Dxone’s cryptocurrency trading platform for professionals. Learn more.

What You Need To Know About Day Trading Cryptocurrency

An Introduction To Day Trading Crypto

One of the most popular trading strategies is day trading. Day traders are active in stocks, forex, commodities, cryptocurrency, and essentially all financial markets.

The concept of a “day trader” stems from the stock market where trading only takes place during business days and hours. Day traders never leave positions open overnight.

The Definition of Day Trading

In a crypto day trading strategy, traders daily enter and exit the same position. Another name for day trading is intraday trading. Day traders and intraday traders seek to profit from price changes in crypto or another financial instrument within the same day.

Can You Make Money Day Trading Crypto?

Day traders in crypto and other markets lean on technical analysis to make trading decisions. This includes volume, price action, chart patterns, and technical indicators to pinpoint entry and exit points for trades. Day trades don’t incorporate fundamental analysis into their trading, for these dynamics do not play out on a day-to-day basis, but, rather, over longer periods.

Some day traders, however, only trade the news. For those traders, they find assets with high volume after recent announcements or news and leverage the temporary increase in trading activity. In this day trading strategy, traders attempt profit off of market volatility.

Volume and liquidity are crucial for day trading. Day traders need strong liquidity in order to execute their trades swiftly, particularly when it comes to exiting a position. If there is not enough volume, they might not be able to exit a position and lock in a profit.

Slippage is the difference between the expected price of a trade and the price at which the trade is executed, and typically happens during periods of higher volatility. Slippage can turn a profitable trade into a losing trade for a day trader. Day traders therefore focus on highly liquid market pairs, which experience less slippage. Crypto day traders might focus on just one market pair, such at BTC and USDT, while others watch a list of market pairs and choose which instruments to trade based on technical or fundamental aspects or both.

While crypto day trading can be a highly profitable strategy, this risky strategy requires fast decision-making and quick execution. Day traders must use risk management strategies to succeed. They also must manage their own personal stress from this intense trading strategy in order to maintain their own personal health and wellbeing.

Click here to learn more about DXone.com.

What Day Trading Strategies Do Crypto Traders Use?


Crypto day traders employ many different trading strategies. One of these is scalping, in which traders take advantage of small price moves over short time frames. These small price moves might happen as a result of gaps in liquidity, the bid-ask spread, as well as other market inefficiencies.

Scalpers trade on margin or futures contracts, thereby boosting their profits or losses through leverage. As in many day trading strategies, traders target smaller percentage price movements in this strategy, so larger overall positions — that is, more money at stake — entail the larger profits. Traders who employ scalping and leverage trading strategies must still adhere to the principles of risk management. Scalpers must remain cognisant of margin requirements and position sizing rules.

These traders might review order book analysis, volume heat maps, and many other technical indicators in order to define their entry and exit points for individual trades. Skillful traders are best suited for the fast trade executions and high risks demanded by a scalping strategy. The improper use of leverage via a lack of risk management can cause a trader to lose all their money or at least sustain paralysing losses quickly.

In scalping, which was originally referred to as spread trading, traders exploit small price gaps created by the bid-ask spread. Positions are taken and liquidated within minutes or even seconds. Scalping-focused traders apply technical analysis like over/under-bought, support and resistance zones, as well as trend lines and trading channels to enter or exit the market to profit from small moves.

Range trading

Range trading, also known as range-bound trading, entails candlestick charts and support and resistance levels. Range traders buy support levels and sell resistance levels or short resistance levels and exit trades at support levels.

Range traders assume that the tops and bottoms of trading ranges hold as support and resistance until a new range is started. The lower edge of the range can push the price up, while the upper edge of the range can push the price down.

This trading philosophy emphasises stocks that have been rising off a support price or falling off a resistance price. When a stock hits a high, it will fall back to a low, and vice versa, thus forming a trading range. Range traders attempt to buy stocks near the low for the range and to sell at the high. In another approach, a trader looks for moves beyond an established range, which is called a breakout (price rise) or a break down (price decreases), assuming that once a range has been broken, prices will continue moving in the direction of the trend.

Beginners might consider range trading upon acquiring a good understanding of candlestick charts, support and resistance levels, as well as momentum indicators like the RSI or MACD.

High-Frequency Trading (HFT)

High-frequency trading is an algorithmic trading strategy employed by quantitative traders, also known as “quant” traders. In this strategy, computer programs and algorithms, in the form of trading bots, conduct the trade, swiftly, entering and exiting numerous positions in mere milliseconds.

This strategy entails a lot of investment, for those traders implementing such a strategy must backtest, monitor, and tweak algorithms to adapt to an ever-changing market. High-frequency traders generally are an elite group of traders. Indeed, the general public cannot cheaply access a lot of needed information to compete in this market, if they can access the information at all.

Momentum Trading

Momentum trading, also known as trend following, is used in day trading and other trading time horizons. The assumption here is that financial instruments which have been recently on the rise will continue to rise. The same goes for those instruments which have as late been falling.

Traders attempt to profit by buying an instrument which has been rising or short selling a falling one. These traders depend on technical analysis to identify trends.

Contrarian investing

Contrarian investing is a widely deployed trading strategy. This strategy assumes that financial instruments rising steadily will eventually reverse and fall. And those instruments which have been falling will eventually begin to rise.

Trading the news

In this strategy, traders keep an eye on the news. When the issuer of an asset announces good news, they buy. When bad news breaks, they short sell. The volatility created from such announcements create opportunities for profit or losses. Identifying whether the reported news is good or bad — indeed, if it is even true — is paramount to knowing how to play any announcement.

Price action trading

While traders rely on technical analysis to execute a price action trading strategy, it does not depend on conventional indicators, but, rather, a panoply of price movement, chart patterns, volume, and other raw market data.

Market-neutral trading

A market-neutral trading strategy helps to minimize risk. A trader takes a long position in one security and a short position in another, related security.

How do I day trade cryptocurrency?

Hundreds of cryptocurrencies sell for more than $1 USD. Learning and understanding the market is crucial to your cryptocurrency day trading journey. Here are some sites to learn about the industry and keep up on the news:

Trader beware: most traders lose money. As Cointelegraph notes, 80% of all day traders stop within the first two years; nearly 40% day trade for just one month; only 13% continue to day trade within three years; only 7% remain after five years; average trader underperforms a market index by 1.5% per year, and active traders underperform by 6.5% annually. Further, many traders continue to trade despite losing money. Due to the immense likelihood of failure while trading, many traders recommend never risking more than 1% of your portfolio in a single trade.

During the 2017 bull run, which accompanied the ICO mania, many people without skill were making money because the market was going up. They probably mistook their luck for skill.

While trading, don’t be emotional — don’t trade based on “fear of missing out” (FOMO) or “fear, uncertainty, and doubt.” Also, be mindful of the volume in a certain crypto asset, for those with lesser volume could cause it to be more difficult to enter and exit a trade. Be sure to hedge. While trading, be mindful of the laws by which your trades are regulated, as well as the taxes you’ll have to pay.

[The above article is not investment advice. Trading crypto markets is very risky, and takes an accumulation of knowledge over time. Please be careful. You trade at your own risk.]



Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store
DXone Exchange

DXone Exchange

The Cryptocurrency Exchange for Professionals