Bitcoin Day Trading Tips
First Published date: 2. September, 2022Last Updated: 13. March, 2023Fact-checked by Adrian Müller
Bitcoin is one of the newest assets available for day trading. The rapid spikes and falls in the cryptocurrency’s price make it an excellent asset for day traders. However, the same volatility that makes Bitcoin day trading profitable also renders it risky. That’s why only a handful of traders emerge victorious at the end of each trading session.
To succeed in Bitcoin day trading, you must choose a suitable exchange and adopt the perfect strategy. You also need to get familiar with the latest technologies. Keeping up with the latest development in Blockchain and cryptocurrency is also necessary. Discover more detailed and helpful tips in the following discussion.
Table of Content
Understanding The Basics Of Bitcoin Day Trading
Day trading seeks to profit from an asset’s short-term price movement. Unlike long-term investors, day traders aren’t betting on the stability of prices. Instead, they buy and sell a volatile asset on the same day to end up with more money than they had at the beginning of that session.
The volatility of Bitcoin has made it a profitable asset for day trading. Rarely does a stock or traditional financial asset’s price jump 10-15% during one trading day. But with Bitcoin, it’s pretty common. As a result, day traders experienced in cryptocurrency dealings have made Bitcoin their latest target investment.
To day trade Bitcoin, you must be on a crypto exchange platform. This platform allows the user to place a trading order. Depending on your Bitcoin day trading strategy, you might choose a market, limit, or stop-loss order. You will also dictate the price, quantity, time frame, and other relevant details about your trade.
After a day trader places an order, they spend the rest of the time closely monitoring the trade. Various analytical tools assist the trader during this period. Also, trading software or bots are available to track many ongoing trades and price fluctuations. These technologies are necessary for making sense of the huge amount of data generated during one day.
Suppose Bitcoin was trading at its average rate at the beginning of the trading day. A day trader entered the position during this time. During the day, some major news or announcement dramatically increased the demand for Bitcoin in the following hours. The day trader would close their position at that point and thus take home profits from the price fluctuation.
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Essential Tips For Bitcoin Day Trading
Bitcoin day trading might sound like gambling – you enter a position and wait for luck to kick in during the day. However, that is far from the truth. Of course, sometimes disaster strikes the crypto markets without any prior warning. But besides those few instances, professional Bitcoin day trading is strictly calculative and strategical.
It is well-known that day trading doesn’t agree with most investors. Over 90% of day traders lose their money during a session. When dealing with a volatile asset like Bitcoin, this can be even more disastrous
So, you must choose the best platform, follow the most suitable strategy and educate yourself as much as possible to make it as a Bitcoin day trader. Here are some essential tips for the aspiring trader:
1. Choose The Correct Platform
It’s essential to be on a platform that runs fast, is secure, and offers exchange and asset liquidity. Otherwise, you cannot take and execute quick trading decisions, which is mandatory in day trading. Coinbase, Kraken, Gemini, and Crypto.com are some of the most trustworthy and reliable platforms to day trade Bitcoin.
Background and Credibility
If you live in America, you cannot trade on crypto platforms that are non-U.S. regulated. So, ensure you are on a U.S-regulated platform before signing up or depositing. You must also check the platform has been in business for several years. Long time activity of an exchange speaks of its credibility and trustworthiness.
Finally, analyze online reviews about a platform before joining it. Do other traders complain of fraudulent attempts or other suspicious activity on the platform? It’s essential to be clear on such matters before signing up.
Asset Variation
All major crypto exchanges host Bitcoin. But you should also check whether they offer altcoins. A platform that hosts a wide selection of cryptocurrencies allows you to diversify your investment.
Emergence or price spikes in altcoins significantly affect Bitcoin. You can trade your Bitcoin linked with a high-performing altcoin to balance things out. For that, you would need your platform to offer that coin.
Fees And Deposit Methods
You pay a transaction fee for every trade you execute on a platform. This is how the exchange makes an income and funds the cost of hosting the system. Before joining any site, you should compare its fees with similar platforms. Various online review sites offer detailed comparisons in tables or charts, which can help make decisions.
Also, make sure the exchange you choose accepts your preferred deposit methods. Most platforms will be compliant if you want to deposit using a bank. However, there are fewer options for credit cards or PayPal.
Exchange Liquidity
During peak hours of day trading, you might have to swiftly convert your Bitcoin into other assets. At the same time, this exchange shouldn’t affect the price. This is why you need a platform that offers superior exchange liquidity. Platforms with excellent liquidity tend to have high trading volume, many active traders, and low fees.
Also, ensure you can easily send your assets to other platforms or crypto wallets during the trading day. This helps you take advantage of multiple platforms’ price fluctuations and make the most out of a session.
Interface, Tools, and Security
You should join a platform that provides a user-friendly interface. App-based platforms are always preferable as they let you easily place trades from your mobile. Furthermore, the exchange should offer various charting and analytical tools. Beginners can benefit from a platform that allows shadow trading and has a collection of educational content.
Security is extremely important for a crypto exchange. Even the most advanced crypto exchanges fall victim to cyber-attacks. So, ensure your platform has two-factor authentication and stores clients’ money in cold wallets that the hackers cannot reach.
2. Use Crypto Trading Bots
Even for the most experienced Bitcoin day trader, manually handling a trade can take several minutes or more. Meanwhile, a crypto trading bot can do the same more accurately in milliseconds. Not to mention, it doesn’t experience any fatigue or stress.
Also, all other day traders use bots to process their trades. So, if you still plan on day trading Bitcoin manually, you will fall far behind the competition. In contrast, trading bots will make you a hundred times faster and allow you to place more trades than usual. This means you should make more profit at the end of the day.
How To Use Crypto Trading Bots
Crypto trading bots are artificially intelligent software programs. They follow pre-established parameters to execute trading orders.
Upon your authorization, the bot will access your account on the crypto exchange via Application Program Interface keys. You will define various trading conditions, based on which the bot will automatically communicate and place orders on your behalf.
Such a bot can sort through a vast amount of data in a short amount of time. After completion of this analysis, they identify possible trades and allocate risks. Finally, the bot sends signals (via API) for buying or selling orders to the exchange platforms and executes the trade.
Avoid Fake or Scam Trading Bots
Before employing any bot, make sure it is not fake. Many anonymous creators on crypto platforms will try to sell you scam bots that do none of the things the sellers promise. Therefore, it’s best to use crypto trading bots from well-known developers. Pionex, Shrimpy, and Coinrule are some of the most reliable bots for Bitcoin day trading.
3. Adopt the Best Bitcoin Day Trading Strategy
Most Bitcoin day traders lose money due to a lack of strategy. You must have a suitable strategy that you plan on strictly adhering to. Otherwise, the volatility of the fast-paced market can easily overwhelm you. That is when most beginners make the wrong or emotional decisions.
Here are some popular strategies for Bitcoin trading. You should adopt them according to your level of expertise and the amount of capital you have.
Arbitrage
One of the simple-to-understand strategies for Bitcoin day trading is Arbitrage. First, you buy Bitcoin at a lower price from one exchange. Afterward, you sell it at a higher price on another platform where the price is higher. To put this strategy to work, you must be on high-speed platforms offering excellent exchange liquidity.
For instance, you can buy Bitcoin at 20,000 USD from platform A. Then find a platform B where Bitcoin sells at 20,500 USD (the price differences aren’t usually this extreme). Doing this makes a small but sure profit on the trade. Plus, the profits can add up if your investment is massive.
One major advantage of this strategy is that you don’t enter a trade based on price-difference predictions. Instead, the difference already exists in the market. However, you have to move your assets back and forth very quickly. This is because the volatile nature of the market makes the price differences settle quickly.
Scalping
Similar to traditional day trading, scalping is a popular strategy for investors regarding Bitcoin. Scalpers don’t aim to make big profits from single trades. Instead, they enter many trades and take small gains from each. Ultimately it accumulates into significant profits at the end of the day.
A Bitcoin scalper seeks extremely volatile market conditions. They take advantage of this rapid price movement by entering and exiting trades quickly. A scalper might buy and sell Bitcoin and relevant altcoins through many trades in one hour.
Scalpers usually set very tight stop-loss orders. These trades automatically close as soon as the target price is reached. Crypto trading bots are useful in this situation as they can handle these highly intense and frequent trades quickly and without stress.
Award-Winning Trading Brokers:
Rating:
Regulated By:
FCA, CySEC, ASIC, FMA, FSA, FSCA
CySEC (EU), FCA (UK), ASIC (Australia)
BaFin, FCA
Demo Account:
✔ Free
✔ Free
✔ Free
Live Account:
$100
$200
0
Spreads From:
Variable from 0.5 bps
Variable from 1.0 bps in EUR/USD
Variable from 0.4 bps
Selection Of Instruments:
2000+
1000+
17.000+ (FX, Stocks, CFDs, Commodities and more)
Support:
24/7
24/7
24/7
Payout:
1 – 3 Days
1 – 3 Days
1 – 3 Days
79% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.
79% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.
Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 76% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work, and whether you can afford to take the high risk of losing your money.
High-Frequency Trading Strategy
High-frequency traders take advantage of the price discrepancies in the market that exist for short periods. This requires consistently monitoring the market for such differences and taking action within split seconds. Therefore, high-frequency trading is exclusively dependent on advanced trading bots.
Bitcoin day traders who adopt this strategy understand trading algorithms well. They also have access to sophisticated technological equipment (fast computers, low-latency networks, etc.). HFT traders often develop their algorithms.
Due to its high requirements, HFT might not be suitable for beginner Bitcoin day traders. However, if you have a background in software engineering and access to the proper gear, you should try your hand at it.
4. News Updates and Education
New updates, international events, and rumors influence public sentiment and the demand for Bitcoins. So, you must keep yourself updated on the news to predict the degree of market volatility and then time your trades accordingly.
For instance, if a major software or mobile phone company announces to offer discounts to customers who pay with Bitcoin, the demand will likely surge in the next few hours. Meanwhile, demand will fall if such a giant declares that it won’t accept Bitcoin anymore.
The same happens in response to news of pandemics, war, and political events (such as a government banning or starting to accept Bitcoin).
Besides news, intensive education and understanding of Blockchain and Bitcoin technology can benefit a day trader in making decisions. It’s the same as understanding the inner workings of a company to help you make investment decisions regarding its stocks.
It’s essential to keep updated about developing altcoins. The emergence of new altcoins always has some effect on Bitcoin prices. So, try to learn as much as possible about new coins to predict their effects on the market. Lastly, learn the basic use of trading charts and technical indicators to sharpen your edge as a Bitcoin day trader.
Conclusion
One of the most shared pieces of advice you will hear as a beginner day trader is to trade lightly. This is also true for Bitcoin day trading. Don’t try to hit the jackpot on your orders because that’s not what this trading style is about. Instead, try to make small, steady gains in a volatile market. Otherwise, you will only increase your chance of losses.
To improve yourself as a Bitcoin day trader, indulge in our rich educational content. You can also join our forums to gain peer-generated insights into the market.
About the author – D. Schmidt
I’m a German stock trader who has lived around the world. I travel extensively and believe that my experiences give me a unique perspective on global markets. I love trading! It’s always exciting to see what happens next. My goal is to help people understand the game so they too can enjoy it to the fullest. In this blog, I will share some tips and tricks that helped me along the way.
