As you are aware, the cryptocurrency market is quite volatile. For this reason, although searching for long-term trends may be the most stable strategy, it is often not the most profitable one. Most active traders speculate on Bitcoin day trading. What is day trading? How to use small time frames correctly? How to prevent draining deposits in one day and what cryptocurrency day trading strategies are most relevant for intraday analytics?
Day trading with cryptocurrencies is a conventional name for a trading style where all operations are carried out within a day.
It is important to understand several aspects:
The day is not measured according to your time zone, but by opening and closing times of major exchanges. You can trade around the clock, since major players from America, Europe and Asia are located in different time zones.
Positions are not rolled over to the next day, in order not to generate a security interest from the broker.
It is not customary to separate intraday trading into a whole sub-category, since there are different methods. For example, aimed at ultra-short interaction with the market (scalping, high-frequency HFT). There are also approaches that determine the direction of movement, and in day trading they are limited only by the closing at the end of the region’s session.
The main characteristic of speculation on small timeframes is a large number of operations. In the classical view — it is working with high leverage, sometimes using cross-leverage. But in the cryptocurrency market, you can use less risky strategies, since volatility allows you to make a profit even during intermarket arbitrage.
Note: Market Arbitrage is a technology whereby a trader simultaneously registers on several trading platforms and makes multidirectional transactions. The microscopic difference in quotes between platforms determines the income and allows them to make the best trades.
Cryptocurrency day trading is not the only way to make money on speculative transactions. If you are interested in long-term results, we recommend that you learn about other effective trading strategies.
Bitcoin day trading includes a number of different approaches.
The first tip: For effective speculation, choose one trading technique and master it.
Second: Always follow your own risk management plan. Even if it seems that everything is going well at the moment, do not take risks.
Third: Remember to plan for losses and profits, as well as tight stops. The world’s top players have a good to bad trades ratio of 20:1. By timely stopping and fixing losses, they minimise losses, while the remaining successful trades provide a large profit.
Fourth: When scalping, prepare for slippage and ensure you have a good connection to the server. The faster the response from the pad, the less chance of slippage.
Fifth: Never lock when day trading, especially when using leverage. At the end of the calendar day you will have to close a losing position. Locking, in this case, can be a bad joke if a stable trend has formed.
Sixth: Close unprofitable positions immediately and keep profitable ones.
Technical analysis is one component of a trader’s success. Others are risk management, fundamental analysis and psychology.
As you know, Bitcoin defies fundamental analysis, although the subject is controversial. There are various BTC day trading strategies that have shown positive results.
Why is intraday trading considered the best strategy for cryptocurrencies? Because it is a clear method and you can easily day trade crypto with the necessary knowledge. For example, large predicted movements in conditions of large trends are impossible due to the lack of fundamental analysis. Nevertheless, within the framework of the day, any movements, except for sharp and large pumps (thousands of points per minute), are calculated using classical instruments.
The top five approaches to day trading cryptocurrencies include:
Swinging during corrections.
Following the trend.
Swing trading is also called reversal catch. In fact, swing trading is one of the most risky but rewarding techniques. It uses the same indicators and advisors as trend following, but in reverse order.
When swing trading, it is not the strength of the trend that needs to be determined, but the potential overbought/oversold locations where the movement will be corrected. All methods are helpful: false breakouts, reversals, flat breakouts and noise on the chart.
The approach is based on Eliot waves and ratios 5:3, 7: 5 and 21:13. In simple terms, this theory states that a trend cannot progress in a straight line completely. Sooner or later, a part of the resisting market will present itself leading to the correction.
The greatest difficulty in swing trading technical analysis is not determining the entry, but the strength of the trend return. Moreover, a rebound may turn out to be a trend reversal or a transition to a flat.
Scalping is an extremely simple strategy that requires a little intuition and quick hands. At certain times, there is a difference between supply and demand. That is, there are people who are willing to sell at a lower price, and traders who want to sell at a higher price. Using this gap between prices, the scalper closes the needs of both, opening deals on consent.
Another scalping option is to cut market noise at extremely short time intervals. You open a long speculative position for a small amount of money, and if the fluctuations have pierced it, you close the position in a few minutes. The main danger is the broker’s commission, but since it is minimal in cryptocurrencies and the volatility is high, it is possible to successfully scalp with impulses on noise.
Trading with advisors, indices and trading robots is a controversial topic. There are still discussions. The essence of the method is in full or partial automation of the process. The speculator uses a large number of different “analysers” that provide signals about a trend, reversal points, etc.
On the one hand, the Bitcoin intraday bot greatly simplifies the technical analysis process and offers convenience for tracking multiple pairs at the same time.
On the flipside, even the best platforms, combined with advisors and robots, and verified profitability can not only fail, but give incorrect results if the situation changes dramatically.
The simplest example is the 2017 crypto boom, when all advisors and indicators predicted a big overbought at the USD $2,000 mark, and Bitcoin rose to $20,000 and began to depreciate with small bounces.
A good use of algorithmic trading would be high frequency intermarket arbitrage. It cuts off the belated correlation between different platforms for profit. The only limitation is the need for a depot, high lane communication, well-built software and leverage. In the absence of at least one of the points, the arbitration will be unprofitable.
Bitcoin news daytrading is a specific phenomenon on the verge of fundamental analysis. Before key events occur, there is increased volatility, on which you can swing and scalp. Moreover, if the expectation is strong or your forecasts for the news come true, you can catch a strong impulse or trend even before it starts.
Bitcoin has a number of key events that allow traders to make more or less correct assumptions. These include:
News from potential regulators.
Second-order futures and derivatives policy.
News about new blockchain updates.
Anything else can shape the trend, but not guarantee a profit.
Do you want to understand how to trade Bitcoin by following the news and how news about the possible appearance of regulated derivatives affects quotes? Then click here.
Trend following is both the simplest and the most difficult day trading strategy among the existing ones. Its simplicity lies in the fact that a few drawn lines and channel determination are sufficient for analysis. The tricky part is that in most cases you won’t be able to determine the ideal entry and exit point.
The essence of the strategy – you determine the levels of support and resistance. Next, look at the slope of the trend, identify critical weaknesses for a reversal (using the triangle figure) and try to exit the trend on these pieces of the chart.
Cryptocurrencies impose certain restrictions due to the fact that their movement is pump-like/dump-like. That is, not with smooth lines, but with sharp jumps, which even with developed intuition and accurate determination of the channel, threatens with slippage.
Among the advantages – conservative analytics, has been worked out for decades, offering stable profitability as much as possible.
Among disadvantages – slippage due to the peculiarities of exchanges, a small number of trading operations per day. When working with extremely low timeframes, you can mistake noise for a trend and lose money due to a wrong forecast.
Margin is a tool that enhances the above strategies.
In short, this is interaction with a broker who lends a trader an amount that is a multiple of his deposit. Thus, the trader receives greater funds for speculative operations. The price delta by 1 point changes the size of the deposit in proportion to the leverage.
Accordingly, both profitability and risks increase. In the case of successful analytics, you can earn much more, and if the leverage is incorrectly set and there is no luck, you can be left without funds by literally one unsuccessfully closed deal.
A comprehensive guide to margin trading will help you understand how to use collateral and leverage.
Among all timeframes in cryptocurrencies, the cryptocurrency intraday strategy provides the best results. This is due to volatility, which in case of slippage can knock out even the strongest traders.
The trend can change every minute, which is most noticeable during the day, and the described approaches allow you to maximise profitability from panic and inspiration of other traders.
Nevertheless, intraday is not a panacea, but one of the methods for making a profit on Bitcoin.