How to Day Trade Cryptocurrency

The crypto market’s unique characteristics require you to have a firm understanding of how it works.
Otherwise, your experience can be like skydiving without a parachute.
The good news is that we’re going to provide you with everything you need to survive ​crypto day
trading​.
Day trading the cryptocurrency market can be a very lucrative business because of the high
volatility. Since the crypto market is a relatively new asset class, it has led to significant price swings.

Before day trading Bitcoin or any other altcoins, it’s prudent to wait until we have a high reading of
volatility. The good news is that even when we have a low reading of volatility relative to other asset
classes, this volatility is still high enough that you can generate a modest profit on your trades.
Crypto day trading also requires the right timing and good liquidity to make precise entries.
A lot of the cryptocurrencies and crypto exchanges are very illiquid and don’t have the liquidity to
offer instant execution that you might find when trading Forex currencies.
Before day trading Bitcoin or any other alt coins, it’s also important to check how liquid the
cryptocurrency you wish to trade is. You can do so by simply verifying the 24-hour volume of the
crypto trade.
CoinMarketCap is a good free resource to read and gauge the market volume of any particular coin.
Note* Always remember that not having enough liquidity could lead to substantial slippage
and subsequent to bigger losses.
As previously stated, crypto day trading doesn’t require trading every single day. We only like day
trading cryptocurrencies when all the conditions align in our favor. In this case, avoid trading on
weekends and limit trading only on the highest-volume days.
Put your seatbelt on because next, we’re going to reveal how professional traders are day trading
cryptocurrencies.

Crypto Day Trading Strategy

The idea behind crypto day trading is to look for trading opportunities that offer you the potential to
make a quick profit. If day trading suits your own personality, let’s dive in and get through a
step-by-step guide on how to day trade cryptocurrency.
Now, before we go any further, we always recommend taking a piece of paper and a pen and note
down the rules of this scalping strategy.
In this article, we’re going to look at the 'buy' side.

Step #1: Pick up Coins with High Volatility and High

Liquidity
As previously discussed, the number one choice you need to make is to pick coins that have high
volatility and high liquidity. If you’re not day trading Bitcoin, which is the most liquid coin out there,
and you like the altcoins, try to pick those coins that have good liquidity and volatility.
There are more than 1600 coins on the market and growing. By following only the top
cryptocurrencies, you’ll reduce your area of selection.

Day trading smaller cryptocurrencies can also be a very lucrative business, but there are higher
risks. Remember, crypto prices can crash just as fast as they have risen.
Moving forward, you’re going to learn how you can make money crypto day trading.

Step #2: Apply the Money Flow Index Indicator on the

5-Minute Chart
This specific day trading strategy uses one simple technical indicator, namely the Money Flow Index.
We use this indicator to track the activity of the smart money and to gauge when the institutions are
buying and selling cryptocurrencies.
The preferred settings for the MFI indicator are 3 periods.
We’re also going to alter the default buying and selling levels from 80 to 100 and respectively from
20 to 0.
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How to use the IMF indicator will be outlined during the next step.
See below:

Step #3: Wait for the Money Flow Index to reach the 100
level
An MFI reading of 100 shows the presence of the big sharks stepping into the markets. When
buying, smart money can’t hide their footsteps. They inevitably leave tracks of their activity in the
market and we can read that activity through the MFI indicator.
Technical indicators aren’t always right, so in order to fine-tune our day trading strategy, we’ve
added a few more conditions. Namely, during the current day, we need to skip the first two MFI
readings of 100 and study the crypto price reaction.
The price needs to hold up during the first and second 100 MFI reading.

If the price drops after the first two MFI 100 readings, then this suggests that most likely we’re going
to have a down day.
Let’s now determine the appropriate place to go buy Bitcoin and what are the technical conditions
that need to be satisfied.
See below:

Step #4: Buy if MFI = 100 and if the subsequent candle is

bullish
We can now wait for the third MFI reading above 100. It doesn’t necessarily have to be the third MFI
= 100 reading, you can take every other MFI = 100 readings. If your time doesn’t allow you to catch
the third 100 reading on the MFI indicator, you can simply pick the next one as long as all the other
technical conditions are satisfied.
Next, we also need the candlestick when we got the MFI = 100 reading to be a bullish candle. The
close of this candle needs to be near the upper end, giving us a candle with very small wicks.
This brings us to the next important thing that we need to establish when day trading cryptocurrency,
which is where to place our protective stop loss and where to take profits.
See below:

Step #5: Hide your protective Stop Loss below the low of
the day. Take Profit during the first 60 minutes after you
opened the trade.
The obvious place to hide your protective stop loss is below the low of the day. A break below it will
signal a shift in the market sentiment, and it’s best to get out of the trade. This can also signal a
reversal day.
We’re more flexible when it comes to our exit strategy. However, the only rule you need to abide by
is to take profits during the first 60 minutes or the first hour after your trade got triggered. Holding the
trade longer than one hour will result in a lower success rate. At least that’s what our backtested
results showed us.

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Conclusion – Crypto Day Trading
If you took the time to read the whole day trading crypto guide, then you should be able to buy and
sell Bitcoin and alts and make some daily profits. If you are interested in learning ​how to day trade
cryptocurrency​, be sure to equip yourself with enough information before diving into the market.
Crypto day trading​ can be a great way to grow your crypto portfolio and it’s a very lucrative
alternative to the holding mentality that it’s crippling the crypto community.
Making a living day trading cryptocurrency can be a lot easier due to the high volatility nature of the
crypto market. High volatility suits day trading very well, so you have the right environment to
succeed.

Thank you for reading!

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Action Blueprint on How to
Exploit Market Structure to Find
Winning Trades!

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