Ready to Day Trade Crypto? Here’s Everything you Need to Know

how to day trade crypto

Introducing Day Trading Cryptocurrency

Day trading cryptocurrency can be lucrative and exciting, but it is also complex and requires an understanding of the various markets and strategies. It is important to note that day trading cryptocurrency is not something to be taken lightly, as there can be a considerable amount of risk involved. Before beginning your journey in day trading cryptocurrency, it is imperative that you understand the basics.

Day trading cryptocurrency is the process of buying and selling digital assets within a single day. The goal of day traders is to make profits by taking advantage of short-term market movements. Day trading crypto involves quick decisions based on market conditions, meaning that it is important to stay up to date on news and trends in the crypto space.

Day trading cryptocurrency has many benefits, including the potential for large profits in a relatively short amount of time. Additionally, the market is highly liquid, meaning that traders have more opportunities to enter and exit positions with minimal slippage. Finally, day trading is available 24/7, meaning that traders can take advantage of the global markets no matter their location or time zone.

However, there are also some risks associated with day trading crypto. As the market is highly volatile, it is possible to incur significant losses in a short amount of time. Additionally, transaction fees can be steep, meaning that the profits from successful trades may be reduced significantly. Finally, there is always the possibility of fraud, meaning that traders must exercise caution when selecting an exchange or trading platform.

Overall, day trading cryptocurrency can be a lucrative and rewarding endeavor, but it is important to remember that it is not for everyone. In order to be successful in the crypto trading space, one must have an in-depth understanding of the markets and the strategies involved. With this understanding, traders can maximize their potential profits and minimize their potential losses.

Overview of the Different Types of Cryptocurrency Trading

Trading cryptocurrency can be a lucrative activity, but it is important to understand the different types of trading strategies that are available. Before getting started, it is important to familiarize yourself with the different types of trades you can make so that you know which fit your goals and trading style. In this section, we will cover the most common types of cryptocurrency trades.

Spot Trading

Spot trading is the most basic and common type of trade, where one buys a cryptocurrency and holds it for a period of time. This type of trading is done on exchanges, which enables traders to buy and sell cryptocurrencies at market prices. Spot trades are relatively simple and can be done quickly if you know what you are doing.

Margin Trading

Margin trading is a more advanced type of trading, and requires some prior knowledge. Margin trading allows traders to borrow funds from a broker or exchange and use them to trade a larger position than they would be able to with just their own funds. This type of trading can be risky, but it can also lead to large potential profits.

Day Trading

Day trading is a type of short-term trading in which the trader opens and closes positions within a single day. In day trading, traders often use technical and fundamental analysis to identify trading opportunities and react quickly to capitalize on price changes. Day trading requires a high degree of skill and discipline, as well as the ability to act quickly.

Swing Trading

Swing trading is a type of trading in which traders look for longer-term price movements. Swing traders usually look to open and close positions over several days or weeks, and tend to focus on identifying and exploiting trends in the market. Swing traders usually have a bigger risk appetite than day traders, as they are willing to hold their positions for longer periods of time.


Scalping is a type of trading in which traders try to capitalize on small price movements. Traders who engage in scalping attempt to open and close many positions in a single trading session, and to take small profits on each trade. Scalping requires a high degree of skill and discipline, as well as the ability to act quickly.

Understanding Market Sentiment & Patterns

One of the most important aspects of trading cryptocurrency is understanding market sentiment and patterns. Before you start trading, it’s important to understand how the market works, and how prices are determined. In order for traders to be successful, they must be able to identify and interpret market sentiment and patterns.

Market sentiment is essentially how traders feel about the market. It can be positive or negative, depending on existing and upcoming news, events, and trends. Knowing how traders view the market is an essential part of day trading cryptocurrency. Experienced traders are always alert to changes in market sentiment, as this can be an indicator of price movements.

In addition to market sentiment, traders must also understand market patterns. These are the graphical patterns that form on charts that show the market’s direction over time. By identifying and interpreting these patterns, traders can get a better understanding of where the market is headed and can make more informed decisions about their trades.

Day trading cryptocurrency is not easy and requires a lot of research and hard work. Understanding market sentiment and patterns is a key element of successful day trading. Traders who are able to read and interpret market sentiment and patterns have a better chance of making profits from their trades.

Setting Up a Day Trading Account

When it comes to day trading cryptocurrency, the first step is to set up an account with an online broker or exchange. This account will allow you to access the markets, place trades, and manage your positions.

Before you decide to open an account, there are a few things you should consider. First, what type of account do you want? Do you want an individual account, or one through a bank or other financial institution?

You will also need to determine if you want to use a cryptocurrency exchange or a brokerage firm. Each option has its own advantages and disadvantages, so it’s important to understand which one is best for you.

Once you have decided on an account type, you will need to provide the exchange or broker with some basic information about yourself. This includes your name, email address, phone number, and other data. You will also be asked to create a password.

Next, you will need to fund your account with either fiat currency (such as USD, EUR, or GBP) or cryptocurrencies such as Bitcoin, Ethereum, or Litecoin. The funds will be used to purchase coins or tokens for trading.

Finally, you will be asked to choose a “wallet” that will store your cryptocurrency. There are several types of wallets available, and each one can offer different features. For example, some wallets may offer more security than others.

Once your account is set up and funded, you can begin trading. It is important to remember that day trading cryptocurrency is very risky and can lead to significant losses. It is important to understand the markets and use proven strategies in order to minimize risk and maximize profits.

Basic Trading Strategies and Tips

Day trading cryptocurrency can be a lucrative business, but it requires a good understanding of the market and associated strategies. Here we’ll discuss some basics tips and strategies to help you get started.

Start Small and Build Up Slowly

The key to becoming a successful trader is to start small and build up. Don’t try to go in all at once. Start with small investments, and as you build your skills, increase your investments gradually.

Create a Trading Plan

Developing a trading plan is a must when day trading cryptocurrency. Make sure your plan outlines your risk management strategies, trading objectives, and profit targets. This will help you stay on track and make more informed decisions.

Manage Your Risk

Before you begin trading, it’s important to understand the risks involved. Day trading carries significant risks, so investing more than you can afford to lose is not recommended. Set daily and weekly stop-loss limits and stick to them.

Time Your Trades

Timing the market is key when day trading, so make sure you understand market sentiment and patterns. Before making a trade, always do your research and wait for the perfect time to enter or exit a trade.

Learn from Your Mistakes

To be successful in day trading, you must be able to accept your losses. Every trader makes mistakes, so don’t be discouraged if you make one. Instead, use it as an opportunity to learn and grow. Similarly, celebrate your successes and be proud of what you have achieved.

Risk Management Strategies

When trading cryptocurrency, it is important to have strategies in place to manage the risks associated with the volatile market. Here are some tips for managing risk when day trading cryptocurrencies:

  • Set Stop Loss and Take Profit orders – When trading, set a maximum loss that you are willing to incur, and also a take profit target.
  • Diversify Your Portfolio – Don’t put all your eggs in one basket. Spread your risk by investing in multiple cryptocurrencies and exchanges.
  • Understand Leverage – Be aware of the amount of leverage being used when trading. Use a stop-loss when trading with leverage in order to limit potential losses.
  • Set Limits on Your Trading – Know your limits and stick to them. Decide on how much you are prepared to risk in any particular trade, and adhere to this.
  • Take Breaks – In times of high volatility, take breaks from trading. This will give you time to assess the market and make more informed decisions.
  • Monitor Your Trades – Make sure to keep track of your open trades so that you can adjust your positions if needed. Monitor the market constantly to ensure that your trades are in line with market conditions.
  • Use Technical Analysis – Incorporate technical analysis into your trading strategy. Look for patterns and use indicators to help you identify buying and selling opportunities.

These are just a few tips for managing risk when day trading cryptocurrency. Always remember to research each cryptocurrency and exchange thoroughly before trading to get a better understanding of the risks. By following these strategies, you can minimize the risks associated with day trading cryptocurrency.

How to Select an Exchange for Day Trading Cryptocurrency

Day trading cryptocurrency can be a lucrative activity, but it is important to choose the right exchange for it. It is essential to select an exchange platform that offers the features and tools needed for successful day trading. Below are some key factors to look at when selecting an exchange.

Trading Fees

The most important factor when selecting an exchange is the fee structure associated with it. Exchanges normally charge traders fees for each transaction made on the platform. It is important to understand the fee structure of the various exchanges as these fees can significantly impact trading profits.

Security of Funds

When selecting an exchange, it is important to choose one that is highly secure and reputable. Most reputable exchanges use advanced technologies such as cold storage, multi-signature wallets, and secure sockets layer (SSL) encryption to protect user funds from theft and malicious activities. It is highly recommended to carefully review an exchange’s security protocols before depositing any funds.


Liquidity is also an important factor when choosing an exchange as it affects the ease and speed of trading. It is important to check the trading volume of a particular exchange to determine how liquid the market is. Higher liquidity tends to lead to smaller spreads which helps reduce trading costs.

Customer Support

It is also important to select an exchange that provides good customer support. Cryptocurrency trading involves risks, so having access to knowledgeable customer support representatives is key in helping to manage them effectively.

Platform Features

Finally, it is important to select an exchange that has the trading features and tools needed for successful day trading. Look for an exchange that offers charting tools, technical indicators, order types, demo accounts, and other features that can help enhance the trading experience.

In summary, there are many factors that should be considered when selecting an exchange for day trading cryptocurrency. Fees, security, liquidity, customer support, and platform features are all important criteria to consider. Careful research and due diligence is necessary to identify the best exchange for day trading.

Types of Crypto Investment Vehicles

When it comes to investing in cryptocurrency, you have a few different options. Each one has its own set of benefits and drawbacks, so it’s important to weigh your choices based on what’s most important to you. In this section, we’ll review the various types of investment vehicles you can use when trading cryptocurrencies.

Cryptocurrency Exchanges

The most common type of investment vehicle is a cryptocurrency exchange. Exchanges allow users to buy and sell cryptocurrencies for other currencies or other digital tokens. Since these markets are constantly fluctuating, traders can often turn a profit by buying and selling at the right times. Popular exchanges include Bittrex, Kraken, and Huobi.

Cryptocurrency Funds

Cryptocurrency funds are another type of investment vehicle for traders. These funds invest directly in a selection of cryptocurrencies, and offer investors a way to diversify their crypto portfolio without dealing with the hassle of managing their own investments.

Coin/Token Mining

Mining is the process of verifying transactions on a blockchain network in order to create new coins or tokens. Those who mine coins are rewarded with newly minted coins or tokens, allowing miners to collect a share of the profits. However, mining can be difficult and expensive, so it’s not recommended for novice traders.

Cryptocurrency Arbitrage

Cryptocurrency arbitrage is a process by which traders exploit price differences between different exchanges in order to make a profit. By simultaneously buying and selling the same currency at different prices, traders can make a tidy profit in a short amount of time. However, it requires good market knowledge and quick reflexes in order to be successful.

Smart Contacts and Derivatives

Smart contracts and derivatives are relatively new innovations in the cryptocurrency world. Smart contracts are self-executing contracts that are stored on a blockchain network, allowing users to enter into complex agreements without the need for third party involvement. Derivatives are financial instruments that derive their value from an underlying asset, such as a cryptocurrency. Both of these investment vehicles are becoming more popular among traders looking for more advanced investment strategies.

Popular Platforms for Day Trading Cryptocurrency

Day trading cryptocurrency is a popular activity for those looking to make profits quickly and easily. In order to do this, it is essential to have access to the right platforms that enable you to buy and sell digital assets quickly and securely.

In this section we will look at some of the most popular platforms available for day trading crypto. We will explore the features of these platforms and highlight the key benefits for day traders.


Coinbase is one of the most popular trading platforms for both buying and selling cryptocurrencies. It boasts the ability to make payments using bank transfers and credit cards, while also allowing you to store your crypto in an online wallet. Coinbase also has an easy to use interface that allows investors to set up their account and start trading within minutes.


Binance is another popular choice for day traders. Similarly to Coinbase, Binance offers a range of payment options including bank transfers and credit cards, as well as an intuitive user interface. Additionally, Binance features a wide selection of coins and tokens, meaning that it is an attractive option for those looking to diversify their portfolio.


Kraken is a well-established cryptocurrency exchange that was founded in 2011. It offers investors the ability to buy and sell a variety of coins, as well as offering a range of services such as margin trading and advanced trading tools. Additionally, Kraken is particularly popular amongst traders due to its low fees and fast execution times.


Bitfinex is another popular platform for day traders. This platform focuses primarily on providing services for professional traders, with its advanced trading tools making it a great choice for those with experience in the sector. Bitfinex also offers margin trading, as well as the ability to buy and sell a wide range of different cryptocurrencies.

To conclude, these are just a few of the popular platforms available for day trading cryptocurrency. Each platform has its own strengths and weaknesses, and it is important to research the options thoroughly before deciding which one to use. With the right platform, day traders can enjoy navigability, security and a wide selection of digital assets.

Tax Implications of Day Trading Cryptocurrency

When you day trade cryptocurrency, there can be a number of different tax implications. It is important to understand how the IRS views your investments and how you report any gains or losses from them.

Are Cryptocurrency Gains Taxable?

Yes, capital gains resulting from profits made on day trading cryptocurrency are taxable. According to the IRS, cryptocurrency is treated as property for federal tax purposes. The same rules that apply to investing in stocks or other investments also apply to crypto.

Short-Term vs. Long-Term Gains

The tax rate that applies to your gains depends on the length of time you held the cryptocurrency before selling it.

Cryptocurrency gains that have been held for a year or less are considered short-term capital gains and are taxed at your ordinary income tax rate. Gains that have been held for longer than a year are considered long-term capital gains and are taxed at a lower rate than your ordinary income tax rate.

Reporting Your Cryptocurrency Tax Gains

You must report any crypto gains on your taxes. When you file your taxes, you should include a Form 8949, which is used to report the sale or exchange of capital assets. On this form, you should list each transaction, including the date of the sale or exchange, the cost basis of the asset, the sale price, and any necessary adjustments.

You also need to complete Schedule D, which is used to report capital gains and losses. You’ll need to include Form 8949 when completing Schedule D so that all of your gains and losses can be properly calculated.

Keep Records of All Transactions

It is very important to keep records of all of your cryptocurrency transactions, including the date, time, and amount of the purchase. This will help you accurately calculate any gains or losses when filing your taxes.

By keeping detailed records of all your cryptocurrency trades, you can save yourself time, money, and potential headaches when tax season rolls around.

Bitcoin-Specific Day Trading Strategies

Day trading Bitcoin carries the highest risk of any asset type, but it also has the greatest potential reward. If you want to get into crypto day trading, you should pay close attention to the Bitcoin market. After all, it’s the oldest and most widely traded digital currency available.

Whether you’re trading Bitcoin or another cryptocurrency, these strategies can help you leverage the volatility of the crypto market and maximize your chances of success.


Scalping is a strategy used by traders to quickly capitalize on price movements in the market. When scalping, traders look to buy at the lowest possible price and sell at the highest possible price—each typically within the same day.

To successfully scalp Bitcoin, it’s important to stay focused and disciplined. You’ll need to leverage technical indicators and price action to identify buying and selling opportunities in the market.

Swing Trading

Swing trading is a longer-term strategy that aims to capitalize on significant market swings rather than short-term price fluctuations. Swing traders look to capitalize on momentum and ride the trend until it shows signs of reversing.

Swing trading is ideal for traders with more experience in the market who are looking to make larger profits over time. Since swing traders typically hold their positions for days or weeks at a time, it’s important to have a strong understanding of technical analysis and be comfortable with taking risks.

Momentum Trading

Momentum traders aim to take advantage of large price changes by buying or selling when those changes occur. This strategy is highly speculative and can be extremely risky, so it should only be attempted by experienced traders.

It’s important to be able to identify and react to the signs of a shift in market sentiment quickly. Momentum traders need to be prepared to act fast, as the window for making a profit can close quickly.

Arbitrage Trading

Arbitrage traders take advantage of discrepancies between different exchanges by buying and selling the same asset on both exchanges. For example, if Bitcoin is trading for $10,000 on one exchange and $10,020 on another, an arbitrage trader can make a profit by buying on the cheaper exchange and selling on the more expensive one.

This strategy requires a lot of capital and research, and it can be difficult to find profitable opportunities. It’s not suitable for everyone, and it’s best left to experienced traders.


At the end of the day, day trading in cryptocurrency is a great way to increase your potential returns over time. As with any investment, though, it does come with some risks. Before starting to day trade, it’s important to ensure you are well-prepared by doing plenty of research on the cryptocurrency market and understanding the different strategies involved.

You’ll also need to choose the right exchange, understand the tax implications of trading, and be aware of the inherent risks of trading. With due diligence and a little bit of luck, you could potentially turn your small investments into substantial returns.

By following the strategies outlined in this guide, you’ll be able to make informed decisions and carefully manage your risks. With practice and dedication, you could become a successful and profitable trader. So take the first step and make sure you’re prepared to day trade crypto.

Frequently Asked Questions about Day Trading Crypto

  • Q: What is day trading cryptocurrency?
    A: Day trading cryptocurrency is a trading strategy where traders buy and sell digital assets within the same trading day. This means that traders open and close their positions within a single day. It is a highly volatile strategy that offers potential quick profits but carries just as much risk.
  • Q: What are the different types of cryptocurrency trading?
    A: The different types of crypto trading include day trading, algo trading, swing trading, scalping, news trading, market-making, and arbitrage trading.
  • Q: How do I set up a day trading account?
    A: Setting up a day trading account involves opening an account with a crypto exchange and depositing funds into it. To be eligible for day trading, you need to have a funded account with the exchange and meet the requirements set out by the exchange.
  • Q: What basic strategies and tips should I follow when day trading cryptocurrency?
    A: Some basic strategies and tips to keep in mind while day trading cryptocurrency include developing your own trading strategy, risk management, understanding market cycles, following technical indicators, setting stop-loss orders, diversifying your portfolio, research each trade thoroughly before entering, and ensuring that you have the knowledge of blockchain technology before investing.
  • Q: How do I select an exchange for day trading cryptocurrency?
    A: It is important to understand your investment goal and know the features and services offered by an exchange before selecting which exchange to use for day trading cryptocurrency. Some important factors to consider include fees, security, regulation, liquidity, support services, user-interface, and the number of coins available.
  • Q: What types of crypto investment vehicles are there?
    A: There are a variety of different crypto investment vehicles available, including cryptocurrency ETFs, futures, CFDs, and cryptocurrency mining. Each vehicle carries its own associated risks and rewards so it’s important to understand each one before investing.
  • Q: What are some popular platforms for day trading cryptocurrency?
    A: Some popular platforms for day trading cryptocurrency include Binance, Coinbase, BitMEX, Kraken, and Huobi Global. Each platform offers different features and trading fees, so it is important to understand which platform best suits your needs before opening an account.
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