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Trading Rules the Crypto Day Trader Needs to Know

Jimmy Khan

May 25, 2022 15:18


If you are reading this, I'm presuming you understand the basics of cryptocurrencies, such as the fact that crypto is digital or electronic money that is not backed by a government or bank. To keep your funds safe, you should keep them in a digital wallet, ideally on a computer, thumb drive, or mobile device. Furthermore, you should know that cryptocurrency is incredibly volatile, hazardous, and simple to manipulate.

If you still want to trade cryptocurrencies, let's speak about security. To begin, register with a trusted trading platform like Top1 Markets or Robinhood. Yes, there are other options, but you have to start somewhere. These two well-known, reputable organizations will perform the work until you can sift the good from the bad.

Stay away from any expensive online brokerage businesses or cryptocurrency exchanges you've never heard of. Many are scam sites that take advantage of your inexperience. Please do basic research before handing over your money to unknown businesses. Here's a thought: Before transferring your funds, call or contact the brokerage to check its quality of service. Check to check whether the firm exists at all.

Second, even though hundreds of cryptocurrencies (some genuine, some not) stay with the most popular and liquid: Bitcoin. 1.19 percent for bitcoin BTCUSD. Feel free to trade other cryptos after gaining more expertise (after bitcoin, Ethereum ETHEUR, 0.88 percent, is the second-largest).

Once you've chosen a platform, it's time to decide what you want to invest in. Market volatility is a necessary evil for crypto day traders. The turmoil that scares away buy-and-hold investors is the same chaos that provides chances for day traders to profit. The day trader requires both volatility and liquidity to engage successfully in the crypto market.

According to Tally Greenberg, director of business development at All nodes, success as a crypto day trader involves more than just reading the charts. "Knowing what the blockchain is and what it accomplishes and its network size, governance, and protocols," Greenberg explains, "will help you evaluate the overall state of your potential investment." "Be prepared to study a lot and keep up with blockchain changes on your chosen assets."

A technical grasp of the technology and team behind an altcoin project, according to Greenberg, offers traders a competitive advantage. When asked how a day trader should choose which currency to trade, Greenberg stressed great thought. "Investing in the top 15 to 20 currencies by market cap is a popular crypto strategy. Even so, I would proceed with care, "Greenberg continues. "Not all of the coins on this list make perfect sense, and you'll have to do your investigation to figure it out. Day trading in cryptocurrency is a high-risk activity, and only invest money you can afford to lose. You'll be lucrative if you treat day trading like any other serious profession and study all there is to know about the skill and the assets you're dealing."

Consider asset liquidity, volatility, and trading volume when deciding what to invest in.

Asset liquidity is the ease with which an asset may be converted into cash without affecting its price. When a trader performs a deal, and the exchange honors the order, the price of a crypto asset might vary. Slippage is the difference in pricing, and in the crypto markets, a few minutes may make the difference between a significant profit or a large loss.

A lack of liquidity in the cryptocurrency market might be disastrous, causing price slippage and increasing the risk of a flash crash. A flash crash occurs when a massive market sell order clears out the top purchase bids in the order book. Traders aim to leave their positions as quickly as possible, and if no purchase orders are available, the asset's price might plummet. In the past, exchanges have refunded consumers millions of dollars in losses due to flash crashes.

A day trader's greatest friend is understanding and accounting for volatility. The unpredictability of crypto price swings is referred to as market volatility. The news cycle, economic statistics, and research reports are all factors that influence market volatility. The exact causes have a significant (or no) influence on various crypto assets in the crypto markets.

Compared to more famous and well-known cryptocurrencies like bitcoin or ether, altcoins with lower market capitalization have the most volatility.

The total amount of cryptocurrencies exchanged over a certain period is trading volume. The trading volume of a cryptocurrency is a measure of overall market interest. A cryptocurrency with a large trading volume has more liquidity. Similarly, a cryptocurrency with excellent liquidity frequently has a higher price. While the cryptocurrency market is very liquid, it is also quite volatile; not all cryptocurrencies are created equal. Crypto day traders should examine an asset's trading volume closely to see whether it can be sold swiftly and at a better price than obtained.

The cryptocurrency industry is still in its early stages, and the blockchain technology that powers it is unique, posing crypto-specific market issues. One example is the price link between bitcoin and all other cryptocurrencies. If Bitcoin miners leave a nation, for example, the cryptocurrency's price might plummet as miners dump their holdings. When bitcoin's price falls owing to downward pressure, the altcoin market follows suit.

Finding a crypto asset with high liquidity and volatility is a good place to start when looking for the best cryptocurrency to trade. Other variables particular to the crypto issue should be considered while deciding whether or not to participate. What method is used to mine or mint it? Is the coin getting a lot of attention? When should you liquidate your losses if the coin's price does not increase by a specific period?


Cryptocurrency Day Trading Strategies

To succeed, you'll need a lot of nerves and a successful game plan in addition to an easy crypto trading platform. Even while rigorous research and a good day trading plan will provide you with a competitive advantage in the market, they do not guarantee success. Because cryptocurrencies are very volatile, their values fluctuate often. Nonetheless, traders use several quite reliable day trading crypto tactics.


Scalpers make up the majority of trading on financial markets. Scalpers benefit by taking advantage of rising trade volume. A scalper, for example, may terminate a position seconds after it is opened, and most scalpers employ automated crypto trading bots to increase the frequency of their trading sequence. The goal is to profit from minor price swings over short periods.

Most scalpers use leverage to increase their earnings by trading on margin or futures contracts. Scalpers are only interested in limited price ranges. As a result, having a large bankroll is essential for this technique to function. Trading with leverage is very dangerous, and you must use risk management concepts to succeed.

Trading the Range

The notion of support and resistance on candlestick charts is frequently used in range trading cryptocurrencies. As a result, studying a candlestick chart and identifying support and resistance levels is essential for range trading success. As the name indicates, range traders recognize bitcoin price ranges inside market structures and plan trades based on such fields. The goal is to purchase cryptocurrency when it reaches support and sells when it approaches resistance.

Range traders believe that support and resistance will be maintained inside specific price ranges until the price movement breaks outside of them. As a result, the price action may be pushed higher by the bottom confine of a price range, while the price action may be pushed downwards by the top confine. However, depending on how many times it reaches a support or resistance level, the price movement might break out of a range.


This day trading method entails purchasing bitcoin on one marketplace and selling it at a better price on another. The spread refers to the price difference between the purchase and sell prices. The cryptocurrency industry is essentially unregulated, and anybody may open an account on a cryptocurrency exchange. Due to variances in trading volume and liquidity across businesses, this might result in significant spread disparities.

To become an arbitrage trader, you must first create accounts on exchange systems where you are aware of big spread disparities. This implies that companies will charge various amounts for the same item. For example, there was a point when the price of Bitcoin in Korea was 40% greater than in the United States. Buying BTC in the US and selling it in Korea resulted in large gains for day traders.

Market Trends in Cryptocurrency

To assess the figures, a competent crypto trader will rely on their expertise and understanding. Chart patterns, volume, price, and other technical indicators are just a few things they consider when deciding whether to buy or sell cryptocurrency. Of course, the idea is to buy cheap and sell high. Still, since crypto is so volatile, day trading crypto will need even more technical research than day trading other assets, such as equities issued by firms on which fundamental analysis may be conducted.

Remember that, unlike a firm with inherent value or future promise based on its goods or board of directors, cryptocurrencies are types of money whose value is solely determined by the market. The crypto market has established patterns that may be used to day trade Bitcoin or any other cryptocurrency. New cryptos are sometimes introduced, and early adopters will have the option to get in on the ground floor.


Avoid These Mistakes While Day Trading

Although day trading is popular among cryptocurrency traders, it is considered dangerous due to the volatile nature of the cryptocurrency market. As a result, traders often lose money. Here are some frequent day trading cryptocurrency blunders to avoid.


Due to its extreme volatility, the crypto market offers a plethora of day trading options. However, being too enthusiastic and investing large sums of money in day trading might result in severe losses.

Instead of trading emotionally, professional traders advise sticking to logic and having a plan. Because there are so many trading chances, most new traders may find themselves trading everything, leading to poor judgments. It would be beneficial if you could set your emotions aside and go through with your strategy.

Trade More Than You Can Afford to Lose

Beginners sometimes invest their whole life savings in bitcoin trading to become wealthy soon. Cryptocurrencies are speculative financial products with large price fluctuations that may occur at any time, and even skilled traders can lose considerable amounts of money.

On the other hand, day trading is a smart method for generating income and building wealth over time, rather than a get-rich-quick gimmick. It requires a good strategy, execution, risk management, and trading abilities. Cryptocurrency traders with good risk management abilities may avoid losing all of their money or suffering large losses.

FOMO Trading (fear of missing out)

Beginner traders are prone to exiting trades early to minimize losses or entering trades late to avoid losing out on a trend. While day trading crypto, most traders are led by the fear of missing out syndrome, which often leads to large losses. Because cryptocurrencies are speculative investments, avoiding FOMO might be difficult, and it is critical to learn how to do this to succeed.

If you want to prevent trading FOMO, adhere to your trading strategy. You may also choose the maximum allowable losses or the profit level you want to quit a transaction. After all, the cryptocurrency industry is full of surprises, and new ways to generate money appear every day. So sit back and let FOMO pass you by.

Not Doing Your Research

Most traders depend on crypto trading signals from individuals who claim to be experts on social media platforms in their early days. These individuals may provide you with incorrect information, resulting in huge losses. Before following their tips as a prudent bitcoin trader, you should always perform your study before following their tips.

When it comes to knowing when to join or quit the market, a prudent trader does not rely on information from other traders. Learn how to do technical analysis and pay attention to news stories that might impact the market. There are several online resources available to educate you on basic trading techniques so that you may progress as a trader.

What Makes Cryptocurrency Day Trading Different From Stocks?

The stock market is unpredictable, but crypto is more so since it is unregulated and brand new. It has to be seen if crypto will stabilize over time.

Stocks provide dividends, but crypto does not. Dividends are payments made to shareholders from a company's earnings. Stocks are ownership shares in a firm, but cryptocurrency is merely cash with no payoffs other than its value rise. In truth, crypto was not designed to be traded but rather used as a means of exchange. Because crypto is unregulated and several exchanges, traders might benefit by buying crypto on one exchange and selling it on another at a greater price. This is a different day trading method not mentioned previously, but it may be quite profitable for crypto traders who can profit from price disparities like this.

Is Cryptocurrency Day Trading Legal?

Trading cryptocurrencies is unquestionably legal. Furthermore, since the cryptocurrency industry is still largely unregulated, cryptocurrency day trading maybe even less controlled than day trading on the stock market.

A crypto day trader may utilize their preferred trading platform without worrying about the SEC or the restrictions imposed by a cryptocurrency exchange due to government regulations. However, when big financial organizations like the Federal Reserve establish their cryptocurrencies, cryptocurrency traders may find themselves in a different regulatory environment. Some financial analysts believe that the introduction of federally regulated crypto will spell the end of the crypto business, noting what happened to uncontrolled media downloading tools such as Napster and Limewire after iTunes was introduced.

The People's Bank of China has already launched the digital Yuan, and major US institutions are building their crypto. Only time will tell how government-regulated cryptocurrency affects the game, but trading Bitcoin or any other cryptocurrency is akin to a gold rush until then.

Do Cryptocurrency Day Trading Rules Apply?

They don't, no. The Securities and Exchange Commission (SEC) requires stock investors and day traders to follow particular standards, and executives of a firm must file papers when they purchase and sell stock in their company. To file taxes as a day trader, day traders must have a $25,000 or more brokerage account balance and complete additional requirements.

In general, the stock market has laws to avoid market manipulation and actions that would destroy investor trust (as much as feasible). In contrast, crypto is the Wild West, at least for now.


Day trading cryptocurrency might be quite successful in the end. To take advantage of the benefits of the crypto-verse, day traders use intraday crypto trading tactics, and they will most likely close their holdings before the day finishes. On the other hand, winning involves more than simply developing trading discipline and implementing a good bitcoin day trading plan.