The crypto market has over the past few years spawned an army of both day traders and long-term believers in the blockchain. Many, until December 2021 had dreams of retiring both early and rich.
At the time of the great crypto bull, they were capitalized on crazy market momentum and were fed a diet of news and analysis proclaiming anything crypto was going to da the moon.
In this article, I’ll show you how to approach bitcoin and crypto day trading; not as a blind believer in blockchain but as a calculated speculator who knows exactly when to hold 'em and when to fold 'em.
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Before we get to the nuts and bolts of a day trading crypto strategy, a little perspective’s needed.
Bear with me, this story is long but relevant.
2018 will forever be remembered as the great crypto bull market that even went on to surpass the Dutch Tulip Mania of the 1630s. For much of that year, I was clueless as to what cryptos even were, preferring to trade stock indices or Gold CFDs.
But I had friends heavily invested in Bitcoin. some even have the audacity to tell me, I need to get in Bitcoin asap.
They were boasting how much money they were making; spending obscene amounts of money at the local bar, and some were even quitting day jobs to focus solely on day trading cryptos. They often asked me, if I'd ever made a few hundred % on any investment in my trading career?
I kept my mouth shut. I like to keep my market maneuvers to myself.
With leverage that CFD trading offers, a few hundred % on a single trade outcome (relative to the risk taken) is quite normal but they would never understand that.
At the time, Bitcoin was trading at $6k. I was impressed at the move but told my buddies it was probably going to hit the psychological barrier $10K, and then collapse.
A bubble’s a bubble, whether it's tulips, real estate, pork bellies or corn. As far as money goes, human nature never changes.
I waited – Bitcoin shot straight through $10K – making me look idiotic – and didn’t stop till it hit $20K.
I could see guys getting rich all around me and here I was, having traded markets for over 15 years, feeling like a pauper in comparison!
I was going to have to rethink my whole premise of how markets worked. I had to admit the argument for investing in cryptocurrencies seemed compelling.
● The blockchain was going to revolutionize the world.
● It could be used for world trade
● Bitcoin allowed anonymity.
● There was a limited supply
● The Fed couldn’t print it out of thin air.
● It was the first completely online bull market open to mass participation
● It was giving back power to the people
● It was going to a $100,00 or more apparently
However, I resisted the urge. And was secretly shaking my head, hoping Bitcoin would return to gravity so I could load up.
It wasn’t long before things started going awry
Governments were concerned, JPMorgan's Jamie Dimon was concerned, the Fed were concerned, and regulators started to ban exchanges. And the price started falling hard.
I mention it for one very important reason – to trade the markets successfully, any market whether its crypto CFDs, stock index CFDs, or Gold CFDs you need a trading plan.
None of my friends had one, and it came back to bite them in the butt.
As a full-time trader, I’ll make one thing clear – if you don't have an exit plan you are doomed to failure in this business.
The bizarre idea of HODL
When I first heard this I couldn’t believe it. If you’re unaware of this funny acronym It stands for hold on for dear life.
I mean are you kidding me?
I was shocked that so-called serious investors were spouting this nonsense as a legitimate investment mantra. It goes to show how clueless most crypto investors were back then, I’m sorry to say.
Listen, If you're going to make money with Bitcoin, any other crypto, and if you're going to day trade cryptos for sure, you're going to need both an entry and exit plan.
Traders use the price chart to evaluate the market, predict trends, and even develop trading techniques. You'll know why the market is going up, down, or sideways after you understand how to read charts, and you'll know which technique to utilize in each direction.
In the two years since then, I've traded Bitcoin many times at Mitrade platform.
Now let's look at a typical chart on Bitcoin▼
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Bitcoin and the other main cryptocurrencies are good for trading – if you know what you're doing that is.
Price moves are dramatic. Collapses are stunning. Consolidations are followed by massive increases in volatility.
The reason I love the crypto market so much is, short-term trading strategies that I typically use on a daily chart, work a charm intraday on Bitcoin, and the others.
If you want to know more about day trading, you should read Jesse Livermore, who first observed different stocks and markets have different personalities. That was nearly a hundred years ago. But his observations are just as accurate today as they were then.
There's a perception that to day trade, you need multiple screens, need to watch multiple timeframes, and have access to a constant diatribe of news.
If this is what you want, that's fine; but it's far from necessary.
I've made a career out of trading the insanely simple patterns there are. The indicator I ever employ is a short-term simple moving average.
Let's look at the simple day trading strategy.
Timeframes 2 hours
I am going to use a 2-hour chart.
Anything lower than this IMO has far too much random noise. Whilst anything higher and you’re getting into the realms of swing trading, not day trading.
The 2-hour chart, in the crypto market, seems to work well for the system I’m going to teach you.
The only two things you are going to be looking for a trading setup are:
● A red candlestick bar
● A 10-bar simple moving average
The filtering process
In trading, we always need to filter market noise from tradeable market edges. The hardest part of day trading is passing up lower probability set-ups and waiting for the higher probability ones.
The filter system works as such:
● The most recently closed candle must be red
● It must also be above the 10 bar SMA.
● Or, if below, it must be touching the moving average.
If the most recently closed bar is red, and one of the other criteria are met we then:
● Place a buy entry stop order 2 points above the high of the red bar.
● Place a protective sell stop at the value of the low of the red bar.
Cancelling – a secondary filter
If the order isn’t triggered by the close of the next bar (in 2 hours ) then cancel it. The setup has lost its effectiveness. And we look for a new opportunity.
If the order is triggered then we prepare to protect our trading position. This can mean either open profits or reducing the risk exposure.
This is done via the trailing stop.
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After the first candle in our trade is closed:
● Move the protective stop to the value of the low of that bar.
● If the value is lower than the value of the original stop loss do nothing.
● As each bar moves consecutively higher, move the stop to new low
● Do this until stopped out
Here are three images of this strategy in action.
Don't dismiss this system because it's simple. I have made a career out of this type of thing.
Many traders choose to fill up their charts with all sorts of things. Trendlines, support resistance levels, fib levels, MACD, RSI, etc
When you're day trading you need to be able to think quickly, and if you're processing too much data or metrics it is going to confuse you.
Day trading is hard enough because you can spend long hours at the pc, waiting for a setup to come along. This can lead to lapses in concentration.
After sitting for hours, worrying when a setup will come along, and questioning whether you are going to make money that day it's easy to start placing trades you shouldn't.
Also, trading is the most emotional type of trading there is. Money can be made, and lost in record time, which can lead to overconfidence or fear of the market.
You need a clear head when day trading cryptos.
If you win money quickly, you can become greedy. If you lose money too quickly it can start you on a path of revenge trading.
Yep, day trading is hard – but is also why we are compensated so highly for it.
Successful trading is a business, not a hobby. Like any business, you have profits and expenses. How you manage them both determines how far you go. Nowhere is this truer than when trading forex CFDs.
Day trading cryptos offer fantastic rewards, regardless of whether it goes to $100K or never again goes about $20k.
The volatility in this asset class is truly immense and it is a day trader's dream.
Have you ever known a business that required no customers, no selling, was location independent, no stock purchases, and no marketing?
Have you ever known a business that was location-independent and didn't require a special business premise? Or that didn’t require a special license? Or one where you could make up your work hours?
There is no business in the world like that, except one. Trading.
Here at Mitrade we want to help you make your trading journey both as enjoyable and as profitable as it can be.
Day trading cryptocurrencies is just one of several routes to do that.
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What can you trade on Mitrade?
Mitrade allows you to trade CFDs on major cryptocurrencies, as well as over 300 different US shares and forex. You will trade Bitcoin, ethereum, ripple, dogecoin, SOL, and other cryptocurrencies. The following are some of the cryptos you can trade today.
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1. What is the greatest cryptocurrency for day trading?
Volatility is what day traders are looking for. Many altcoins and tokens have the highest levels of volatility. However, in the cryptocurrency area, I do not recommend day trading altcoins because your position can rapidly blow away.
The forex market is the primary market for day traders because of the continuous small volatility. However, cryptocurrency has been more volatile than forex, so I propose trading the mainstream crypto——Bitcoin. Bitcoin's market is rather stable now, and it has considerable liquidity.
2. What are the best day trading strategies?
There are several tactics to explore for investors who are interested in day trading. One of the most effective strategies may be news trading. The market is generally affected directly by the announcement of the news, resulting in spectacular price changes. Many economic data releases move markets ahead of schedule, causing a consolidation pattern.
3. What are the risks of day trading cryptocurrency?
The majority of day traders will lose money. Because the more you trade, the more you are to make a mistake. Another is the fees may be high. A tiny fee is charged for each transaction, which can quickly mount up when you trade daily.
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