Day trading on bitcoin

Day Trading Bitcoin

As you are aware, the cryptocurrency market is quite volatile. For this reason, although searching for long-term trends may be the most stable strategy, it is often not the most profitable one. Most active traders speculate on Bitcoin day trading. What is day trading? How to use small time frames correctly? How to prevent draining deposits in one day and what cryptocurrency day trading strategies are most relevant for intraday analytics?

What is day trading?

Day trading with cryptocurrencies is a conventional name for a trading style where all operations are carried out within a day.

It is important to understand several aspects:

The day is not measured according to your time zone, but by opening and closing times of major exchanges. You can trade around the clock, since major players from America, Europe and Asia are located in different time zones.

Positions are not rolled over to the next day, in order not to generate a security interest from the broker.

It is not customary to separate intraday trading into a whole sub-category, since there are different methods. For example, aimed at ultra-short interaction with the market (scalping, high-frequency HFT). There are also approaches that determine the direction of movement, and in day trading they are limited only by the closing at the end of the region’s session.

The main characteristic of speculation on small timeframes is a large number of operations. In the classical view — it is working with high leverage, sometimes using cross-leverage. But in the cryptocurrency market, you can use less risky strategies, since volatility allows you to make a profit even during intermarket arbitrage.

Note: Market Arbitrage is a technology whereby a trader simultaneously registers on several trading platforms and makes multidirectional transactions. The microscopic difference in quotes between platforms determines the income and allows them to make the best trades.

Cryptocurrency day trading is not the only way to make money on speculative transactions. If you are interested in long-term results, we recommend that you learn about other effective trading strategies.

Getting Started: Day Trading Tips

Bitcoin day trading includes a number of different approaches.

The first tip: For effective speculation, choose one trading technique and master it.

Second: Always follow your own risk management plan. Even if it seems that everything is going well at the moment, do not take risks.

Third: Remember to plan for losses and profits, as well as tight stops. The world’s top players have a good to bad trades ratio of 20:1. By timely stopping and fixing losses, they minimise losses, while the remaining successful trades provide a large profit.

Fourth: When scalping, prepare for slippage and ensure you have a good connection to the server. The faster the response from the pad, the less chance of slippage.

Fifth: Never lock when day trading, especially when using leverage. At the end of the calendar day you will have to close a losing position. Locking, in this case, can be a bad joke if a stable trend has formed.

Sixth: Close unprofitable positions immediately and keep profitable ones.

Technical analysis is one component of a trader’s success. Others are risk management, fundamental analysis and psychology.

Top 5 Strategies for Bitcoin Day Trading

As you know, Bitcoin defies fundamental analysis, although the subject is controversial. There are various BTC day trading strategies that have shown positive results.

Why is intraday trading considered the best strategy for cryptocurrencies? Because it is a clear method and you can easily day trade crypto with the necessary knowledge. For example, large predicted movements in conditions of large trends are impossible due to the lack of fundamental analysis. Nevertheless, within the framework of the day, any movements, except for sharp and large pumps (thousands of points per minute), are calculated using classical instruments.

The top five approaches to day trading cryptocurrencies include:

Swinging during corrections.

Following the trend.

Swing trading

Swing trading is also called reversal catch. In fact, swing trading is one of the most risky but rewarding techniques. It uses the same indicators and advisors as trend following, but in reverse order.

When swing trading, it is not the strength of the trend that needs to be determined, but the potential overbought/oversold locations where the movement will be corrected. All methods are helpful: false breakouts, reversals, flat breakouts and noise on the chart.

The approach is based on Eliot waves and ratios 5:3, 7: 5 and 21:13. In simple terms, this theory states that a trend cannot progress in a straight line completely. Sooner or later, a part of the resisting market will present itself leading to the correction.

The greatest difficulty in swing trading technical analysis is not determining the entry, but the strength of the trend return. Moreover, a rebound may turn out to be a trend reversal or a transition to a flat.

Scalping

Scalping is an extremely simple strategy that requires a little intuition and quick hands. At certain times, there is a difference between supply and demand. That is, there are people who are willing to sell at a lower price, and traders who want to sell at a higher price. Using this gap between prices, the scalper closes the needs of both, opening deals on consent.

Another scalping option is to cut market noise at extremely short time intervals. You open a long speculative position for a small amount of money, and if the fluctuations have pierced it, you close the position in a few minutes. The main danger is the broker’s commission, but since it is minimal in cryptocurrencies and the volatility is high, it is possible to successfully scalp with impulses on noise.

Algorithmic trading

Trading with advisors, indices and trading robots is a controversial topic. There are still discussions. The essence of the method is in full or partial automation of the process. The speculator uses a large number of different “analysers” that provide signals about a trend, reversal points, etc.

On the one hand, the Bitcoin intraday bot greatly simplifies the technical analysis process and offers convenience for tracking multiple pairs at the same time.

On the flipside, even the best platforms, combined with advisors and robots, and verified profitability can not only fail, but give incorrect results if the situation changes dramatically.

The simplest example is the 2017 crypto boom, when all advisors and indicators predicted a big overbought at the USD $2,000 mark, and Bitcoin rose to $20,000 and began to depreciate with small bounces.

A good use of algorithmic trading would be high frequency intermarket arbitrage. It cuts off the belated correlation between different platforms for profit. The only limitation is the need for a depot, high lane communication, well-built software and leverage. In the absence of at least one of the points, the arbitration will be unprofitable.

News analytics

Bitcoin news daytrading is a specific phenomenon on the verge of fundamental analysis. Before key events occur, there is increased volatility, on which you can swing and scalp. Moreover, if the expectation is strong or your forecasts for the news come true, you can catch a strong impulse or trend even before it starts.

Bitcoin has a number of key events that allow traders to make more or less correct assumptions. These include:

News from potential regulators.

Second-order futures and derivatives policy.

News about new blockchain updates.

Anything else can shape the trend, but not guarantee a profit.

Do you want to understand how to trade Bitcoin by following the news and how news about the possible appearance of regulated derivatives affects quotes? Then click here.

Momentum or trend following

Trend following is both the simplest and the most difficult day trading strategy among the existing ones. Its simplicity lies in the fact that a few drawn lines and channel determination are sufficient for analysis. The tricky part is that in most cases you won’t be able to determine the ideal entry and exit point.

The essence of the strategy – you determine the levels of support and resistance. Next, look at the slope of the trend, identify critical weaknesses for a reversal (using the triangle figure) and try to exit the trend on these pieces of the chart.

Cryptocurrencies impose certain restrictions due to the fact that their movement is pump-like/dump-like. That is, not with smooth lines, but with sharp jumps, which even with developed intuition and accurate determination of the channel, threatens with slippage.

Among the advantages – conservative analytics, has been worked out for decades, offering stable profitability as much as possible.

Among disadvantages – slippage due to the peculiarities of exchanges, a small number of trading operations per day. When working with extremely low timeframes, you can mistake noise for a trend and lose money due to a wrong forecast.

Daily margin trading

Margin is a tool that enhances the above strategies.

In short, this is interaction with a broker who lends a trader an amount that is a multiple of his deposit. Thus, the trader receives greater funds for speculative operations. The price delta by 1 point changes the size of the deposit in proportion to the leverage.

Accordingly, both profitability and risks increase. In the case of successful analytics, you can earn much more, and if the leverage is incorrectly set and there is no luck, you can be left without funds by literally one unsuccessfully closed deal.

A comprehensive guide to margin trading will help you understand how to use collateral and leverage.

Conclusion

Among all timeframes in cryptocurrencies, the cryptocurrency intraday strategy provides the best results. This is due to volatility, which in case of slippage can knock out even the strongest traders.

The trend can change every minute, which is most noticeable during the day, and the described approaches allow you to maximise profitability from panic and inspiration of other traders.

Nevertheless, intraday is not a panacea, but one of the methods for making a profit on Bitcoin.

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A Complete Guide to Day Trading Bitcoin in 2021

Do you want to start trading bitcoin but unsure of how to get started? Whether you want to invest in Bitcoin by buying the cryptocurrency, or you are just interested in day trading by buying and selling Bitcoin in a short period of time, you will learn everything you need to know to finally start trading this cryptocurrency.

Fiat Gateway

First and foremost you need to transfer your fiat money to an exchange account. There are many different exchanges to do so, but the most convenient and easiest way to buy Bitcoin is by going to Coinbase and directly buying it with credit cards. If you are willing to put in the extra hours to figure out how to send your fiat to an exchange, you will not only save a lot of fees but you will also have far more trading opportunities that come with opening accounts on proper exchanges.

The Safest Exchanges

The best cryptocurrency exchanges are those which are the safest ones to use and store your money and cryptocurrencies in. Also, very important criteria are how many coins you can actually trade , how much fees it costs to trade on the exchange, how much you can withdraw and deposit, how long it takes to get verified, and how promptly the support answers your requests. I’ve collected a list of the best exchanges to use, especially if you have a European or US bank account.

The best and most convenient exchange to use if you want to link your bank account to directly withdraw fiat to your exchange account is KRAKEN. It only takes a few days to open up an account, verify it and to link your bank account. The steps are very easy and once it is done, you can directly buy Bitcoin. Once you have bought Bitcoin, it is a good idea to transfer the Bitcoin to a secure ledger wallet, for which only you possess the private key.

Bitcoin ( BTC/USD ) day trading guide

Securely Storing Bitcoin

For each cryptocurrency , you can create a digital wallet which is only accessible with a private key. Once correctly set up, nobody will ever have your private key beside you. This makes it literally impossible to get your cryptocurrencies stolen because no one but you possesses the private key which gives access to the wallet. On the other hand, if you have lost the private key, there is nobody who can help you regain access to your wallet. This means you have to be very careful about your private key. The best idea is to write it down in a perfect and steady script, which you then store in a safe place.

Another, more convenient but also more expensive way is to buy a TREZOR or LEDGER NANO S. Both give you access to a wallet whose private key is not possessed by anyone but you, however, you don’t need your private key all the time. All you need is to follow the instructions given by the Trezor and Ledger instruction sheets.

The Best Exchanges To Trade Bitcoin

With that out of the way, we can finally continue with the guide to buy and trade Bitcoin. The best exchange for Bitcoin trading is definitely Binance, since it has numerous trading pairs and is known to be very reliable and safe. So, you could go ahead and send your Bitcoin to your Bitcoin wallet in your Binance account, once you have set up such an account.

There are various other cryptocurrency exchanges, for which security, however, remains questionable, such as Kucoin, Bibox, Huobi, OkEX, BitMex, Upbit, Hitbtc, Bitfinex and several others.

Margin Trading

If you want to start margin trading (opening short and long positions with borrowed money) your best choice is BitMex and Bitfinex. Both have their benefits and disadvantages. Bitfinex, on the one hand, shows your profit and loss in real-time, which makes it very convenient to day trade Bitcoin on it. Bitmex, on the other hand, is not accused of being in financial difficulties, which significantly threatens your funds on Bitfinex.

It is advised to stay away from both exchanges if you do not know exactly what to do. Please beware the fact that margin trading can cause immense losses.

Useful Crypto Tools

If you want to stay updated about the recent price movements of the total cryptocurrency market in the blink of an eye, you must definitely add Coinmarketcap to your repertoire. It enables you to search for every cryptocurrency, check its market cap, its volume and on which exchanges it is traded. You can also use it to verify the websites of such projects or to check the URL of the exchanges.

The last thing you want to do is to open up false URLs of such exchanges, which can result in your funds being stolen.

Another very useful tool to look at is the Coinmarketcal, which collects all upcoming events in the cryptocurrency and blockchain world. This can be very useful in a bull market, where many people trade solely on “buy the rumors, sell the news”.

Useful Crypto News Sites

If you are more serious about cryptocurrencies, you will need to update yourself with the daily news regarding Bitcoin and other cryptocurrencies. We invite you to do that here on FX Leaders by following our cryptocurrency feed . We have a daily dose of news, real-time updates on cryptocurrencies, in-to-depth technical analysis, trading ideas and price forecasts. Other good resources for crypto news are websites like CoinDesk and CoinTelegraph . This can help you with your Bitcoin trading decisions, as negative or positive headlines might affect the price movements of Bitcoin and the cryptocurrency market.

Technical Analysis

If you are interested in professional day trading of Bitcoin, you should definitely consider to check out Tradingview, as it gives you the ability to do technical analysis on all kind of charts with all kinds of indicators. Although it costs a monthly fee, it is definitely worth the money if you are serious about trading Bitcoin.

Reddit, Telegram & Facebook Groups

Telegram has become popular through cryptocurrencies. You can find plenty of useful groups in Telegram and Facebook. The cryptocurrency community mostly uses those two platforms to connect and debate with each other. In addition, you will find every project having their own telegram group or channel for you to directly contact the developer of the project or just to keep updated about the latest news of your favorite project.

Reddit is also on top of the most visited sites as users here can discuss trading ideas, news and strategies. The communities have their own rules and moderators but still upholds the core principles of Reddit. Users frequent this site so they can get quick information about market changes, opportunities and engage with other Redditors.

You will definitely find plenty of relevant groups on Telegram, Reddit and Facebook. The cryptocurrency community mostly uses these platforms to connect and create conversations that can benefit them.

How To Day Trade Bitcoin

Of course, this heavily depends on your trading style . One thing is for sure: day trading Bitcoin doesn’t necessarily differ significantly from trading other assets or securities. Most Bitcoin traders rely on EMAs, Fibonacci, RSI and MACD, support and resistance levels as well as candlestick analysis and volume. In fact, I would highly suggest you to use the Fibonacci tool, the 200 and 50 EMA as well as to learn bullish and bearish divergences in the RSI and MACD. Although those are all very useful helpful indicators, you need to always keep an eye on the price and volume. For many experienced traders, price action and volume matter the most by far to assume up or downtrends.

Thus, you should learn candlestick analysis as well as read the level 2 order book.

Conclusion

Trading Bitcoin can be very profitable, but there is definitely a barrier to entry. You should be extremely cautious about false URLs, the security of your wallets and which coins and exchanges you decide to buy and use. It is necessary to focus on education, what tools will be useful, learning risk management and choosing the right crypto exchange. Day Trading will best fit you if you want minimal investments with short-term results. You won’t get rich overnight doing day trading even though it might prove to be the simplest among the investment choices. It will still yield a profit if you are ready to deal with the volatility and instability of cryptocurrency with a proper trading strategy.

If you are interested in what the difference between Bitcoin and Bitcoin Cash is, you should definitely read this article .

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