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The best crypto day trading strategies

25 Mar, 2024 7 min read
best crypto day trading strategies

In one of our recent articles, we talked about crypto day trading, one of the most profitable, albeit risky, methods of making money on cryptocurrency. In this article, we'll take a closer look at crypto day trading strategies. We'll discuss the best day trading strategies for crypto, how to make money crypto day trading, and determine which platform is best for day trading cryptocurrency.

What is crypto day trading?

Before discussing the best strategies for crypto day trading, we'll traditionally start with a definition. 

Crypto day trading is a variation of speculative trading on the crypto market. In day trading, a trader closes positions on the same day they are opened. This type of trading is also called intraday trading. In day trading, the duration of holding a position is from several minutes to several hours.

Day traders most often use charts with relatively short timeframes, such as 5 minutes, 15 minutes, 30 minutes and 1 hour.

Top crypto day trading strategies

A trading strategy is a plan of action for making a profit from trading. If you don't have a clear trading strategy, it won't be possible to trade cryptocurrency with profit.

A trading strategy usually consists of the following components:

  • Rules for analysing the market and finding opportunities
  • Rules for entering and exiting a position
  • Risk management.

A properly built trading strategy should answer four main questions about your every trading position:

  1. What triggers entry into the position?
  2. What triggers an exit from the position?
  3. Where should the Stop Loss be?
  4. What size should the position be?

The choice of the best crypto trading strategy should be consistent with the trader's goals, experience, personality and discipline, as well as the amount of time a trader is willing to devote to trading. A ready-made trading strategy is like a clear action plan that can be applied to both manual and automated trading.

Below, we outline some of the best day trading strategies for crypto. Remember that different strategies may be more or less suitable for different assets. Before using the chosen cryptocurrency day trading strategy, you must first test (and backtest) it on the selected asset.

Range Trading

Range trading is a simple trading strategy used when the price moves sideways in a certain range between horizontal support and resistance levels. It's one of the best crypto day trading strategies for beginners.

When using this strategy, a trader opens a long position when the price bounces off the support level and closes it when the resistance level is reached (or when the price approaches it if the trader sees that the momentum is weakening and the price may not reach the resistance line).

The Stop Loss with this strategy is set slightly below the support level. Keep in mind that a Stop Loss order placed too close to the level can be triggered by a false breakout, and one that is placed too far from the level will increase your losses if the breakout turns out to be real. If a confirmed breakout of support or resistance level occurs, the trader should wait for a new range to form and start trading within it.

Range trading

Channel trading

It's the best strategy for day trading crypto, very similar to range trading, but it's used when the price moves inside an ascending or descending channel.

When using this strategy, the trader opens long positions at the lower border of the channel and closes at the upper one. Short positions, in turn, are opened at the upper border of the channel and closed at the lower one. Bear in mind that the better trades are those that correspond to the trend. This means that it's better to open long positions at the lower border of the ascending channel and short ones at the upper border of the descending channel. The Stop Loss is set outside the channel boundaries and follows their direction.

Just as with range trading, when one of the channel boundaries is broken, the trader waits for a new channel to form and starts trading within it.

Ascending channel trading

Breakout trading

Breakout trading comes next on our list of crypto day trading strategies. This is a very popular strategy that intersects with the previous two, and many traders use it in combination with one of them. When using this strategy, a trader waits for a breakout of a support or resistance level or a trend line and opens a position at the moment of breakout. 

Usually, breakouts of important levels are strong price movements with increasing volume. A trader using this strategy tries to get into this movement and participate in it at the stage of formation. Participation in the breakout at the stage of its formation gives you the opportunity to reduce risk because the Stop Loss will be closer to the entry point.

Traders who prefer a more conservative approach don't open a position at the moment a breakout occurs, but after the price returns to the broken level and bounces off it. Take Profit orders placed beyond the breakout point shouldn't exceed the previous range in most cases. Since there is no guarantee that the price will reach your goal, it's important to monitor the position and close it if price movement significantly weakens before triggering your Take Profit order.

In addition, the breakout may turn out to be false, and the price will return to the range. A common sign that a breakout will be false is low trading volumes at the time of the breakout. The Stop Loss is placed just below (or above if dealing with a short position) the broken level.

Breakout trading

Moving averages crossover strategy

This is the most effective crypto trading strategy. It uses the popular technical analysis indicator moving averages (MA). This strategy often allows you to identify a trend change. For this strategy, two moving averages are used, one with a longer time period and the other one with a shorter period. Day trading often uses moving averages with time periods of 9 and 20 candles. When the short MA crosses the long one upwards, it's a buy signal; when the crossover occurs downwards, it's a sell signal.

It's worth remembering that MAs are lagging indicators, so they won't indicate the best point for opening a position, and if you reduce their timeframe, they'll give a lot of false signals.

MA crossover trading

Crypto day trading strategies for beginners

The strategies described above have gained popularity, not least because of their simplicity, so they're quite suitable for beginners. Nonetheless, all of these crypto day trading strategies for beginners are based on technical analysis, so you need to master them to successfully apply them.

Tips for crypto day trading

In the previous article on crypto day trading, we gave some tips for novice traders. Here are a few more.

  • In day trading, don't use averaging into a position. Averaging into a position means buying an asset at a successively lower price (or selling at a successively higher price for a short position). Keep it for longer-term trading strategies.
  • Choose only the strategies that you understand well and adjust them to your circumstances.
  • To increase the reliability of your strategy, confirm the opening of a position using additional indicators, but don't use more than 3 or 4 simultaneously.
  • Don't start trading multiple cryptocurrencies at once. Pick 2 or 3 and practise your strategy on them.

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What is a day trading strategy?

A day trading strategy refers to a plan of action aimed at profiting from short-term fluctuations in asset prices within a single trading day. It typically involves analysing market conditions, determining entry and exit points, and managing risk effectively.

What is the best Bitcoin day trading strategy?

The best bitcoin day trading strategy often depends on factors such as market conditions, trader's goals, experience, and risk tolerance. However, popular strategies for bitcoin day trading include breakout trading, range trading, and moving averages crossover strategy. These strategies capitalise on short-term price movements in the bitcoin market.

What is the best strategy for day trading crypto?

The best strategy for day trading crypto varies depending on individual preferences and market dynamics. However, some effective strategies for crypto day trading include:

  • Range Trading. Trading within a specific price range between support and resistance levels.
  • Channel Trading. Capitalising on price movements within ascending or descending channels.
  • Breakout Trading. Entering positions when the price breaks out of significant support or resistance levels.
  • Moving Averages Crossover Strategy. Identifying trend changes using moving averages with different periods.

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