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5 Effective Day Trading Strategies for Cryptocurrency

5 Effective Day Trading Strategies for Cryptocurrency

Tushar Bakshi

Table of Contents

If you want to succeed in the risky world of cryptocurrency, you’ll need steel nerves, a winning day trading strategies for cryptocurrency, and an easy-to-use trading platform. Through research, you’ll discover steely nerves and a trading platform best suited for you. Let’s look at some of the trading tactics you’ll employ.

The term “day trader” comes from the stock market, where trades generally only happen during regular business hours on weekdays.
For a newbie, it helps to know some day-trading basics along with some major things for investing in crypto in this manner.

This article will give you overview of fundamentals of how to approach crypto market speculation and 5 day trading strategies for cryptocurrency. You’re more likely to meet your trading and investment objectives if you have a sound trading plan.

First, What is Day Trading?

Day trading is a short-term trading strategy that involves buying and selling trades on the same trading day. This is referred to as “intraday trading” on occasion. Intraday trading strategies are used by day traders to profit from price movements of a specific asset or financial instrument.

Things to Know About Day Trading Strategies for Cryptocurrency

For a profitable day trading there are two market conditions that must be present.

Liquidity: Traders must be able to enter and exit deals rapidly without causing significant price movement. Slippage—when a large position cannot be liquidated at the price a trader desires—can eat into a trader’s earnings in a market with limited liquidity. With slippage, the position must be sold in stages, with each order having a lower price than the one before it, resulting in fewer overall gains by the time the entire position is sold.

Volatility: Prices don’t move when there’s no volatility, therefore there’s no prospect of buying low and selling high. Because day traders strive to purchase and sell on the same day, markets must be fluctuating on a short-term basis in order for this technique to work.

5 Day Trading Crypto Strategies

There are several tactics to attempt for investors who are interested in day trading. Technical analysis is one of the most popular tactics, with entire trading communities forming around this school of thought.

One thing is certain: short-term traders must use some sort of rule-based trading approach. Here are five day trading cryptocurrency strategies.

1. Technical Analysis

Technical analysis (TA) is the process of predicting how prices will move in the future by applying mathematical indicators and chart patterns. Some technical indicators, such as the RSI, can be generated by a computer tool like TradingView, while others must be found by humans looking at charts (the cup-and-handle pattern, for example).

The relative strength index is a common technical indicator (RSI). A single line with a value between 0 and 100 appears beneath a chart. The closer the RSI comes to 100, the more overbought the market is deemed to be, suggesting that prices may collapse. The closer the RSI comes to 0, the more oversold the market is perceived to be, implying that prices may climb. This is an example of how TA could be used by someone day-trading cryptocurrencies.

2. Scalping

The goal of this technique is to profit from relatively modest price movements over short periods of time. These are frequently market inefficiencies, such as bid-ask spread gaps or liquidity gaps.

Scalpers typically employ leverage, such as margin or futures contracts, to increase their earnings because they are looking to profit from small price swings. However, because this method amplifies possible losses, risk management is very crucial.

To select entry and exit positions for their trades, scalpers may use tactics such as volume heatmaps, order book analysis, or a variety of technical indicators.

Scalping is best suited for experienced traders due to its fast-paced and high-risk nature.

3. Range Trading

Range trading is based on the assumption that prices tend to move in a specific range. Candlestick charts, as well as support and resistance levels, are used in this method.

When prices hit a support level, traders may purchase, and when prices reach a resistance level, they may sell. Alternatively, they could go short when prices hit resistance and then close the position when prices fall back to support.

Range-bound trading is exemplified by pivot points. Calculating pivot points gives investors an indication of where momentum reversals are most likely to occur.

4. High-Frequency Trading (HFT)

High-frequency trading is a method of profiting from price movements that happen on the order of seconds or fractions of seconds. The frequency in question is typically on the order of dozens of trades per second, well above the human trader’s capability.

Using a piece of software known as a trading bot is the only way to engage in high-frequency trading. The bot continuously watches the market and conducts trades based on the trading logic provided for as long as it is connected to the exchange. High-frequency trading can be integrated with a variety of other tactics by implementing unique trading logic.

5. News and Sentiment Analysis

The distinction between news and sentiment analysis and technical analysis is that it is based on forecasting human actions and reactions rather than price patterns.
By examining various information sources, news and sentiment analysis attempts to predict whether demand for a specific cryptocurrency will fall or rise.
By evaluating the sources, you can try to figure out what the social consensus is on a currency and forecast what people would do with it. Industry and mainstream news publications, as well as social media posts, are the sources of this information.

Key Takeaway:

It’s not easy to come up with a crypto trading plan that fits your financial goals and personality. We went over some of the most common cryptocurrency trading techniques so you can find out which one is right for you.

You may also try to apply various techniques to different portions of your portfolio. This manner, you can keep track of each strategy’s individual performance while maintaining proper risk management.

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