coin, Third in the Row

 

A couple of years back, Binance released their cryptocurrency - Binance Coin. A stable exchange rate and a high trading volume make this cryptocurrency a good option for day trading. Many day traders and analysts consider this crypto coin one of the best options to start with and so it would be difficult to dump its rates.   

 

Ethereum, Comes Fourth in Our List

 

ETH is as popular as Bitcoin in the crypto world because it is not just a cryptocurrency, but a blockchain platform. It allows the development of decentralized applications along with the creation of new tokens. Also, the currency is listed on most exchanges which means you can trade it anytime, anywhere.  

 

Tron, Last But Not Least

 

TRX was created as a platform aimed to clear all borders on the web and this crypto coin provides a reward for content exchange. This coin may be the best choice for you as it has got low prices which means you dont need a big budget to begin trading. Also, it is stable enough that you dont need to worry about managing risks.     

                       

3. Cryptocurrency Day Trading Rules

Cryptocurrency, the privately-issued form of electronic money, is becoming a popular option for day trading. Whether you are into trading or investment, it comes with several risks. However, by following certain rules, you can be in a better day trading position.

 

Weve listed some rules of day tradings, check them out

 

Rule 1: Invest what you can afford to lose - Yes, it may seem rude but it is the truth that you should only invest what you can afford to lose. Remember, as soon as your money is converted into cryptocurrency, there is no guarantee of returns. Evaluate your current financial situation and trade accordingly.   

 

Rule 2: Diversify Your Portfolio - Never put all your eggs in one basket as it increases the risk of losing your money. Diversify to safely capture the benefits of growth from multiple coins and expanding your coins also help reduce the risk.         

 

Rule 3: Dont Raise Your Expectations: Do not take profit for granted and raise your expectations too much as theres nothing like no risk, only profit. By being greedy for more, you may risk losing the profit you already earned.    

    

Rule 4: Do Research before Your Spend: Dont indulge in day trading of cryptocurrency blindly because it is research that is the key to success. Find some reliable brokers in the crypto markets and seek expert advice.

 

Rule 5: Think Big: It is always good to categorize your investment into different categories of coins and have a great vision. Looking at the long picture will help you understand more about the crypto market and make good profits.

 

Rule 6: Learn from Your Mistakes: Theres always some risk involved and there may be a loss but never accept a total loss. Evaluate what you have done wrong and try to use that experience for your next move.

 

Rule 7: Set Stop-Losses: If you are doing active trading, it is always better to set stop losses as it helps you decide on a point of acceptable loss. You can use the figures to evaluate things better and adjust for future trades.

 

4. The Simplest Trading Day Trading Strategy

 

 

As its name indicates, day trading refers to a strategy in which a trader doesnt hold any position overnight as it is opened and closed in a particular trading vehicle during the day. Once practiced by professionals, day trading of cryptocurrencies has become increasingly popular with retail traders also. The main reason behind its popularity seems to be the advent of online trading platforms and brokers.

 

If youre looking to enter the day trade cryptocurrency world, heres the simplest day trading strategy that may help you make a profit from market fluctuations

 

Follow three simple steps:

 

1. The Setup: In the ever-changing conditions, you need a good trade setup by filtering out all the non-relevant information. Every traders setup will be different depending on your portfolio and it will include a timeframe such as a 2-hour chart. For instance, if a triangle pattern is your trade setup when it appears, you get to know a trade could be imminent.

 

2. The Trade Trigger: A good trade setup lets you know what your entry point will be and a trade trigger is an event that occurs following a trade setup that lets you know its time to enter. It is a kind of indicator that lets you know the exact moment you are ready to enter a trade. It simply means defining an entry point once the trade is setup.

 

3. The Risk/Reward Assessment: A trade setup has occurred and you know when to enter the trade, your next step should be to determine if you take the trade or not. Here, you assess risk or reward via research and testing. If the potential reward outweighs the risk, you may execute the trade and vice versa.  

 

Though there are many strategies that you can follow for day trading, it is good to start simple if youre a beginner.

 

5. Here is the list of factors that can be included while determining day trading crypto strategies:

Day trading can be a highly profitable strategy given that you consider a few things before starting such as

 

1. How You Want to day Trade Cryptocurrencies: There are two ways you can day trade cryptocurrencies and each method has its advantages and disadvantages.

 

4. Stick to the Popular Crypto Coins: Check for crypto coins that are ranked as the best coins to day trade as they can be your money-makers.

 

5. Technical Analysis or Charting: many exchanges have advanced charting tools to help you understand the history of an assets price and its future price movement.

 

6. Volume & Volatility: Volume helps you determine the popularity of the crypto while volatility helps you understand the price fluctuations in the crypto market.   

 

7. Use Correlations: Use coins that are highly curated to improve your outcomes as it helps you better track the price movement.

 

8. Start Small: As a beginner, start with just a few stocks as tracking and finding opportunities will be easier this way.

 

Closing Thoughts

 

Day trading crypto currencies require time, knowledge, and discipline. Though it is difficult to master, some good techniques and guidelines can help you create a profitable strategy. Also, it demands enough practice and consistent performance to beat the odds. You need to have a well-researched, well-defined trade setup to get started.

 

Furthermore, being a relatively new market, cryptocurrency day trading brings with it great uncertainty but traders with the right understanding and tools can make profits.