Day Trading Cryptocurrency Strategies

As we all know the way to make money in cryptocurrency is to hold long term. If you are like me, though, you watch the charts everyday and would like to get a piece of the action.

Before I got into crypto I was heavily involved in option and securities trading, where I held long positions and short term positions. I learned valuable information from the stock market which has helped me tremendously in crypto. First and foremost, educate yourself on technical terms and general chart conditions. Stockchart.com and investopia.com are great resources for learning how to read charts and using indicators (there are many more advanced sites as well). Granted, crypto is its own beast and doesn’t follow your typical technical analysis, but having a good base of understanding is important.

Day trading is not for everyone. I’ve had my fair share of losses intraday trading. Just like managing a project in your office, you need to stick to a strategy when executing quick trades.

Remember: The cryptocurrency market is open 24/7. Understand the risks of short term holding while you sleep.

Cryptocurrency Day Trading Requirements

Source of FIAT funds: Coinbase.

Cryptocurrency Exchange: Binance.

Recommended credentials: Government ID for funding FIAT and increasing deposit and withdrawal limits in Coinbase. Email for Binance. Google Auth for both services.

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Scan for Binance

Offline Wallet for longterm storage: Ledger Nano S

Guidelines for Day Trading

Below is a list of guidelines I like to use when trading. If anyone has any suggestions/ rules they follow, please join in on the conversation.

  • Diversify with your long positions and play your intraday positions. It’s important to hold long positions that continue to gain value over time to offset any losses you take from day trading.
  • Remove emotion from your trades. This is hands down one of the most difficult parts of trading. Stick to your strategy, stick to your strategy, oh and stick to your strategy.
  • Read the chart. Learn the history of the chart. Look at how it has traded in the past. How much does it fluctuate in price on a weekly basis? What do your indicators tell you about the current health of the chart? Where are your supports and resistances? How has the chart reacted to news in the past? What cause that spike or dip 6 months ago? These are questions you should be answering before trading. There are many many more questions that can be asked, but that’s something you need to work into your own strategy.
  • Volume is king. A stock or coin will only drastically move in price with an influx of volume. Look for charts that are experiencing unusually high volume.
  • Risk/reward. This comes with time. Learning how much of your portfolio you’re willing to risk on any given trade takes some failed trades to find your threshold of pain.

I like to trade with $1000. (Although, day traders tend to use 10x that) I set my stop loss fairly tight (for crypto) around 5%-10% loss (so $50-$100 loss). Because of the volatility, I look for quick 5%-10% swings. I buy in at the support level and sell within a few minutes hopefully with a decent gain. Because fees are so low in crypto I can get out with a 2% gains and be happy. The goal is to punch in and jump out.

  • One big rule that I always follow is “do not hold a short term position over night.” This was especially true for stock trading. Do not let a short term position sit over night. Even if you set your stop losses correctly anything can happen while you sleep. It’s best to keep your trading money in fiat.
  • Do not jump into a trade because you heard someone touting a ticker on some chat/ forum. Do your own research and analysis to determine if there is money to be made on a trade. Most people have a motive in this game, trust no one.
  • Trust your analysis and stick to your guns. This one can be tied directly to emotion trading. Once you are in a position you tend to watch the price like a hawk. You put in your buy and watch a ton of buys come flooding in right after. You feel great and are on your way to a small gain. Then a small dump begins and your heart races. Did I time my trade incorrectly? Did I read my indicators wrong? At this time it’s best to make sure your stop losses are set and take your hand off the mouse. Have your trade screen up, but don’t hover over the sell button. Wait. Trust that your analysis and all of that reading you’ve done will pay off.
  • Keep a hand written journal of trades you’ve made. It will help refine your process and strategy. And since we all love stats you can use this data to see what your average gain/loss is, the average amount of time you spend in a position, or which coins you trade more frequently.
  • Money flow. Now this isnt strictly a day trading thing, although, identifying where the market money is flowing will help find coins with more volume. There are thousands of stocks worldwide. There aren’t nearly as many coins, especially on an exchange to exchange basis. So following the flow of money is much easier. For example isn’t it interesting that one week btc soars while alts and others sink. Then the next week btc dips and alts spike. Since the crypto market is still young and relatively small you can see when money shifts from one coin to the next. If you can figure out this rhythm you will be worlds ahead of everyone. This is one of the main reasons that diversifying your long term positions is important. You gain value as the overall market gains value even though some of your positions are up and others down.

I find technical analysis very helpful when looking for my entry and exit spots. When looking at a chart, haven’t you noticed that the price consolidates around certain price points? It’s not magic, there is analysis to be had. And in order to day trade you need to have these indicators set up to execute successful trades. By your statement I’d guess you are not a day trader or an unsuccessful one. No need to try and rain on the parade of the people looking to learn about market manipulation and chart analysis. Just because you believe TA is bullshit doesn’t make it true. There are countless books and resources that refer to TA. There must be some validity to it, right?

Limiting Loss and Dealing With Emotion

Example Strategy:

I also limit my day trades to a small portion of my pre-existing profits.

So my first hodling coin doubled. I take 5-10% of that and put into daytrading. I day trade until I’ve doubled that money and put the original 5-10% at face value back into the hodling coin.. and essentially repeat this.

There are times when I don’t feel like day trading and stick the profits back into my hodling coins. And when I’m ready to trade again I take the last profits I had at $ face value back out.

This strategy, I’ve found after many failed previous strategies, is what keeps the emotion away from my brain. I’m playing with 100% of profit and not a personal savings I am hoping to return.

There have been times when I’ve gotten burned, but it doesn’t have that gut sink feeling when you’re playing with house money. I don’t get emotional because of this. I chalk it up to a bad reading on my part.

Example Strategy:

I buy into a position with $1000;

  • I take my initial $1000 out and let the profits ride which further diversifies my portfolio.
  • I sell the entire position and reinvent my gains into my long term holds.
  • I sell my entire position and let my profits sit on the sideline in case I dip below my initial $1000. (Which happens from time to time) there is no perfect strategy.

Cryptocurrency Day Trading Taxes

Make sure to keep track of your purchases and sales meticulously for tax reporting. Blockfolio (iOS or Android) and Spreadsheets are your friend.

Familiarize yourself with general tax strategy and laws on our post: Cryptocurrency Taxes

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