Crypto Day Trading Strategy: My Take

Cryptocurrency is what keeps me going nowadays. Today, cryptocurrency is the most popular form of investment. I research it every other day because things change in a sec in the crypto world. Hence I learn a lot. Bitcoin accounts for over $ 6 billion of online transactions daily. When you take the other coins into account, there is a lot more.

Cryptocurrency is volatile and a very high-risk venture. To win in the cryptocurrency world, I developed a nerve of steel, an intuitive trading platform, and a winning game plan. In addition, I learned about the trading strategies that I needed to put in place to avoid losing my investment. 

Some of these strategies include:

Trend trading

This is one of the active strategies and is also known as position trading. It is a tactic where an investor holds a particular position for a while; when I chose to be a trend trader, I had to keep up and take advantage of the directional trends.

Being a trend trader, I had to decide my investment strategy based on fundamental analysis. However, to be a successful day trader, all my ultimate assets had to keep moving toward future trends.

To increase my chances of success, I learned that I had to incorporate trend lines and moving averages as technical indicators. Furthermore, as I did my research, I realized that trends could change and keep in mind that a trend reversal is possible.

Scalping

Scalping is the last active strategy. Investors do not hold their position like in the case of trend trading. Instead, scalpers open and close their position within a short period; very short, it can even be in seconds. In scalping, the focus on small moves is repeated over and over again. It also takes advantage of the gaps in liquidity and other market inefficiencies.

While I was trying to implement this lucrative strategy, I knew where to find the market inefficiencies and exploit them. By manipulating them, I made a small profit. Finding many inefficiencies over time, my small profits then become sizable. 

As a beginner, I wouldn't say I liked it because it required me to have detailed knowledge and understanding of how the market works and high liquidity. In addition, it is a very complex strategy.      

Arbitrage 

Arbitrage is a policy of taking advantage of price differences in different markets for the same assets. For example, in this cryptocurrency world, arbitrage is buying cryptocurrency in one market and selling it in another market for a higher price. 

In the cryptocurrency market, anyone is allowed to create an exchange. This leads to a significant difference in the buy and sells price of an asset. This is so because of the difference in asset liquidity and trade volume. Traders usually hold a portfolio on an exchange they are trading in the cryptocurrency market. 

To start an arbitrage opportunity in the cryptocurrency market, I had to open accounts on exchanges I believed would show significantly different prices for the same asset. While on it, Bitcoin traded at a 40% higher price in South Korea than in the United States. Since I am based in the U.S., I had to purchase Bitcoin on U.S. exchanges and immediately sold them to the South Korean exchange. Discrepancies are not usually this high. Hence, the low barrier to entry for new exchange brings new opportunities frequently. 

Bitcoin volatility

Cryptocurrency has five times more volatility than that of the traditional asset classes. As a result, volatility trades can always make money whether Bitcoin goes up or down. 

Chicago Mercantile Exchange offers options on Bitcoin's future by opening up a wealth of volatility strategies for traders. Hence, they are directionless. There is also the option of a long straddle. 

The long straddle is also a directionless volatility strategy that I took. I bought a call and put an option at the same time for the same strike price and expiration date. The straddle was profitable when the Bitcoin fell and rose away from the strike price by more than the premium. To exit the straddle, I sold the call and put it at the same time.

Day trading

As a digital asset investor, I have various resources and strategies that are always familiar with—basically, the Active and Passive strategy, which are trading strategies I can choose from. 

Active strategies are the most popular. However, it requires more time, attention, and constant monitoring. Passive systems only allow a more hands-off approach. 

One of the best-known active strategies is day trading. I chose this strategy and was hence allowed to enter and exit positions the same day. It was a fun strategy. Day trading aims to capitalize on proven movements that occur within one trading day. These movements are known as the intraday price movement. 

I created my trade ideas through a technical analysis and price action. This was the best strategy, and I can personally advise advanced traders to try it out. 

Crypto Day Trading has some pros and cons, which I only got to Learn about while at it.

Advantages of Crypto Day Trading Strategies.

When day trading, traders can take advantage of some fantastic unique features that the crypto market offers to maximize their gains, but they also come with their disadvantages.

Here are the advantages:

Volatility

With cryptocurrency, the market is very volatile; that is, there are huge swings in prices. Higher prices mean more opportunities to make a profit. So I thought since I was going for Day trading, volatility was a very lucrative instrument because there are very high opportunities of making a profit. 

24/7 

The unique cryptocurrency trading feature is open 24 hours a day, seven days a week. So we can trade any time of the day that suits you or suits the market because the market never closes.  

No regulations

The cryptocurrency market has no regulations like the stock market is heavily regulated, especially in the United States. The U.S. stock market regulations come with rules and restrictions on how often one can trade. The cryptocurrency market does not come with all these restrictions. Anyone can create a wallet and start selling regardless of age and trading experience. 

Disadvantages of Crypto Day Trading Strategies

Everything with an upside must have its downside. Some cryptocurrency day trading strategies include:

Legality

In most jurisdictions, cryptocurrency is illegal, limiting many people from trading while others do it secretly. 

No regulation

As no restrictions are an advantage, it can also be a disadvantage. This is so because if an exchange closes down, gets hacked, goes bankrupt, or runs away with your money, your funds are gone. You can never go to a higher authority to claim your money. 

24/7

This is another advantage that can be a disadvantage. I had thought that an always-open market has desirable trades, but that is not true. Instead, the open nature of cryptocurrency means fewer times in the day that it's profitable. 

Verdict

Investing in cryptocurrency is extremely risky. Hence some investors always stay away. However, this did not put me off because I had learned the right strategies and knew how to implement them. Following them, I found success in crypto day Trading.