Day Trading Crypto: Tips, Tricks & Strategies (2024)

Day trading crypto has become increasingly popular in the fast-paced world of digital assets. Explore the fundamentals of day trading crypto — including tips, tricks, and strategies.

J264G

Share post

What is day trading?

Day trading is a form of speculative trading where individuals buy and sell financial instruments within the same trading day, intending to profit from short-term price fluctuations. Alternatively put: unlike long-term investing, which involves holding assets for extended periods, day traders aim to capitalize on intraday price movements, leveraging volatility in the market.

The primary instruments traded in day trading include stocks, currencies (forex), futures contracts, options, and cryptocurrencies. In this context, day traders typically focus on highly liquid assets that exhibit significant price movements throughout the trading session, allowing for rapid buying and selling.

One of the key characteristics of day trading is the use of leverage. Traders often utilize margin accounts, allowing them to control larger positions with a smaller amount of capital. While leverage can amplify potential profits, it increases the risk of significant losses as well, as losses are also magnified.

Popular day trading strategies

Let’s take a look at the most frequently used strategies to day trade crypto.

Technical analysis

This is a methodology used by day traders to forecast future price movements of financial assets based on historical price data and trading volume.

In the context of day trading strategies, technical analysis involves the examination of price charts and various technical indicators to identify patterns, trends, and potential entry and exit points for trades.

If you’d like to get started with technical analysis indicators, this might be a good resource for you.

High-frequency trading (HFT)

A trading technique that exploits rapid price changes occurring within seconds or even fractions of a second. 

This strategy involves executing a large number of trades within a very short timeframe, typically beyond the capacity of human traders. 

High-frequency trading, therefore, relies on specialized software such as trading bots, which continuously monitor the market and execute trades based on predetermined algorithms.

Long straddle

This strategy involves buying both a call option and a put option with the same strike price and expiration date, anticipating a significant price movement in either direction.

Traders employing this strategy aim to profit from volatility, regardless of whether the price moves up or down, as long as the movement is substantial enough to cover the cost of both options.

However, it's essential to note that the long straddle strategy can be risky, as it requires a significant price swing to be profitable, and time decay can erode the value of the options if the anticipated move doesn't occur quickly.

Scalping

This strategy involves making numerous small trades throughout the day to exploit minor price movements.

Scalpers aim to capitalize on short-term volatility by entering and exiting positions quickly, often within seconds or minutes.

Profit margins per trade are typically small, but they can accumulate significantly throughout a trading session.

Range trading

Range trading, also known as mean reversion trading, involves identifying price ranges, or support and resistance levels, within which an asset's price tends to fluctuate.

Traders buy at the bottom of the range and sell at the top, or short sell at the top and cover their position at the bottom.

This strategy relies on the assumption that prices will revert to their average or mean level after reaching extremes.

Price arbitrage

Price arbitrage trading involves exploiting price differences for the same cryptocurrency pair across different exchanges.

As such, traders aim to buy assets at a lower price on one exchange and simultaneously sell them at a higher price on another, thus profiting from market inefficiencies.

Executing arbitrage trades can be challenging due to network congestion, liquidity variations, and differences in trading fees between centralized and decentralized exchanges.

Breakout trading

Breakout traders aim to capitalize on significant price movements that occur when an asset breaks out of a predefined range or consolidation pattern.

As such, they monitor support and resistance levels and wait for a breakout above resistance or below support to enter a trade in the direction of the breakout.

Breakout traders often use volume and momentum indicators to confirm the strength of the breakout.

Pullback trading 

Pullback trading in day trading involves identifying temporary reversals in the direction of an established trend and entering trades to capitalize on the resumption of the trend.

In this context, traders look for price retracements against the trend, commonly occurring after a strong move in one direction, as potential buying or selling opportunities.

This strategy relies on technical analysis indicators such as moving averages, Fibonacci retracements, and support/resistance levels to confirm the strength of the trend and the likelihood of a pullback.

Traders typically employ stop-loss orders to manage risk and protect against significant losses if the pullback extends beyond anticipated levels.

News/sentiment trading

News trading involves exploiting market volatility from significant news events or economic data releases.

Traders monitor economic calendars, news feeds, and sentiment reports to anticipate market-moving announcements. They quickly enter positions to capitalize on short-lived price fluctuations when an opportunity presents itself.

Here are some sentiment resources you might want to explore:

• Google Trends: Google Trends is used to analyze and visualize the popularity of specific search terms over time and across different regions. It provides insights into trends, interests, and consumer behavior, helping you to make more informed trading decisions.
• Bitcoin Dominance Ratio: The Bitcoin dominance ratio, also known as Bitcoin dominance, is a metric used to measure Bitcoin’s market capitalization relative to the market capitalization of all cryptocurrencies. A high Bitcoin dominance ratio thus indicates that Bitcoin holds a significant share of the overall cryptocurrency market, a lower ratio suggests a more diversified market — with other cryptocurrencies gaining traction.
• Fear & Greed Index: This sentiment indicator measures the current frame of mind of investors and traders in the cryptocurrency market. As such, the Fear & Greed Index assesses whether market sentiment is driven by fear or greed on a scale from 0 to 100, with lower scores indicating extreme fear and higher scores suggesting extreme greed. In this context, times of "fear" are often good buying opportunities, while times of "greed" tend to be good selling opportunities.

How to day trade crypto?

Day trading crypto is risky. 

Here's how you can minimize risks and execute effectively in the fast-paced environment of crypto day trading: 

• Understand your risk tolerance and establish precise objectives.
• Concentrate on a select few cryptocurrencies, ideally between three to five. 
• Employ effective risk management strategies, including stop-loss orders to contain potential losses and register profits at predetermined thresholds.

Day trade crypto via perpetual futures (perps)

1. Make sure you have some SOL in your wallet to cover account rent and transaction fees
2. Head over to app.mango.markets
3. Connect your Solana wallet in the top-right corner of your screen.
4. If it's your first time we'll guide you through creating and funding your account. It costs a small amount of SOL to create your Mango Account (this is the rent cost on the Solana blockchain). This is refunded in full if you close your account. You'll also need to deposit collateral like USDC, SOL, etc... to be able to trade perps.
5. Next, navigate to the menu bar on the left side of your screen, select "Trade" and then "Perp". 
6. You'll land on the SOL-PERP market. To change markets click the SOL-PERP dropdown above the candlestick chart on the left. Select the perpetual futures contract you'd like to trade. 
7. Now you can use the trade form to create your trade. It's recommended to use limit orders as market orders can result in slippage and prices worse than you expect.
8. When you're happy with your order, submit it and sign the transaction prompts from your wallet – done!

Day trade crypto via spot trade

1. Make sure you have some SOL in your wallet to cover account rent and transaction fees
2. Head over to app.mango.markets
3. Connect your Solana wallet in the top-right corner of your screen.
4. If it's your first time we'll guide you through creating and funding your account. It costs a small amount of SOL to create your Mango Account (this is the rent cost on the Solana blockchain). This is refunded in full if you close your account. You'll also need to deposit collateral like USDC, SOL, etc... to be able to borrow spot assets to short.
5. Next, navigate to the menu bar on the left side of your screen, and select "Trade" and then "Spot". 
6. You'll land on the SOL/USDC market. To change markets click the SOL/USDC dropdown above the candlestick chart on the left. Select the spot pair you'd like to trade. 
7. Now you can use the trade form to create your trade. It's recommended to use limit orders as market orders can result in slippage and prices worse than you expect.
8. After completing the order form, submit it and sign the transaction prompts from your wallet — you’re good to go!

Day trade crypto via Mango Swap

1. Make sure you have some SOL in your wallet to cover account rent and transaction fees
2. Head over to app.mango.markets
3. Connect your Solana wallet in the top-right corner of your screen.
4. If it's your first time we'll guide you through creating and funding your account. It costs a small amount of SOL to create your Mango Account (this is the rent cost on the Solana blockchain). This is refunded in full if you close your account. You'll also need to deposit collateral like USDC, SOL, etc... to be able to borrow spot assets to short.
5. Next, navigate to the menu bar on the left side of your screen, and select "Swap". 
6. Use the swap form to select the token pair to trade.
7. As soon as you’re happy with the order form, click "Review Swap", complete the process, and sign the transaction prompts from your wallet – happy trading!

Disclaimer: This guide is strictly for educational purposes only and doesn’t constitute financial or legal advice or a solicitation to buy or sell any assets or to make any financial decisions. Please be careful and do your own research.

Safer. Smarter. Faster.Get Started on Mango Today!Let's Go!