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Best Crypto Day Trading Strategies

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According to a Rutgers study, day trading crypto reminds gamblers of haphazard gambling more than legitimate investing. I would say consider the source, but eToro warns traders of a similar thing in its General Risk Disclosure when referring to its contract for differences (CFDs), which include crypto:

Attribution: eToro

You’ll find a similar warning on any broker’s site that is under traditional regulation. Yet traders continue to throw money at crypto exchanges and brokerages. The year over year crypto market cap nearly doubled from 2018 to 2019. The warning from eToro gives us a clue that a not-insignificant portion of these users is trying to day trade.

In the volatile world of crypto, you will need nerves of steel, a winning game plan and an intuitive trading platform if you want to win. You’ll find the nerves of steel and intuitive trading platform through research, research and more research. Let’s take a look at the X-factor in this gumbo — the trading strategies you’ll use. 

Range Trading

In many cases, a cryptocurrency will trade for a long time inside a certain range. Bitcoin, for instance, traded between $8,601.40 and $10,210 for a 30-day period. This ±9.4% range seems volatile until you realize that Bitcoin can realize a ±42% change in 24 hours. 

Cryptomarket caps are small enough that they can be manipulated by a single big mover. In some cases, those big movers will systematically manipulate the price of a coin up and down to profit from a range. If you notice these patterns, you can take advantage of them as well. 

If you are range trading, you want to pay attention to overbought and oversold zones. Overbought means that buyers have saturated their need, and the stock will probably sell off; oversold means the opposite. Chart indicators, included in any reputable stock chart program, can help you find these zones. Common indicators used for this purpose include the Stochastic Oscillator and relative strength index (RSI).

Attribution: Wikimedia

Scalping

Scalpers take advantage of increased trading volume to profit. Scalpers may exit a trade seconds after entering, and many use automated bots to increase the frequency of their trading cycles. Ideally, scalpers want to exit a trade before any news item or short-term fluctuation has a chance to change the market’s sentiment on a coin.

Attribution: Quora

It is best to have a large bankroll to take advantage of this extremely short-term day trading crypto strategy. Although the ROI of each trade is very small, staking a large amount means the scalp comes back with a substantial amount of money (0.5% of $100,000 is $500, enough for a luxury car payment). Trading frequently — sometimes making 10-20 trades per minute — also means those small gains add up. 

Playing Bitcoin Volatility

The Chicago Mercantile Exchange (CME) offers options on Bitcoin futures, opening up a wealth of volatility strategies for traders. Crypto has 5X the volatility of traditional asset classes. Volatility trades are ideally directionless, meaning there is a possibility of making money whether Bitcoin goes up or down.

The long straddle is one directionless volatility strategy using Bitcoin options. To initiate, you buy a call and put option at the same time for the same strike price and expiration date. The Bitcoin straddle is profitable when Bitcoin falls or rises away from the strike price by more than your premium. To exit the trade, you sell the call and put at the same time. 

In simple language, a big move up or down is in your favor. 

Attribution: Wikimedia

Arbitrage

Arbitrage involves buying cryptocurrency in 1 market and selling it in another market at a higher price. The difference in the buy and sell price of an asset is known as the “spread.” As a generally unregulated market, crypto allows anyone to create an exchange. This can lead to major differences in the spread because of the differences in asset liquidity and trading volume. 

In the crypto market, traders usually hold a portfolio on an exchange they are trading. To start an arbitrage opportunity, open accounts on exchanges you believe will show significantly different prices for the same asset.

Attribution: Holdbot

At one point, Bitcoin traded at a 40% higher price in South Korea than in the U.S. This was known as the “kimchi premium,” and it showed up more than once. Traders profited by simply purchasing Bitcoin on U.S. exchanges and immediately selling it on South Korean exchanges. Although the discrepancy will not usually be this large, the low barrier to entry for new exchanges brings new arbitrage opportunities more often than in traditional asset markets.

Traders should also take trading fees into account when attempting arbitrage. The fees to make a trade on an exchange may wipe out the gains from the trading spread.

Best Online Cryptocurrency Brokers

The trading platform you choose will likely make a big difference in your day trading results. The strategy that you choose should make a difference in the platform you choose because different platforms will have different strengths. For instance, scalpers need a fast execution time while volatility traders may profit more from an instant news feed. 

Take a look at some of the best online cryptocurrency brokers and what they have to offer.

Best For
Buying & selling Bitcoin
Overall Rating
get started securely through Robinhood’s website
Best For
Crypto Trading
Overall Rating
Get started securely through eToro’s website
Best For
Crypto Trading
N/A
1 Minute Review

eToro, headquartered in Cyprus, England and Israel, has provided forex products and other CFD derivatives to retail clients since 2007. A major eToro plus is its social trading operations, including OpenBook, which allows new clients to copy trade the platform’s best performers. Its social trading features are top notch, but eToro loses points for its lack of tradable currency pairs and underwhelming research and customer service features

Best For
  • U.S.-based cryptocurrency traders
  • Social and copy traders
  • Simple user interface
  • Community engagement and following other traders
Pros
  • Expansive network of social trading features
  • Large client base for new traders to imitate
Cons
  • U.S. traders can only buy cryptocurrency
  • Only 15 cryptocurrency pairs available
Best For
New Investors
Overall Rating
try for free securely through Gemini Crypto’s website
Best For
New Investors
N/A
1 Minute Review

Gemini is a cryptocurrency exchange and custodian that offers investors access to 26 coins and tokens. Founded in the US, Gemini is expanding globally, in particular into Europe and Asia. Offerings include both major cryptocurrency projects like Bitcoin and Ethereum, and smaller altcoins like Orchid and 0x.

Gemini is 1 of the only brokers with multiple platform options based on skill level. New investors will love the streamlined interface of Gemini’s mobile and web apps, while advanced investors might appreciate all the tools that come with ActiveTrader. 

In addition to a host of platform choices, Gemini users also have access to insured hot wallets to store tokens without worrying about digital asset theft. Learn more about what Gemini can do for you in our review.

Best For
  • New investors looking for a simple mobile and web app
  • Experienced investors who need a more advanced platform with more tools
  • Users looking for a 1-stop-shop to buy, sell and store all of their coins
Pros
  • Easy and quick signups — can get started in as little as a few minutes
  • Multitude of platforms to accommodate traders of all skill levels
  • Hot wallets include insurance to protect your from theft and hacking attempts
Cons
  • Charges both a commission and a convenience fee for users buying and selling through the desktop or mobile app
Best For
Crypto Investing
Overall Rating
Get started securely through Coinbase’s website
Best For
Crypto Investing
N/A
1 Minute Review

Coinbase is one of the Internet’s largest cryptocurrency trading platforms. From Bitcoin to Litecoin or Basic Attention Token to Chainlink, Coinbase makes it exceptionally simple to buy and sell major cryptocurrency pairs. 

You can even earn cryptocurrency rewards through Coinbase’s unique Coinbase Earn feature. More advanced traders will love the Coinbase Pro platform, which offers more order types and enhanced functionality.

Though Coinbase doesn’t offer the most affordable pricing or the lowest fees, its simple platform is easy enough for complete beginners to master in as little as a single trade.

Best For
  • New cryptocurrency traders
  • Cryptocurrency traders interested in major pairs
  • Cryptocurrency traders interested in a simple platform
Pros
  • Simple platform is easy to operate
  • Comprehensive mobile app mirrors desktop functionality
  • Coinbase Earn feature rewards you with crypto for learning about available coins
Cons
  • Higher fees than competitors

Trading Crypto Doesn’t Have to be Cryptic

Regardless of the strategy you choose, you must be willing to accept losses in a volatile market like cryptocurrency. Have your exit plan ready before you enter any trade. Don’t follow the hot tips crowd; invest only in coins that you actually believe in — even for just the day.

Also, keep in mind that the market provides endless opportunity. So don’t bite your head off if you’re playing cautious and miss one, and don’t chase the gazelles that have already run off of the farm. Trading is more than anything an emotional journey — you must keep a clear head and stick to your chosen strategy through thick and thin.

Frequently Asked Questions

Which crypto coins are the best for day trading?

1
Which crypto coins are the best for day trading?
asked
1

A. Day traders look for volatility. Volatility is most prevalent in micro coins, or coins with small market caps compared to other cryptos. Right now, any coin with a market cap lower than $1 billion is considered small cap. Some small-cap coins with good trading volume include SiaCoin (SIA), Basic Attention Token (BAT) and Fusion (FSN).

answered

How much can you make day trading crypto?

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How much can you make day trading crypto?
asked
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A: High volatility microcoins can gain price multiples in 1 day, providing exponential returns to lucky investors. High volatility also means those coins can move in the wrong direction just as quickly. As the potential reward goes up, so does risk.

answered

Are there any restrictions for day trading cryptocurrencies?

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Are there any restrictions for day trading cryptocurrencies?
asked
1

There are no restrictions on cryptocurrency day trading.

answered

Can I day trade cryptocurrencies with $200?

1
Can I day trade cryptocurrencies with $200?
asked
1

You can open an account at a cryptocurrency exchange using $200 and start day trading. 

 

answered

Try Gemini

Gemini builds crypto products to help you buy, sell, and store your bitcoin and cryptocurrency. You can buy bitcoin and crypto instantly and access all the tools you need to understand the crypto market and start investing, all through one clear, attractive interface. Gemini Crypto Platform offers excellent account management options. You can manage your account at a glance, view your account balance 24-hour changes and percent changes. Get started with Gemini now.

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