What is Crypto Day Trading?
Crypto day trading is one of the more white-knuckled rides in the financial sphere. With extreme volatility at play and a wide range of potential price influences, day trading crypto is typically left to the more experienced traders or those with enough time to dedicate to the practice.
In this guide, we'll explain how to day trade crypto as well as some of the strategies that you can employ and the more popular cryptocurrencies among day traders.
With Tradu you can trade crypto via CFDs.
Day trading crypto: What to expect from our guide
- Can you day trade crypto?
- What are the best crypto day trading strategies?
- What are the best crypto day trading signals?
- What are the benefits of day trading crypto?
- What are the drawbacks of day trading crypto?
- What is the best crypto for day trading?
- Which instruments can I day trade crypto with?
- Four keys to success when day trading crypto
- Learn more about day trading crypto CFDs with Tradu
Can you day trade crypto?
Absolutely, you can. Just as day trading is popular among traders of stocks and forex, the realm of cryptocurrency is another that lends itself to short-term, fast-paced trades.
Opening and closing deals within a single trading session (i.e. one day) rarely offers the potential to make vast profits from individual transactions. However, the aim is to potentially accumulate returns by executing several trades within a day.
Some trades may run for many hours; others will be open for mere minutes or even seconds.
With Tradu, you can monitor trends using our interactive pricing charts and magnify your trades with leverage through CFDs. Be mindful that with leverage losses can be equally amplified.
Read our comprehensive guide to CFDs.
What are the best crypto day trading strategies?
While the concept of day trading may sound somewhat limited at first, there are actually many kinds of trading strategies that you can adopt within individual sessions. Experienced traders may adopt a variety of strategies and styles across many trades. If you're just getting started, here are some of the more common strategies for day trading crypto:
- Trend trading: Attempting to predict the future movement of a price by analysing its previous performance, such as buying a currency that you believe is at the start of a climb in value. Our in-depth explainer on trend trading has more.
- Swing trading: Effectively the opposite of trend trading. In a swing trade, you predict that previous performance is set to reverse. For example, going short on a cryptocurrency which you believe has been overbought and has an inflated value.
- Range trading: Establishing a coin's support and resistance levels and executing trades accordingly within those values.
What are the best crypto day trading indicators?
- Many parameters will inform the trades that you make. Choosing the cryptocurrency with which to trade is the crucial first one and there are many factors that you may want to consider as you choose from the types of cryptocurrency available to trade with Tradu.
- High volatility: Crypto is a high-volatility space even in its most secure and stable corners. Often sharp price movements – both positive and negative – can open up many opportunities to capitalise in short spaces of time.
- Trading volume: Opting for cryptocurrencies that are involved in greater numbers of trades offers twofold benefits. Firstly, you will have more historical data to judge trades and support/resistance levels. Greater liquidity can also result in more price movements through a day – crucial to this trading method.
- Current events: Perhaps unlike any other tradable market, crypto prices can swing violently off the back of something as seemingly inconsequential as a tweet – when posted by the right person.
What are the benefits of day trading crypto?
- Go long or short: You don't need to wait for positive price movements in order to profit when you day trade crypto. If you believe that a coin will fall in value, a sell order gives you the ability to make returns on a trade.
- No overnight charges: Executing your trades without holding positions overnight means that you won't pay any of the associated fees.
- Limit volatility: Although crypto is by its nature volatile, only trading over short timeframes means that you are less exposed to the more dramatic movements that can be felt over weeks and months.
- Trade on leverage: Day trading crypto with leveraged products such as CFDs allows you to enter high-value trades with a fraction of the capital that would be required otherwise. This can also magnify your profits – or losses.
- No complicated ownership: Hot and cold wallets? Public and private keys? Proof of stake? Forget the lot. When day trading crypto CFDs with Tradu, you won't own any digital currencies or be responsible for any of the associated hassle.
What are the drawbacks of day trading crypto?
- Transaction fees: Each trade that you make is subject to certain fees. When profits are typically smaller – as they are in day trading – you must calculate how your accumulating returns will be affected by these charges.
- Magnified losses: If you're trading with leverage, your losses can be maximised in the same way as any potential profits. Unchecked, this could wipe out all your starting capital.
- Labour-intensive days: Day trading crypto successfully is not a form of passive income. You'll need to monitor news and charts constantly, likely executing multiple trades each day, if you are to enjoy satisfactory returns.
What is the best crypto for day trading?
- Bitcoin: The original cryptocurrency and still the most traded by far. It may be as stable as a stablecoin gets but BTC still experiences the kind of fluctuations that entice day traders, while its liquidity and trading volume are also attractive.
- Ethereum: Second in market cap to Bitcoin, the Ethereum blockchain's prevalence with offshoots such as NFTs and many dApps makes its coin, Ether, sensitive to the fortunes of each of them.
- Litecoin: Established to be a simpler and more tradable version of BTC, Litecoin has historically experienced times of sharp movements followed by more fallow periods.
Which instruments can I day trade crypto with?
Day trading crypto is possible with Tradu using derivative CFDs. You won't ever own the underlying currency and will instead speculate on a coin's future performance.
In CFD trading, a buyer and seller enter a contract where they agree to exchange the difference in a crypto coin's value from the point at which the contract is opened to when it is closed.
These leveraged products give traders opportunities and risks in equal measure. While you can access larger trades with less up-front capital, your exposure is for the full value of the transaction. This has a magnifying effect on both the profits and losses that you stand to make, so knowing where you stand is vital before executing a trade.
Four keys to success when day trading crypto
Nailing your analysis and getting a fortunate break here and there will play a huge role in any profits that you make – but that's not to say that you're solely in the lap of the gods when trading. There's plenty that you can do to improve your chances of capitalising when the time is right.
1. Remove emotion: You may need to make enter or exit decisions in split-seconds, so throwing out weeks of analysis and trend data amid a rush of blood to the head is highly unlikely to be of a benefit. A cool approach and composure amid volatile markets is especially vital in crypto day trading.
2. Put in the work: This is an intense trading method that will likely require lots of your time in order to serve up larger profits. If you want to take up a more passive approach, position trading may be more to your taste.
3. Manage your risk: As day trading can involve multiple transactions being open at any given time, understanding how each affects your exposure is vital. Opening yourself up to higher levels of risk across multiple trades can hit you hard if markets move against you.
4. Research crypto generally: Day trading is stressful enough in areas such as stocks, forex and indices. Add in the emerging technology and trends of cryptocurrency, and things can get a whole lot more confusing. With a new load of jargon to get your head around, fresh currencies emerging constantly and the market's infamous volatility, it's well worth your while to take some time and research the sector before committing capital.
Learn more about day trading crypto CFDs with Tradu
You could be up and running with Tradu in just a few minutes. Our proprietary platform offers a wide range of charts and analytical tools that you can use to come up with the best crypto day trading strategy for you. Still need some more information before you dive in? Check out our library of guides on all kinds of trading strategies and the finer details of cryptocurrency.
Read our comprehensive guide to day trading
With Tradu you can trade crypto via CFDs.
The information in this article is for educational purposes only.