We know that cryptocurrency's high volatility has managed to attract an influx of new traders. But, is it really possible to day trade with crypto?

It is very possible for you to be a day trader with crypto because the volatile nature of cryptocurrencies makes it perfect for day trading. Why is volatility so important here? As we know, crypto's up and down price movements will create openings for making substantial profits. However, you need to have a well-structured trading strategy to avoid any trading mistakes.

day trading with crypto

You're also required to have an in-depth understanding of the way the crypto market works due to the unique characteristics that distinguish it from other markets.

The beautiful thing about crypto day trading is that it does not have to be done every day but rather timing it appropriately so that profit can be made. Consequently, it is recommended that you do not day-trade crypto on weekends because the trading volume is low; to make a good profit on crypto, you need to trade when the volume is at the highest, that is during weekdays.

Another thing to note and remember is the level of liquidity of the cryptocurrency you wish to trade in because less than enough liquidity could cause significant slippage leading to larger losses.

Let's now examine the things you need to do to be able to get started on day trading cryptocurrencies as this will open up opportunities to earn profit.

 

Select a Trading Platform

This is the first step in day trading cryptocurrencies. It is important to choose the right platform because it plays a big role in the possibility of maximizing profit. There are important factors to consider when ing a trading platform:

  • Liquidity: this refers to the ease and speed with which an asset can be converted into another on a trading platform without much changes in price. Preferably, your choice of crypto trading platforms should be very liquid with a little difference between the ask and bid price.
  • The Number of active years: the longer a trading platform has been operating, the better the stability and credibility.
  • Available cryptocurrencies: it is important to know the cryptocurrencies that a trading platform supports because sometimes for day trading, a smaller trading platform that has more cryptos and trading pairs available might be better than a bigger trading platform with lesser options of cryptos.
  • Transaction fees: these are the fees charged by the trading platforms when users on the platform execute a trade. It varies from one platform to another so you must ascertain the fees that you will be comfortable with.
  • Methods of deposit: preferably, a good trading platform should have multiple means by which users can finance their accounts to carry out trades.
  • User reviews: this goes a long way in enabling you to stay away from fake user reviews and choose a suitable trading platform by checking out different crypto communities to give you an idea of which platform to register with.

 

Select Your Investments

Once you have chosen your trading platform, then you decide on the crypto coins you want to trade. Considering the market volatility of crypto is what creates trading opportunities, then whatever cryptocurrency trading pair you choose should have a high level of volatility for a chance to make a profit. Nevertheless, it doesn't hurt to look for certain coins that might be better for day traders.

 

Choose a Trading Strategy

Now that you have ed a trading platform and cryptocurrencies, the next thing is to decide on a trading strategy. To be a successful day trader, you need to devise and implement a solid strategy that will give you a clear indication of when to enter and exit the market. Below are examples of trading strategies for cryptocurrency day trading:

 

Arbitrage

This involves buying a cryptocurrency on one trading platform and selling it instantly on a different platform at a higher price. Cryptocurrency pairs can make arbitrage opportunities available because when the price of a crypto pair varies from one platform to another, traders can take advantage of the value difference to make a significant profit.

 

Long Straddle

This is also known as the buy straddle or option straddle and it involves purchasing a call and put order. This is quite a popular trading strategy due to the highly volatile nature of the crypto market. With this strategy, you earn irrespective of whether the price falls or rises. This is because you are betting on a change occurring in the price of a crypto asset. A loss will only be incurred if there is no price movement.

 

Range trading

This strategy centers on non-trending markets by identifying stable high and low prices which are indicated on charts as resistance and support levels. Day traders implement this strategy by identifying the best period to purchase a crypto asset when it is oversold (at a support) and then sell when it is overbought (at a resistance) to make profits. Range trading is favorable to crypto day traders because it has well-defined entry and exit points.

 

Scalping

It is a well-recognized trading strategy that is perceived to have the quickest turnaround because this strategy is about leveraging sizable amounts of liquidity so that the trader can take advantage of small price movements. This can be done by either purchasing different crypto assets over a period of a few hours and by the end of the day, cash out on small percentage gains, or setting up bot trading via frequent and high-intensity trades based on specific technical indicators. Scalping has certain features which make it an attractive option to day traders.

I hope this has answered the question about becoming a day trader with crypto. As long as you carry out adequate research and arm yourself with the right knowledge of stop loss, risk management, or price chart, you can safely go into crypto day trading. Don't worry, all of them will enable you to eventually come up with a clear trading strategy that will pave the way to take profits from the trades you execute.