Day Trading Cryptocurrency: A Beginner’s Guide for Bitcoin Traders

Smiling man looking at charts and graphs.

Paul Tudor Jones, the trader who predicted the 1987 stock market crash, famously observed: “The secret to being successful from a trading perspective is to have an indefatigable and an undying and unquenchable thirst for information and knowledge.”

If you’re considering getting into day trading cryptocurrencies, you’ve chosen the right place to start trying to quench that thirst.

What Is Day Trading?

A day trader executes several trades per day. He or she is the opposite of a HODLer. For example, if you buy bitcoin in the morning, your aim is to sell it for a profit in less than a day – usually within a few hours or even minutes.

Day trading is diametrically different from HODLing, which is when you buy and hold a cryptocurrency because you feel it’s going to increase over a considerable period of time. It takes a sustained drop to put your initial investment at risk. With day trading, you could make (or lose) significant money from a relatively short-lived movement in price.

Man in a business suit holding a tablet displaying Day Trader.

Where Can I Day Trade Cryptos?

Finding a platform on which to day trade is easy. There are plenty of cryptocurrency exchanges to choose from but, before you sign up for one, carefully check the following:

  • The geographies served. Make sure the platform allows traders from your jurisdiction.
  • Transaction fees. Each platform has different ways of making money off your trades. Even if you have to comb through the fine print, get reliable numbers.
  • Withdrawal fees. You don’t want to make a nice little profit only to have much of it disappear as you take the money out.
  • The platform’s interface. You want to feel comfortable logging in, looking at the charts, and placing a trade. Check how it looks on all devices you’ll be using to trade.

How to Day Trade Cryptocurrencies

  • The trend is your friend. The price of an asset usually has momentum. The movement of price is typically Newtonian: If it’s in motion in a certain direction, it will take greater market forces to change its direction. When you trade with the trend, you are using this momentum to your advantage.
  • Take the time to understand how the altcoins you trade “behave.” Each coin responds differently to news events and the price action of other coins. Your first “investment” should be in learning how the cryptos you want to trade react to changes. For example, some coins tend to go down when bitcoin goes up.
  • Trade when volatility is high. When a lot of people are trading, the price action is generally more favorable to day trading. As different traders choose to buy or sell a digital currency, the price fluctuates to meet their demands. This means more opportunities for you to get in and grab a profit.
  • Set profit targets and stop losses. A profit target secures your profit at a specific price point, and stop losses prevent you from losing more than you’re comfortable with.
  • Check out crypto trading bots. When appropriately used, bitcoin trading bots can help you be a more successful trader. Thoroughly vet several good ones before deciding which one to use.

Trade With a Cool Head

Trading is exciting. You need to balance the rush with calm, pragmatic thinking. Keep the following in mind:

  • Never trade an amount you can’t afford to lose.
  • Don’t be greedy.
  • Don’t hastily hop from one strategy to the next. Evaluate your successes and failures before making any decisions.

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If you arm yourself with knowledge, useful tools, and the right mindset, day trading cryptocurrencies can be an excellent way to earn profits. If you want to learn more about how to trade the crypto markets, subscribe to Bitcoin Market Journal.

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