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What is Crypto Day Trading?
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7 Best Crypto Strategies for Day Trading in 2024

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With 25+ years of financial marketing experience, Niki has an extensive knowledge of the forex, fintech, stocks and cryptocurrency sectors. Niki is a founder and director at the Contentworks agency.
By Niki Nikolaou
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With 25+ years of financial marketing experience, Niki has an extensive knowledge of the forex, fintech, stocks and cryptocurrency sectors. Niki is a founder and director at the Contentworks agency.
on March 21, 2023 | 6 min
Updated on Jan 16, 2024
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Charles Archer
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Charles Archer is an experienced financial writer specialising in monetary law. With a background in stock market and private equity analysis, he’s worked for many years as a freelance investment author, and has had articles published in a wide range of regional and national titles, both online and in print. He holds a Master’s degree in Law from the University of Law, the UK’s largest legal training institution. Charles believes the key to successful investing lies in quality research, and aims to offer a unique viewpoint that investors cannot find elsewhere.
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Cryptocurrency seemed to be a fleeting buzzword some years back, but it has evolved to become an investment option that many new and seasoned investors consider making a part of their portfolios. Millennials and Gen Zs have recognized the possibilities offered by cryptos more than others, with 94% of cryptocurrency buyers belonging to these groups.

Crypto day trading is among the most lucrative ways of profiting from the cryptocurrency market. However, this market is volatile and risky. So, it is best to know a little about the underlying blockchain technology and the fundamentals of the crypto you wish to trade and to formulate a solid trading plan. If you are among those who want to zone into opportunities presented by cryptocurrency trading, this guide is the best place to start. Read on to learn where and how to start trading cryptocurrencies and learn the most used cryptocurrency day trading strategies by experienced traders.

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What is Crypto Day Trading?

The goal of a crypto day trader is to ensure the value of their holdings increases by the end of the day. It’s rare for any traditional financial instrument (stocks, bonds, and commodities) to deliver gains in double-digit percentages. However, in the case of cryptocurrencies, a 10% or even a 25% increase in value in a single trading day is much more frequent. And that is what makes day trading crypto worth it! For a crypto day trader, the underlying idea is to make many calculated moves and earn small profits on several trades throughout the day’s trading session. Crypto trading is new and exciting but is as risky as it is rewarding. So, you need a robust cryptocurrency day trading strategy to make the most of this unique class of assets.

How to Day Trade Cryptocurrencies?

To trade cryptos, you begin by opening a trading account and funding it with fiat currency. It’s important to consider the regulations of your country and evaluate tax liabilities, compliance requirements, and your risk appetite.

Choose a Platform to Trade

New crypto traders may be overwhelmed by the options available online. You can narrow down your list by considering how long a platform has been active, fees charged for facilitating crypto trading, the cryptocurrencies supported by the platform, the fiat currencies in which you can open your live account, available deposit methods, and ease of liquidating your assets.

Choose Your Investments

Many new traders wonder: Is crypto trading worth it? The answer often depends on whether you have chosen the right cryptos to trade. The choice requires a fundamental analysis of the coin and its prospects, as well as the volatility, volumes traded, and liquidity for day trading.

Choose a Trading Strategy

Your trading strategy should be backed by research and tested on a demo account before you enter the live markets. You can opt for copy trading if your chosen platform allows it. This way, you can learn trading and build your strategy by following the strategies used by more experienced traders.

Crypto Day Trading Strategies

Is crypto day trading profitable? Yes, it can be, provided you trade with caution. Understanding your risk appetite and trading style and adopting risk management techniques is important. Here are some of the best crypto day trading strategies:

1. Scalping

Scalping is based on the fastest turnarounds. The duration of a trade may be as small as a few seconds to a few minutes. Traders open many small-sized positions throughout a trading day, to accumulate tiny profits in as many of the trades as possible. Therefore, scalpers need a sizeable amount of capital to make considerable profits. To enhance their effectiveness, scalpers need to choose the best scalping broker, one that offers rapid execution and low spreads. Scalping is an intense activity that requires constant observation of the market to correctly time entry and exit. Often traders automate scalping by using technical analysis tools and bots for high-frequency entry and exit.

2. Range Trading

Range traders capitalize on markets that are moving sideways, by identifying support and resistance levels. A breach of any of these levels indicates an impending low or high swing. Remember that swings in crypto trading can be dramatic. When the price goes beyond the support level, it represents a sell signal, while when it breaks out of the resistance, it is time to buy. Range trading is among the most popular cryptocurrency day trading strategies as it is quite flexible and, if applied correctly, may help traders minimize losses due to unfavorable price movements.

3. Trend Trading

Trend trading is a day-trading crypto strategy that takes advantage of an ongoing trend. Traders jump on an uptrend with the expectation of it continuing for a certain period, and they aim to exit the position before the trend reverses. However, it’s crucial to base your speculations on facts such as trend analysis and market sentiment, rather than your emotional bias towards a cryptocurrency. Another form of trading involves taking advantage of a trend reversal. This is called reversal trading. It can be used carefully to yield good returns with upcoming cryptos that fluctuate more than the older coins.

4. Technical Analysis

This strategy requires studying the history of price movements to predict how the cryptocurrency may perform. Statistical calculations are applied, with the premise that prices are likely to behave the same way they did in the past. Cryptocurrency traders use technical indicators such as the relative strength index(RSI), moving averages, and oscillators to speculate on price movements.

5. News and Sentiment Analysis

Even a single tweet by Elon Musk can make the crypto markets move. Any news of business funding associated with a coin or any update on the vulnerabilities in the underlying blockchain may move the price of the associated cryptocurrency very quickly. Day traders need to keep monitoring news updates and economic data releases. Additionally, analyzing general trader sentiment towards risky assets can provide insights into the volatility and liquidity the market may have. Follow the news of your cryptos on reputable news sites and by utilizing relevant hashtags on social media sites like Twitter.

6. Long Straddle

The long straddle strategy is also called straddle, buy straddle, or options straddle. Straddling is popular among crypto traders because of the inherent volatility of cryptocurrencies. Traders open buy and sell positions simultaneously on a single cryptocurrency option at a given strike price with the same expiration dates. A long straddle allows them to hedge against risks and profit from their speculations. Crypto traders speculate on price changes and can find trading opportunities in any direction of price movements. Call or put calls are placed on derivative contracts and not cryptocurrencies directly, much like CFDs in traditional financial markets.

7. Bot Trading

Bot trading is trading on autopilot mode. This strategy works without human intervention. The trading strategy relies on a set algo or on AI, which uses technical analysis to identify when to open or close positions. Risk control limits are also pre-programmed. Crypto trading bots streamline the process of analyzing chart movements, and trading fees, and take advantage of opportunities without delays. Bots are used by institutional traders or experts who know trading and coding well enough to account for all the factors that impact the price of the cryptocurrency in their algorithm. New traders may also use bots if they have a technical aptitude and recognize the risks involved when they are not constantly observing the markets.

Best Online Cryptocurrency Trading Platforms for Day Trading

There are about 250 crypto exchanges in the world, and many crypto CFD brokers also. Traders should perform their due diligence before selecting an exchange or broker for trading cryptocurrencies. It’s a good idea to begin with one that is well established, offers demo trading, and allows copy trading to gain some experience while learning your way around cryptocurrency trading.

Things to Avoid While Day Trading

Along with a strong cryptocurrency day trading strategy, you also need to know which common mistakes to avoid. Some of these are:

  • Not learning the basics of crypto trading and the fundamentals of the currency you wish to trade.
  • Trading on emotions like FOMO (fear of missing out), FUD (fear, uncertainty, and doubt), or revenge trading, rather than on analysis and signals.
  • Not taking profits regularly.
  • Using leverage beyond your risk appetite in the hope of making big profits.
  • Trading based on pump or dump calls, which do not have any research backing and are spread over social media platforms in ‘closed groups’.
  • Not using proper risk management tools like stop loss and take profit.
  • Ignoring fees and taxes while planning your trading goals.

Professional Tips About Day Trading Crypto

Here are a few professional tips to make your crypto trading experience better:

  • The most important thing to do is to precise your preferred crypto day trading strategies on a demo account. They are generally free, make you comfortable with the platform, and prepare you well before going live with your hard-earned money.
  • Always trade within your risk limits and use leverage with caution.
  • Learn the fundamentals of trading and the cryptocurrencies you plan to trade.
  • Be sure to learn about the underlying blockchain, its network size, and protocols to get a broad perspective on your assets.
  • Do your research to find the hidden gems before anyone else. It sets a trader ahead of others.

Conclusion

The key to crypto trading is to trade what you understand. Your due diligence regarding the exchange or broker that you use and the cryptos you trade is very important. However, traders must remember that crypto is not yet mainstream and may involve higher taxes and different regulations than traditional financial instruments.

FAQ

  • Is day trading crypto profitable?
    Day trading cryptocurrencies can be profitable for those who perform due diligence and ensure they maintain a safe risk-to-reward ratio, as the crypto market is extremely volatile.
  • Which cryptocurrency is best for day trading?
    Bitcoin is the best for crypto day trading, as it is the oldest and most liquid cryptocurrency. There are several other coins which have emerged and become potential alternatives, including Ethereum, Tether, Binance, Cardano, Solana and Litecoin.
  • What is the best crypto day trading strategy?
    If the price chart shows crypto is in a long-term trend, multi-timeframe trend trading is probably the best day trading strategy. In the absence of a long-term trend, one can use support and resistance reversals to make the most of volatility in the crypto market.
  • How much money can you make by day trading crypto?
    Day trading cryptos is considered one of the fastest ways to make money. However, traders must remain cautious, as cryptos tend to be volatile. Develop your strategy according to your trading goals and adopt risk management techniques.
  • What are the downsides of day trading crypto?
    New traders may incur losses if they are not well prepared. The market is also largely unregulated, leaving traders exposed to higher risks than with mainstream assets.
  • Are there any restrictions for day trading cryptocurrencies?
    Some countries do not allow crypto trading. For those that allow it, there are very few restrictions on day trading.
  • What is the tax rate of crypto day trading?
    Every country treats cryptos differently. For instance, in the US, taxes are applicable on the profits you make. The UK, on the other hand, has a maximum trading threshold beyond which 20%-40% taxes are applicable based on how much a trader makes.  
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About Niki Nikolaou
With 25+ years of financial marketing experience, Niki has an extensive knowledge of the forex, fintech, stocks and cryptocurrency sectors. Niki is a founder and director at the Contentworks agency.
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