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Daytrading on Crypto Markets: Good Idea?

Altcoin Trading Blog
06/22/21 · Crypto trading technique

About This Blog Post

  1. Filed as Trading Technique
  2. Uses bitfinex ( + more posts) 
  3. Uses bitforex ( + more posts) 
  4. Uses ftx ( + more posts) 
  5. Uses phemex ( + more posts) 
  6. On the same topic: Daytrading on Crypto Markets: Good Idea?
  7. On the same topic: Cryptocurrency Strategy for Beginners
  8. On the same topic: Time in the Market vs Timing the Market
  9. On the same topic: On-Platform Automation: Where to do basic algo trading directly on the exchange
  10. On the same topic: How is it with arbitrage opportunities in South Korea
Daytrading means entering and exiting the market in a single day. Is this a good crypto trading strategy?
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Coinrule

Daytrading is quite a broad term for the style of trading that has you enter and exit the market during a single trading session, preferably in profit.

You can be a daytrader if you engage in scalping crypto, most types of arbitrage also fall into daytrading but you can in fact aim for larger swings on the crypto markets that will need several hours to develop.

In the latter case, the border between swing trading and day trading gets a little blurry, since bitcoin market hours are 24/7/365.

You probably get the idea, though: You daytrade crypto when you flip in and out of a position within a few hours.

Daytrading in crypto: The Psychology Aspect

Daytrading crypto is indeed possible, but be aware that it is really a good fit only to some type of personalities.

  • If you daytrade, you need to sit down glued to the chart until your trade reaches completion.
  • Oh yeah, you need to actually have this planned quite strategically: What do you do in every possible market structure - close, wait, stop, take profit. There isn’t room for emotion or hesitating.
  • There was the magic word: Stop-Loss. You will probably want to use automatic stop loss, which means you will get stop-hunted. So if you are looking for a personal development project, try building up your strength of character to such level that you will be able to quit a losing trade without automatic stop, just on alert.

Aside from the psychology of the trader which must be compatible with this style of trade execution, let’s now look at some basic rules of the job.

Go for smaller profits

If you want to close your position as soon as possible and with profit, don’t look for huge profit from every single trade.

You might find those in illiquid markets, such as when a new coin is released with much hype and the trading just opens, or in market squeezes, when there is a liquidation cascade. In both cases, those are short-lived.

Choose a deeper market

If you see a high-volume breakout on the bitcoin market, check your favorite TA indicators and decide to either buy or stay out. On BTC/fiat markets your order will fill without hurdles and you will make it safely out too when you want to, at least if you’re trading on reliable outfits and not on a tiny obscure crypto exchange.

If you see a surprise parabolic growth on a small altcoin market, remember that the chances of it catching on are next to nothing, so don’t give in to FOMO. If you buy emotionally during what traders call “pump”, there might not be enough sellers later if the market is too thin for that particular cryptocurrency. The worst case scenario is getting stuck with a bag of altcoin that slowly dies out and eventually gets delisted from the exchange.

Don’t make excuses for being stuck with your past mistakes.

To put it in simple terms, most altcoin markets are simply not deep enough for technical daytrading. If you are okay with speculating on an incoming pump, you might be successful here and there, but that’s more similar to gambling than to trading. Technical daytrading for smaller profits is safer on big markets like BTC/fiat or ETH/fiat.

Daytrading is the technical and strategic legwork and it also means you don’t want to hold that altcoin for months of years, so don’t use that as an excuse for being stuck in your past gambles.

Choose a reliable exchange

If you are only interested in altcoins with larger markets, go for trading outfits that used to be known as “bitcoin” exchanges.

  • Bitfinex trades ETH, ETC, XMR, DASH, ZEC…
  • Kraken trades ETH, LTC, XRP, ZEC, XMR…

For new launches, you might find quite some on Kraken these days, but generally the thinner market plays concentrate on places like YoBit and BitTrex.

If you want to daytrade derivatives, your only liquid crypto futures option in 2019 is still BitMEX.

Charting

For your crypto daytrading chart analysis needs, TradingView FREE Account will be enough unless you need timespans shorter than one minute.

Summary

Daytrading in the technical sense is indeed possible on cryptocurrency markets.

It is an emotionally exhausting and time-intensive work though, therefore it is not a good fit for every crypto trader.

If you still want to give daytrading a shot, you should pay attention to the choice of markets with which you’ll engage (you might find the Wyckoff avoidance strategy useful) and to what tools and platforms you’ll be using.

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