How to Day Trade Cryptocurrency to Earn Money? A Beginners Guide

Want to make a living through crypto day trading? Doesn’t know where to begin? Don’t worry, we’ve got you covered.

Today, crypto day trading is popular among crypto enthusiasts. 

But the investors should be well-versed in the crypto world to win this race against time. It is even more challenging for newcomers.

Here is a comprehensive guide to help you get started. 

What is Crypto Day Trading?

In Crypto Day trading, as the name suggests, the buying and selling are done within a day or within a 24-hour timeframe.

Day trading enables investors to take advantage of price fluctuations occurring in a single day. 

Due to the volatile nature of the crypto market, day trading may reward the investor with better returns. Despite the short duration, day trading also has associated risks.

How to Start Your Crypto Day Trading Journey

1. Learn the Crypto Basics

Research and learn the crypto fundamentals before you dive into day trading. You can even sign up for short courses to cover the fundamentals.

Research deeply on the crypto assets traded and the backed blockchain technology. Stay updated with crypto market trends, review price charts, and industry news from reliable sources, including our analysis of the 5 best Cryptos to Buy Now as CFTC Fast-Tracks Spot Crypto Trading.

Check which currency is volatile and more liquid before trading. Generally, the most popular options are Bitcoin and Ethereum.

2. Choose a Reliable Exchange

Choosing a reliable exchange is crucial to ensure safer investments. Some popular choices are Kraken, Gemini, Coinbase, Binance, and Crypto.com.

While picking the exchange, consider factors like your own location, accessibility across platforms and countries, and track record. 

Pay special attention to existing regulations and legal guidelines in your country regarding crypto exchanges, and check out our guide to the best Crypto Exchanges With Lowest Fees to maximize your profits.

Go through the fee structures and security architecture as well while choosing the crypto exchange.

3. Choose Trading Strategies 

There are many time-tested Day trading strategies; go for beginner-friendly ones initially. 

Popular strategies include:

• Scalping: This beginner-friendly strategy involves selling frequently in numerous small trades to take advantage of minor price fluctuations.
• Breakout Trading: This strategy involves trading when prices reach above resistance or fall below support levels.
• Range Trading: As the name indicates, the strategy is marked by a defined price range. Buy at support and sell at the resistance level.

Decide on the trading time. The intervals popularly chosen are 15-minute, 1-hour, and 4-hour charts.

4. Perform Technical Analysis Effectively

You need to perform a technical analysis before trading. To master the technical analysis, grasp the analysis of the price charts, trading volumes, and historical patterns using technical indicators.

Here are some important indicators you must learn.

• Relative Strength Index (RSI): It compares the magnitude of recent gains to recent losses over a specified period and provides insights about whether a particular asset is oversold or overbought.
• Moving Averages (MA): Tracks average prices over a specific time frame, revealing trends.
• MACD (Moving Average Convergence Divergence): The indicator shows whether the price is trending upwards or downwards and gaining or losing strength.
• Volume: It measures trade activity; a higher volume with price changes indicates a strengthening of the trend.

5. Manage Risks

Managing risk is another crucial aspect of successful crypto day trading. 

Use stop-loss orders, and it is advisable to limit your allocation to a small percentage of your capital (1-2%) per trade.

6. Practice and Review 

After initial trading, analyze the performance. Keep reviewing the results. Adjust and further refine your strategies.

It takes some time to become well-versed in crypto day trading. So, review and refine and see whether it’s your cup of tea.

7. Be Aware of Taxes Involved 

Transactions will incur taxes depending on the location and jurisdictions you are in. Be aware of the taxes involved.

It is advisable to consult a tax professional to get a comprehensive idea.

Major Factors Influencing Your Earnings From Crypto Day Trading

Crypto day trading involves both high rewards and risks. 

Here are some major internal and external factors influencing your earning potential from crypto day trading.

• Volatility: The cryptocurrency is highly volatile, and price swings often happen. Crypto prices swing frequently. Read Understanding Crypto Market Volatility to prepare for market fluctuations.
• Risk Tolerance: Stick to a preset acceptable margin of loss without blindly chasing profits, disregarding loss.
• High Transaction fee: Keep an eye out for the transaction fee. Make sure that it’s not affecting your profits disproportionately.
• Discipline: Day trading can be a daunting process, demanding your valuable time and effort. Maintain a disciplined approach to deal with the emotional stress involved.

Final Thoughts

Nobody can become an expert in crypto trading overnight. It takes continuous effort and refinement to master the strategies to achieve the desired results.

Continue learning and ensure you follow a disciplined approach.