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How To Do Crypto Day Trade

Crypto Day Trade: How To Begin With It

Day trading refers to a set of methods or techniques undertaken to benefit from the short-term developments in the price movements of any tradable commodity. The main aim of any day trader is that he finishes the trading day with a higher value of holdings than at the start of that day. The trader can also set specific trading goals for themselves. These traders can also be identified as swing traders. Now when the concept of day trading is explained, let’s focus on the term “crypto day trade”. So, the aforementioned term doesn’t have any difference in the concept, however, the domain of application is definitely distinct.

Crypto day trading includes the formulation of optimum strategies in order to benefit from the vigorous price fluctuations that take place. One can do so by analyzing the crypto market using technical indicators. Moreover, one can also rely on recommendations from experts. Further, they should be highly attentive while deciding the timings for buying or selling the crypto asset.

However, since the crypto market is the most volatile financial market, it is very difficult to succeed in day trading activities. Therefore, it is important that effective tips and strategies are followed for the same. In addition, the trader must have an in-depth knowledge of the market. In order to aid crypto day trade activities, this article will provide you with a basic guide for it.

Crypto Day Trade: A Guide To Begin

The first and foremost thing that is important is having some crypto holdings in your preferred cryptocurrency, such as Bitcoin (BTC), Ethereum (ETH), or any other crypto you believe in. Further, there should be a valid and available mode of exchange for this currency. This can be done through the several crypto exchange platforms that are available.

The easiest way to start crypto day trading is by creating a trader’s account in one of the known cryptocurrency exchanges like Coinbase, Binance, eToro, Kraken, or even KuCoin. The next step is to deposit funds into the account and purchase the desired crypto asset with it. The funds should be deposited using fiat currency for a better trading experience. After that, you have to consider the crypto day trading strategies that have been discussed below.

Strategies To Note

An optimum strategy planning can lead to the best trading experience. In absence of these tips or strategies, one might gamble away all their precious possessions. A well-planned strategy can lead to long-term gains instead of just one or two gains that are mostly acquired by luck. For an efficient day trading experience, one should analyze the market and use strategies according to the prevalent conditions. However, it is entirely up to the trader to study the market and then choose the correct strategy to benefit from it.  Below is a list of crypto intraday trading strategies that might help in crypto day trading operations.

High-Frequency Trading (HFT)

This day trade strategy focuses on gaining from the swinging price actions that occur every second or even in a fraction of a second. The ‘frequency’ here is linked to the several crypto exchange orders that are placed every second, which is totally out of reach for a human trader.

Therefore, there is only one way to utilize the strategy of High-frequency trading. For this purpose, a trading bot should be used, which is a software that aids in tracking and monitoring the trade orders in a particular commodity. The bot keeps a track of the crypto market fluctuations. Moreover, it continuously carries out trading operations that are based on the trading fundamentals provided. The software works till the time it is connected to the particular crypto exchange. Further, the inclusion of specific trade outlines aids in the High-frequency strategy to be merged with any other strategy on the list.

Range Trading

The range trading strategy functions on the assumption that the crypto price actions would normally be limited to a specific range throughout the day or any other given period of time. Any change in price that is outside this range will point towards an abnormal change in the price movements. The trader can then choose his trading actions accordingly.  For instance, if the price goes beyond the set range then one can consider buying further crypto assets in the concerned currency, with the expectation of an upward swing.

Scalping

Scalping refers to a strategy wherein the trader makes a number of trades and each trade leads to a small amount of profit or gain. These several gains add up to one large gain at the end of the day. This strategy requires a large amount of liquidity or currency circulation for effective trading and to gain from small price movements in a short period of time. Generally, the time for each trade is limited to a few minutes. However, the time can be shortened to a few seconds or even be extended to a few hours.

Technical Analysis

Technical analysis uses statistics and market indicators for a successful crypto day trade session. It requires the implementation of several statistical calculations on the historical data of price movements. The day trader should try to understand the recent market trends and make a decision. Moreover, the trader can also take help from the market indicator charts. This strategy is based on the idea that previous price movements have a significant effect on future price actions.

Arbitrage

Arbitrage involves buying crypto from one platform and selling it on another to benefit from the difference in price on those platforms. To understand better, let’s consider an example. For instance, Bitcoin (BTC) is $20,000 on Crypto.com and $20,500 on Binance. One can then buy 2 BTC from Crypto.com and sell it on Binance within a few minutes to make a $1,000 profit excluding the trading fees.

News And Sentiment Analysis

News and Sentiment analysis is somewhat similar to that of technical analysis. The only major distinction between the two is that the news and sentiment analysis focuses on the prediction of human reaction to the prevalent market conditions. The trader has to analyze whether the demand for a particular crypto asset will rise or fall. This can be done by studying information from different sources, which include mainstream news media outlets and social media trends. The other important decision influencers are market indicators, trading charts, current market trends, risk management tools, and specific crypto price movements.

The above-mentioned intraday trading tips and strategies will only be fruitful if understood and applied correctly. A mere carelessness would lead to the loss of possessions.

Expert Opinion On Crypto Day Trade Activities

Expert opinion in any field and domain always aids in understanding the area better. Therefore, before entering into a pool of risks with crypto intraday trading, one should definitely check out what experts in the domain have to say about it.

Allnodes’ Head of Business Development, Taylor Greenberg, doesn’t restrict one from undertaking crypto day trade opportunities. However, he emphasizes the fact that the trader should know about the crypto market thoroughly and also be well-versed with the underlying technology involved. He explained, 

“Knowing what the blockchain does, its network size, governance, and protocols will allow you to assess the overall condition of your prospective investment.”

Unlike Greenberg, the Onramp Invest CEO, Tyrone Ross, advises that the majority of people should not indulge in crypto trading at all, thereby, showing a red flag to almost all beginners. He explained,

“The everyday individual is looking at crypto assets as an investment or opportunity to build wealth, but the majority of people should not be investing in them.”

Ross further explained by stating that crypto trading might work for the “right person” in the domain. However, there are several things to be considered before one enters into this risky domain and not many people would be able to ace them. For instance, a crypto trader should have emergency savings, the ability to repay the debt, and the capability of setting the correct financial goals.

Though these experts don’t encourage crypto day trading, you can still explore the domain by gaining adequate knowledge about it. Moreover, you should be extremely cautious in doing so, else do not even think of entering the domain.

Winding It All Up

Crypto day trade operations include short-term buying and selling of crypto assets based upon certain strategy formulation. The crypto day trading guide provided above will definitely aid the process. For a short recap, let’s mention the trading strategies to consider. These include High-frequency trading, range trading, scalping, technical analysis, arbitrage, and news and sentiment analysis. However, experts don’t advise jumping into this domain without proper knowledge or experience. Therefore, be cautious while making a choice.


Frequently Asked Questions (FAQs)

1. Which crypto is the best for day trading?

It is impossible to name one crypto as the best choice for day trading activities. Therefore, here is a list of some of the best intraday stocks in the crypto market:

Bitcoin (BTC)
Ethereum (ETH)
Solana (SOL)
Ripple (XRP)
Polygon (MATIC)

It is also advised to consider the volatility, volume, and latest news or updates of the particular crypto before investing in it.

2. Can you trade crypto for 24 hours a day?

The crypto market is always running, that is, 365 days a week and 24 hours a day. Therefore, you can definitely trade crypto 24 hours a day.

3. Can you buy and sell crypto assets on the same day?

Yes, you can buy and sell crypto assets on the same day itself. However, some crypto exchanges might restrict it by placing a daily limit.

4. What is the tax rate for day trading crypto?

Most countries have still not regulated the cryptocurrency domain and haven’t levied any taxes on the particular sector. However, India charges a tax of 30% on income from digital currencies even if the gain is lower than the threshold limit of INR 2,50,000. Moreover, the policy of 1% TDS on transferring cryptos came into effect on July 1.

5. Is day trading like gambling?

Some experts in the financial sector often imply that day trading is inclined toward gambling than actual investing activities. This is because investing is aimed at long-term staking in any stock or commodity, whereas day trading involves short-term stakes and faster withdrawals.

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