Are you interested in learning more about how to day trade crypto? We’ve created this guide for crypto enthusiasts like you who would like to get an introductory sense of strategies and daily trading insight. We cover key questions and discussion points within this topic such as:

  • The Best Time of Day to Day Trade Crypto
  • The Characteristics of the Best Day Traders
  • Signals That Day Traders Use to Make Price Picks
  • Frequently Asked Questions About Trading

Day Trading Crypto: A Brief Summary

In 2009, after the launch of Bitcoin, it wasn’t long before people wanted to start trading cryptocurrency. Over the past 11 years, cryptocurrency trading has become increasingly more popular. Now, there are over 5,000 different cryptos traded daily all around the world. For a large number of millennials, the crypto market was the first experience they had with any type of market trading.

In the year 2020, investor appetite for both cryptocurrency and day trading is higher than ever and still rising. According to a September 2020 article from CNBC, research indicated that day trading activity has significantly increased year-over-year from 2019 to 2020, largely a result of the COVID-19 pandemic. That same article from CNBC reported that TD Ameritrade saw traffic quadruple to the “trading instructions” section on its website during that same time.

Day Trading Crypto 101

A well-known strategy often used with hopes of making money from short-term trading is called day trading. Day trading is exactly what it sounds like… buying and selling securities like stocks or cryptocurrencies on the same day attempting to capitalize on short-term market fluctuations.

While some choose to “HODL,” or hold on to their cryptocurrency investments for a long time, others use a different strategy.

Day Trading vs Cost-Dollar-Averaging

For those who want to profit from their investments as quickly as possible, they turn to trading their cryptocurrency in the short to medium term. Crypto day traders take advantage of high volatility that causes large price fluctuations over the trading day. This is very different than another commonly used trading strategy called “dollar-cost-averaging.” Dollar-cost-averaging refers to the process of buying a security like a stock or a cryptocurrency over a long period of time regardless of the price. With this strategy, the trader is more concerned about increasing the overall position of a stock rather than purchasing it at a certain cost and selling it at another.

Day trading, however, does not rely on such long term strategies to maximise profits. The two approaches couldn’t be more different as far as trading strategies are concerned. The amount of time from one trade to the next is significantly shorter when you are a day trader compared to a cost-dollar-average trader. One strategy is based on increasing a position over longer periods, and the other strategy takes advantage of daily price changes within the market to make profits. However, we’ll save the conversation regarding long-term strategies for another blog.

Crypto Day Trading Signals

Crypto trading signals are indications or recommendations to buy/sell a specific coin at a specific price and time. These trade signals are produced either manually by an experienced trader, or by trading algorithms and bots that deliver the trade signals automatically. Sometimes it could even be a combination of both! Normally, trade signals have been tied to profit-taking and stop-loss-shielding as well. You have to cover your back from all sides.

There are free day trading crypto signals available to use, but there is no guarantee that these signals will be any good. Some trade signal applications cost money, but these are also not guaranteed to work either.

Going beyond free and paid trading signals are the internal signals used by some of the world’s most successful capital funds. Those funds have the genius data scientists who can predict trends based on indicators that most people would only dream of knowing.

For example, the infamous quant fund Renaissance Technologies hired the data scientist Sandor Straus as the company was starting. Straus helped Renaissance collect information on historic commodities as far back as the 1800s.

About his research at Renaissance, Strauss talked about some of the data patterns that he viewed the markets through:

“Certain recurring trading sequences based on the day of the week. Monday’s price action often followed Friday’s, for example, while Tuesday saw reversions to earlier trends. Laufer also uncovered how the previous day’s trading often can predict the next day’s activity, something he termed the twenty-four-hour effect. The Medallion model began to buy late in the day on a Friday if a clear up-trend existed, for instance, and then sell early Monday, taking advantage of what they called the weekend effect.”

Renaissance Technologies’ understanding of market data has driven the fund into becoming one of the highest returning to date. Unfortunately, all of the trade secrets in the Renaissance Technologies Medallion Fund are almost exclusively only available to the fund’s employees.

In general, investors do anything it takes to get an edge in how the market will move, whether it’s feeding a century and a half of data into a predictive trading model, or using technical analysis indicators against line graphs on a 30-minute chart. Regardless of what you do, be careful how you get your information. Remember, scammers are always waiting. Industry veterans who’ve been trading crypto for years are wrong every single day about price movements in the market. No one is perfect.

If you want to learn more about trading, download our feature packed app for iOS and Android to trade crypto on-the-go.

Factors to Consider Before Day Trading

Before going into the best time to day trade crypto, let’s first briefly discuss how day trading works. As explained earlier, day trading is the act of buying and selling securities (in this case, cryptocurrencies) within a 24-hour window. Even though we are discussing the cryptocurrency marketplace, day trading can occur in any securities marketplace and is most common in the stock market and foreign exchange market, commonly known as Forex.

The world’s most successful day traders are highly educated in the technicalities of trading. They need to understand a variety of different techniques such as the power of leverage, as well as other shorter-term trading strategies to defeat the odds stacked against them. Trading strategies help people capitalize on price movements that occur in highly volatile markets like crypto.

Factors that can cause price fluctuations include but are not limited to:

  • Breaking news
  • Job reports/ unemployment rates 
  • Earnings reports 
  • New product features 
  • Competitor announcements 
  • Industry changes 

Tactics Used by Crypto Day Traders

Day traders use a variety of intraday strategies to make trading decisions, these include:

  • Scalping: This strategy aims at making numerous small profits on small price changes over a whole day.
  • Range trading: This trading strategy uses resistance & support levels to determine prices, as well as for purchasing and selling decisions.
  • News-based trading: As the name suggests, this trading strategy makes decisions based on news.
  • High-frequency trading (HFT): This type of strategy uses a sophisticated algorithm to identify emerging trends & recognize marketplace shifts, then creates bid-ask spreads that are advantageous to traders.

Characteristics of a Crypto Day Trader

For you to become a successful crypto trader, there are some characteristics that you should aim to possess:

  1. Knowledge and experience in the crypto market: For you to become an effective trader, you should be both familiar with the market and have a vast knowledge of cryptocurrency behaviours. You should have the ability to know the factors that affect the price’s rise and fall. You should also have experience in forex trading so that you can get a hang of how trading pairs work.
  2. Must have sufficient capital: All traders should have Risk Capital. This refers to the money that they can afford to lose. Moreover, having risk capital prevents and protects the traders from emotionally trading and/or falling into financial ruin.
  3. Have a trading strategy: As a trader, you need to have an investment thesis. Your personal trading strategy should give you an edge over the rest of the market. There are several different trading strategies that cryptocurrency day traders use, such as swing trading, arbitrage, and trading news.

Additional Characteristics Include:

These characteristics also include a certain type of skillset for the individual themself. Most of what separates those that lose in crypto daily trading from those that profit is that the successful ones are determined to make a profit no matter what it takes. In addition to having developed day trading strategies, here are some other skills that you need to have:

  1. Be disciplined & focused: Let’s face it, without discipline, you will be doomed to fail in life, and day trading is no different. Even if you have a profitable strategy, without discipline, you will still incur lots of losses. You also must remain patient during intense moments. You will be tempted to buy or sell something even when it goes against your investment thesis. You’ll be tempted to hear bad news and panic sell. Discipline and focus are both very necessary to get the gains you’re hoping for.
  2. Have multiple news sources: You should be up-to-date with what happens in the crypto and forex market. This will give you insights to use in your trading sessions.
  3. Access to analytical software: Despite this being an expensive tool for many day traders, this is something that can potentially improve your investment success. Swing traders rely more on analytical software than on news.
  4. Access to a trading desk: As a crypto day trader, you should have simultaneous access to all trading equipment that will help you make swift decisions and act in real-time.

When is the Best Time to Day Trade Crypto?

Trading crypto can prove to be a fair bit difficult, especially if you aren’t familiar with any type of trading strategy. If 9 or 9.5 out of 10 people fail to make money trading crypto daily, that should tell you something. The ones that do make money set themselves up with the right scenarios, and are probably a little lucky too.

That said, the high volatility of crypto is a window full of opportunity, but it could also be a doorway to lots of suffering and losses if you aren’t careful.

So, when is the appropriate time to day trade cryptocurrency? Let’s jump into it. Keep in mind these times are local to us here in Queensland where the timezone is GMT +10. Although we have the earliest morning in Australia, it means we’re also well-prepared with our day fully started as the rest of the country and Asia start to wake up.

Best Time of Day to Trade Cryptocurrency

In 2020, crypto has taken on a strong correlation of over 95% with the S & P 500. In other words, BTC’s price is highly dependent on the movement of the S&P index. CoinDesk has a telling graph (found here) that illustrates Bitcoins and the S&P’s relationship up through July 2020. Ever since this correlational phenomenon began earlier this year, more people have been trading Bitcoin during the American afternoon (4am here in Queensland).

A July 2020 Cointelegraph article produced similar findings. As the report recorded, in 3 days the largest volume of crypto was traded around noon local time for New York (2am for us here in Queensland).

Although it is smart to consider the USA news cycle when you think about the price of Bitcoin given the correlation, other places should also be considered.

There is a significant fraction of crypto trading that takes place in South Korea. As a result, a lot of crypto news there has the potential to shift the market. The trading activity that takes place on Korean exchanges is some of the highest in the world, so the beginning of the trading day there can very important. (GMT+9). Trading happens in the early hours of the morning, and more precisely, just as Korean banks open at 9:00 am local time, which is 00:00 GMT.

Nevertheless, the high quantity of trading during working hours in Korea, and Asia in general, gives a reasonable climate for traders.

After a large portion of the action calms down in the American West Coast, it is the middle of the night in Asia, & market activity may decrease. As Australia and New Zealand awake closer to the Asian morning, there may be supplementary action, but the threat of surprises hops only when the cycle fulfils its completion & Koreans are active once again.

To summarize, the American trading day seems to dictate the current market cadence. There are some other times of day that are of-interest, however, they don’t carry the same weight as the trading volume during normal trading hours in the USA.

Crypto Day Trading is Extremely Risky

It’s hard to say what the best crypto trading strategy is. It depends on your personal appetite for risk. If you’re feeling peckish for the riskiest type of trading, then day trading cryptocurrency might be right for you. However, again, for the record, cryptocurrency day trading is not for everyone, and the vast majority of people lose money! I’m not just saying that because I have to, it’s true. Day trading is a very risky endeavour.

Although this type of trading can be extremely risky, it can be extremely rewarding as well. Many day traders look to make quick profits from their investments and use a specific day trading strategy to make money. By trading different crypto multiple times a day, the best crypto traders take advantage of crypto’s high volatility. Some traders even rely on day trading as their only source of income. As we said earlier, this type of day trading may not be for everyone.

To begin to learn how to effectively day trade cryptocurrency, it is important to first understand the basics of trading and crypto. Before focusing specifically on how to day trade cryptocurrency, we will first discuss some of the more general, fundamentals of day trading strategies, as well as cover crypto market trading as a whole.

Common Terminology:

Day Trading: As the name suggests, day trading involves making several to dozens of trades in a single 24-hour trading window. Traders typically base decisions on technical analysis and sophisticated charting systems.

Volatility: This is the amount of fluctuation in the measurement of stability within a security’s price. Volatility is a calculable figure, usually determined by a standard deviation based on a compounded capital return over a given time period. In other words, volatility measures if a stock or cryptocurrency is stable, or if it’s likely to fluctuate, and by how much?

Fiat Money: This is the type of money that has dominated the monetary system for the last few centuries. It is typically a paper currency that is issued and backed by a national government or central bank. However, other examples such as the Tenino Wooden Dollar, a wooden dollar offered by the small town of Tenino in the USA, have deviated from the standard.

Swing Trading: This is a trading method based on identifying advantageous fluctuations called “swings” in the price per trade of securities. Swing trades happen across security classes and may include stocks, commodities, or cryptocurrencies over a given period of time from a few days to a few weeks.

Stop-Loss Order: This is an order to buy or sell a security like a stock, commodity, or cryptocurrency once it reaches a specific, predefined price, known as the “stop price.” Once the stop price is reached, a stop-loss order then becomes a market order.

Frequently Asked Questions

How do you conduct a crypto day trade?

Day trading, as mentioned earlier, refers to making several to dozens of trades within a 1-day window. Day-traders typically base decisions on technical analysis and sophisticated charting systems.

Can you day trade crypto?

Anyone can day trade crypto. However, first, you need to dedicate yourself to the right training, education, and discipline before risking any of your money. As we’ve made clear throughout the article, it’s very easy to lose money by day trading cryptocurrency. While the exact figures are hard to come by, CoinTelegraph estimates 95% of day traders lose money and fail. Forbes estimates that only around 10% of traders are successful with 90% losing some or all of their money.

Patience is very important, and it’s starting to become a rare trait. Yet, even if you are patient, it is extremely unlikely that you predict the market correctly 100% of the time. We are long-time HODLers ourselves, and we hope the same for anyone the uses Swyftx! We like to buy and hold!

Can you make money day trading crypto?

While some sophisticated and/or lucky traders make thousands, if not millions from day trading, other people are not so lucky. In fact, 40% of traders who start to day trade stop after about 1 month, and 80% of traders quit within the first two years. It’s said that between 90% and 95% of people lose money day trading. Oftentimes they stop trading altogether, or they choose a different trading strategy. 

Written by Kurt Hogan

Written by Kurt Hogan


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