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March 31, 2020

Cryptocurrency Day Trading

Cryptocurrency daytrading all began with Bitcoin. The year 2017 was a landmark time for the cryptocurrency industry, as the value of Bitcoin soared close to $20,000, catching the attention of mainstream media while attracting new investors to the space.

Many new cryptocurrencies bloomed off the success of Bitcoin.  The surge in awareness of crypto led to a significant increase in the number of crypto investment tutorials, trading, tips, exchanges, and crypto oriented websites.

Enter the Day Traders

Retail and professional investors  jumped on board the crypto train in hopes of making exponential gains, and with them came the day traders. A special breed of investors who employ a trading strategy designed to make daily profits trading crypto asssets.

“Not many have the risk tolerance for cryptocurrency day trading. It is not for the faint of heart. It is a highly risky and speculative trading model.”

Not many have the risk tolerance for cryptocurrency day trading. It is not for the faint of heart. It is a highly risky and speculative trading model.

However, if you are an adrenaline junky, and have disposable capital, then this article will outline a solid approach to getting started in day trading.

Have Realistic Expectations 

Many cryptocurrency investments have a higher degree of return than traditional stocks. Not necessarily so with day trading. Cryptocurrency day trading relies on making small profits (usually single-digit profits) for every trade.

“The goal is to have a higher win to loss ratio by the time you decide to stop trading for the day.”

It is natural to incur a loss on some trades. The goal is to have a higher win to loss ratio by the time you decide to stop trading for the day. The more you know about reading crypto charts, the better equipped you will be to predict the movement of cryptocurrencies. 

So any person looking to start crypto day trading must be willing to risk some capital as well as devote some time to understanding the basics of chart reading and analysis.

5 Things To Consider About  Cryptocurrency Day Trading

Follow these simple recommendations to minimize your day trading risks:

Open Accounts With Exchanges

Cryptocurrency exchanges differ considerably on many features. Coin pairs, trade amount limits, KYC (know your customer) requirements, withdrawal/deposit limits, and transaction fees are all variables you should consider.

“You should compile a list of vetted exchanges. This will help maximize arbitrage opportunities”

Since day trading involves low-profit margins per trade, it is important to understand how these factors affect your bottom line. You should compile a list of vetted exchanges. This will help maximize arbitrage opportunities and enter/exit trades and markets quickly.

Until you become a bit more seasoned, it is better to go with centralized exchanges rather than decentralized exchanges. Centralized exchanges have greater security features and high liquidity.

Choose And Follow A Strategy

Build and follow a well-researched strategy to enhance your success  in cryptocurrency day trading. You should select cryptos for which there is ample exchange coverage.

“Your trades should be based on solid understanding of the fundamentals of financial chart analysis.”

Study their movements often to get a better insight into the daily trends. Your trades should be based on solid understanding of the fundamentals of financial chart analysis. Make sure you do your homework.

Ignore “FOMO” (Fear of Missing Out). Many times, you will come across situations where you feel that a particular trade is going to be a sure winner. In such cases, it is crucial that you do not over commit your funds. Just a few small mistakes can eat away your accumulated profits.

“A conservative strategy is a must in day trading to ensure that you do not lose your gains in a few risky trades.”

Cryptocurrency day trading requires a consistent and disciplined strategy to make profits. A conservative strategy is a must in day trading to ensure that you do not lose your gains in a few risky trades.

Small, safe and consistent is the ideal strategy to follow in day trading rather than risky big scoring stakes.

Make An Exit Strategy

Many factors control the movement of cryptocurrencies. It is very possible your investments might start a downward movement. Rather than getting caught in hopes and emotions of better performance in the future, it is wise to set stop-loss limits.

“Know in advance when and under what conditions you will exit a trade and stick to those parameters.”

Know in advance when and under what conditions you will exit a trade and stick to those parameters. Many exchanges provide the feature of setting a stop loss so that you automatically exit a trade if the price falls below a predetermined level.

Having a stop-loss limit reduces your risks and helps in maintaining a good cyptocurrency day trading strategy.

Understand Technical Analysis

Having good knowledge of technical analysis of charts is crucial to increasing the success ratio of your trades. There is no single method to analyze charts, even though some analysis methods are more common.

“Having good knowledge of technical analysis of charts is crucial to increasing the success ratio of your trades.”

Having good knowledge of technical analysis of charts is crucial to increasing the success ratio of your trades. There is no single method to analyze charts, even though some analysis methods are more common.

Become familiar with multiple technical analysis methods to help you make a better trading decision. You can find various technical analysis methods on YouTube which explain key terms and pointers related to trades.

Be Active On Niche Forums

Connecting with like-minded people has enormous benefits in any niche. There are cryptocurrency forums like BitcoinTalk.org where you can find plenty of resources to keep you up to date with the recent happenings in the crypto space.

“Forums are also a good source for tutorials, reviews and case studies to help increase your understanding of how to make profits from day trading cryptocurrencies. ”

Forums are also a good source for tutorials, reviews and case studies to help increase your understanding of how to make profits from day trading cryptocurrencies. 

Getting connected with successful traders on forums gives an extra edge in learning and profiting from trades.

Automate Your Trading Using Trading Robots

cryptocurrency day trading 3 commas download banner

Many more advanced day traders use trading robots or "bots" which automate many of the repetitive tasks of trading can may help improve trade tracking and performance. 

One of the leaders in the automated trading space is 3Commas. Established in 2017, they have over 220,000 registered users and interface with 23 different crypto exchanges.

Their plans start for as little as $14 per month. You can use their tools to trade manually across multiple exchanges, configure and use simple or complex trading bots, or set up your own indexes and portfolio.

Many day traders find these tools very powerful aids in doing exchange arbitrage or executing leveraged training strategies. They have a 3 day free trail and you can trade using a demo account to "kick the tires."

Some of the features of the 3Commas Platform include:

  • Trade Optimization - Sell and buy coins in a single window, Sell by multiple targets, Take Profit and Stop Loss Trailing feature
  • Charts and Signals from TradingView
  • Automated trading with Trading Bot - Trade 24 hours a day with technical indicators.
  • Analyze and copy bots - Bots can analyze performance, view and copy other bot settings on the 3Commas platform.
  • Smart Cover - Accrue additional profit with unexpected market moves. Sell and buy back coins

Final Thoughts

Cryptocurrency day trading offers significant opportunity for financial gain. However, it is EXTREMELY risky and should only be pursued by well informed and experienced traders.

Make sure you do your homework and only trade with funds you are comfortable with losing. By implementing the above strategies you can set a solid foundation for any type of cryptocurrency trading!

And remember, CryptoVerrified.com is always here to help you survive and thrive in this new and exciting space! We have an awesome FREE Crypto Guide and toms of resources at our crypto blog.

You might also enjoy our article "Cardano ADA Review 2020"!

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