by Dr. Harry Hamann (MBA), September 7, 2022

Can you Day Trade Cryptocurrencies?
[better strategy revealed!]

Day Trading Crypto on a 15 minute chart

Disclaimer: Please do your research. This analysis is not financial or investment advice and only for entertainment and educational purposes. You are responsible for your actions.

Can you day trade crypto successfully? The following article will give you a detailed answer to this question and reveal an even better strategy for how to grow your wealth with crypto effectively.

Key Takeaways


Summary

Day Trading Crypto is risky due to the high volatility, and the low trading timeframe coupled with high leverage. It requires a lot of effort to be consistently profitable long-term.

Most people will get much better financial results by long-term investments in high-quality crypto assets such as Bitcoin and Ethereum.


Key Points

  • This article contrasts two sides: crypto day trading and long-term crypto investing.
  • Day Trading Crypto is possible, but it is very difficult to master.
  • Day trading crypto means you actively buy and sell crypto within a day to
    generate a profit from the price difference at the time of purchase and selling.
  • In contrast to paper currencies, Crypto assets such as Bitcoin and Ethereum are investment assets that will protect and grow the purchasing power of your capital.
  • Most people lose all of their money day trading crypto, because they seek thrill and excitement instead of profits.
  • The high volatility of crypto, the short timeframe of day trading, and the high leverage in crypto make it very difficult to be profitable long-term by day trading crypto.
  • You can day trade crypto on most crypto exchanges, such as FTX, Binance, Kraken.
  • A good charting platform for Technical Analysis is Tradingview.
  • Define a precise buying and selling crypto strategy and create fixed trading rules.
  • Use good risk management: define your risk per trade (e.g., 1%) and set stop losses.
  • Your crypto day trading strategy must have a positive expectancy to be profitable.
  • Two of the crypto day trading strategies that you can use are the Range Trading Strategy and the Daily Open Strategy.
  • Trading Indicators such as RSI and MACD are lagging. It is more effective to focus on pure price action.
  • Day Trading has the shortest trading timeframe, Position Trading has the longest, and Swing Trading is in between the two.
  • Mark Minverini and Peter Brandt are examples of very successful traders.
  • Buy high-quality crypto assets such as Bitcoin and hold them long-term with a mentality of an investor. You have a much higher probability of success with investing as compared to day trading crypto. Investing leads to earlier retirement.
  • Learn how to invest with Financial success at H2 Intel.

The author's experience with Day Trading Crypto [Real Story!]

I am not a journalist or newsletter writer, and I have years of experience in Day Trading Cryptocurrencies and will prove it in this article. I have made money (and also lost money) with day trading cryptocurrencies. I am very familiar with trading and have made hundreds (if not thousands) of trades.

Did I build the bulk of my wealth with day trading crypto? I did NOT.

Did most financially successful people I know build their wealth with day trading crypto? They did NOT.

That does not mean you can not build your wealth by Day Trading Crypto, and you CAN! It is up to you. Is it likely, though?

I build most of my wealth with a completely different strategy than crypto day trading strategies. Why talk about Day Trading Crypto, then? Because people want to know about it.

Understanding Crypto and Day Trading will make you better at creating wealth. Whether you are day trading the crypto market or choosing a completely different strategy - this understanding will help you to succeed in financial markets.

I will present both sides (trading crypto and the alternative), and you can decide what is suitable for you.


Make sure you read this article to the end. It will go beyond day trading crypto and explain how to build real wealth in financial markets.


1. Day Trading Crypto: can you do it?

There are a lot of things you CAN DO in life. And yes, one of them is day trading crypto! The process is quite simple, and I will show it to you. Riding a bicycle is arguably more difficult.

The more interesting question is: can you day trade the crypto market with financial success for years and years and never blow up (losing all your capital)?

There are people in this world that can, but there aren't many. The probabilities of success are against you. Only the best succeed at this, the ones that work very hard. Most had lost all their wealth multiple times before they finally reached success.

Yes, day trading in the crypto market is possible.

Make sure you want it because doing it with financial success long-term is incredibly hard.

This article will explain the nuances.


2. What is Day Trading?

There are two parts to day trading.
First, trading means actively buying and selling financial assets such as crypto to make money. You generate a profit by selling at a higher price than you purchased.

How? You can initiate a long position (you bet on rising prices) or a short position (you bet on falling prices). You can use market orders (you get filled immediately based on the orders in the order book) or limit orders (the buy executes only if the price falls to your limit price).

Second, Day Trading means you open and close your position (usually) within one trading day. It is a very active, high pace, a high-alert form of trading. Day traders are generally in front of the screen with total concentration while they trade, and it is like a performance sport.

Crypto trades 24/7. You can trade it anytime in contrast to other asset classes (such as stocks that trade during certain hours).

Day trading crypto means you actively buy and sell crypto within a day to generate a profit from the price difference at the time of purchase and selling.


3. What are Cryptocurrencies?

Cryptocurrencies are better described as crypto assets. There are many forms of them, and Bitcoin (the first successful crypto asset) and Ethereum are the most prominent ones.

Their primary objective is not to be used in the economy to buy and sell goods and services such as currencies like the US-Dollar. One of the main functions is to protect and grow the purchasing power of your capital, as paper (fiat) currencies get increasingly devalued by money printing from central banks (e.g., quantitative easing after the financial crisis of 2008/2009).

Another critical function of crypto assets is the utility to holders. In the case of Bitcoin, the cryptographic encryption, game-theory design, and decentralized network structure enable users to hold their crypto assets without a middleman (e.g., a bank). With Bitcoin, it is possible to control and own your own money. All that users need to protect their funds is safely storing the private key (think of it like a password) to the crypto.
Crypto assets have gained attention because of the sharp price rises and drops.

Crypto assets such as Bitcoin and Ethereum are investment assets that will protect and grow the purchasing power of your capital.


In contrast, paper (fiat) currencies such as the US-Dollar or Euro can be devalued through inflation by money-printing central banks.


4. What is the primary goal of Crypto Day Trading?

The answer to that question might be obvious, but from experience, it isn't. The reason is the following: most people lie to themselves.

Their primary goal is not to make money from day trading crypto but to feel and enjoy the excitement while trading crypto. Crypto is one of the most volatile assets on the planet. Day trading crypto is like trading but on steroids. It can be like riding a rollercoaster for many.

There is a saying that people get what they want from financial markets. It is true. People in it for the excitement will get the enthusiasm (and lose all of their money). People that are in it for the money at least stand a chance to make money.

The primary goal of crypto day trading is to make money.


Unfortunately, most people seek the thrill and excitement from day trading crypto and quickly lose all of their money.


5. Is it difficult to Day Trade Crypto?

Yes, it is difficult to trade it because crypto is very volatile, and the price swings up and down are extreme. Day trading crypto is especially difficult because you are trying to generate profits in a brief period.

Also, most people can not handle the emotions of crypto day trading. Although they might have a day trading strategy, they will abandon it due to fear and greed.
Day trading crypto is like a high-performance sport. You need to train hard, watch the screens for long hours, and keep your emotions in check for them to work.

Furthermore, day trading crypto often involves high leverage. Leverage means you only need to provide a certain amount of capital to trade and can loan the rest of the required money from your crypto exchange for a fee (e.g., annual interest rate). Trading fees can quickly add up. Most people can not handle high leverage in the crypto markets and not only lose their capital but lose it very fast.

Yes, day trading crypto financially successful is difficult because of the high volatility of crypto assets, the short-term timeframe of day trading, and the usually high leverage that most people take.


6. Where can you Day Trade Crypto?

You can day trade crypto on most crypto exchanges, such as FTX, Binance, Kraken, and Coinbase. You register to open an account and deposit crypto assets or fiat currencies (USD, EUR, etc.) onto the platform and are ready to go. Those platforms will let you place buy and sell market or limit orders on different crypto assets such as Bitcoin, Ethereum, and others.

They will also provide you with Technical Charting that shows the price changes of crypto assets over time and enable Technical Analysis.

Furthermore, they offer you leverage to trade crypto. Leverage is simply a loan from the crypto exchange to you for a fee. If you use two times leverage, you can generate profits even faster. For example: if Bitcoin goes from $20k to $22k and you are leveraged twice, you make 20% (instead of 10%) in profits. Leverage is a two-edged sword and can accelerate not only your profits but also your losses.

You can day trade crypto on most crypto exchanges, such as FTX, Binance, Kraken, and Coinbase. It is easy and fast to open an account at a crypto exchange.


7. How can you Day Trade Crypto?

First, you need to open an account at a crypto exchange.

Crypto day trading is mainly based on technical analysis because the timeframe of a day trade is too tiny for fundamentals to matter. What you need is a good charting platform for day trading, and I use Tradingview and can recommend it.

You can analyze crypto assets such as Bitcoin, Ethereum, Solana, etc., on multiple timeframes (e.g., 1-hour chart, 15-minute chart, etc.). You also can create alerts that will notify you if the price reaches a certain level.

Then you need a clear crypto day trading strategy for buying and selling (I will cover them in the next section). It is best to write down clear rules that you will strictly follow at all times. A common beginner mistake: changing your crypto day trading strategies constantly. The result is that you will never understand whether your system works or not. Try out different crypto trading strategies at the beginning, but then select one day trading strategy and focus all your energy on it.

You also need a framework for risk management. It is essential, especially in crypto day trading. Always set a clear stop-loss when you enter a trade. A stop-loss is a price at which you place a limit sell order. If triggered, the sell order will automatically activate, limiting your losses.

Another part of risk management in day trading cryptocurrency is to define your risk. How much are you willing to lose at the maximum per trade? I would recommend a stop-loss of 1% or 0.5% per trade. It means that if you lose one trade, the value of your portfolio will go down by only 0.5% to 1%. From experience, I can tell you that larger position sizes (e.g., 5% per trade) will likely lead to a complete loss of capital in the long run. You can explain it with statistics, but I will not discuss that further here.

How do you make money with crypto day trading? There is a precise formula that you must understand to make money. Your trading strategy will only be profitable if you have a positive expectancy. The expectancy calculates as follows:

Expectancy Ratio = Winrate * Reward-to-Risk-Ratio - (100% - Winrate)

The Winrate is the number of winning trades divided by the total trades you take.

The Reward-to-Risk Ratio is the sum of your profits divided by your losses.

The graph below shows different expectancies over Winrate and Reward-to-Risk-Ratio. An expectancy of 0 means you are a breakeven trader. On aggregate, you are flat, and you are not gaining profits but also not losing money. Winrate and Reward-to-Risk-Ratio, which lead to a positive expectancy, will be profitable trading strategies. The higher the expectancy, the higher the profitability of your trading strategy.

Expectancy, Winrate, Reward to Risk Ratio defines Profitability of Trading Strategies

It is essential to understand that many highly profitable traders have a Winrate of less than 50%.

For example, a Winrate of 30% means the trader only wins 3 out of 10 trades and might be a losing trader. But what matters is expectancy. It is not how often you win or lose; it is about how much you make when you are right versus how much you lose when you are wrong.

Even if the Winrate is only 30%, if your Reward-to-Risk-Ratio is higher than 3, your trading strategy is profitable!

In summary:

  • For crypto day trading, use a good crypto broker such as Kraken and a good charting platform for Technical analysis such as Tradingview.

  • Define a precise buying and selling crypto strategy and create fixed trading rules.

  • Use good risk management: define your risk per trade (e.g., 1%) and set stop losses.

  • Your strategy must have a positive expectancy if you want to make money by crypto day trading.


8. Which Crypto Day Trading Strategies exist?

There are many strategies for crypto day trading. We will show you two strategies of day traders. One method uses ranging crypto markets (range trading), and the other uses strong trends in crypto markets (daily open strategy).

Range Trading Strategy of Day Traders:

If the crypto markets are not trending, they are going sideways. Day traders can still make money. Below is a chart of Bitcoin on the 15-minute timeframe. The price finds support at the first orange arrow on the left, and the price goes up until it encounters resistance (second orange arrow). We can now draw clear support and resistance levels.

Day traders can now buy at support (exit short positions, initiate long positions) and sell at resistance (exit long positions, start short positions) as long as the market environment does not change (the market keeps in this range). We can produce several profitable trades that way. You can, for example, set a stop-loss at the half range of support and resistance (see red horizontal lines).

The range breaks, as shown at the right of the graph below. Subsequently, the stop triggers, but our downside is limited. The market environment has now changed. We can not use the Range Trading Strategy in a trending market, and we have to wait to use the Range Trading Strategy until we can identify a new sideways range that establishes.

Let us look at another strategy of day traders.

Range Trading Strategy for Crypto Day Trading

Let us look at another strategy of day traders.

Daily Open Strategy of Day Traders:

Day traders can use the Daily Open Strategy for strongly trending markets (either in an uptrend or downtrend). In the graph below, we look at Bitcoin in the 15-minute timeframe, and vertical blue lines show the daily open and the daily close.

  1. After the daily open, wait for the first 15-minute candle to close.
  2. Draw a range by using the high and low of the first 15-minute candle.
  3. Wait for the first 15-minute candle to close outside of the range.

Day traders can establish a short position as soon as the first 15-minute candle closes outside the range (in this case, below the range). The stop-loss is triggered by the high of the trading range.

In this case, the market strongly trends down after establishing the short position. At some point, we monitor the trade for a potential reversal in trend. The vertical blue line in the middle makes it apparent that the trend direction might change. It is not the case, as the continuing price action shows us a bearish Swing Failure Pattern (The candle can not close above the prior swing high), and the resistance zone is holding. The downtrend re-establishes, and we stay in the profitable trade. At the daily close, we close out the position by exiting the short.

In strongly trending markets such as Bitcoin, the Daily Open Strategy can work very well for day traders and produce excellent profits in a short period.

There are also automated crypto trading bots, but I would avoid them. Some crypto day traders also use a statistical trading strategy.

Daily Open Strategy for Crypto Day Trading

You can use the Range Trading Strategy and the Daily Open Strategy for Crypto Day Trading.



9. Which Trading Indicators can you use?

There are many different trading indicators, such as the Relative Strength Index (RSI), the Moving Average Convergence Divergence (MACD) oscillator, and many more technical indicators that day traders use.

I am not a fan of any technical indicators because they are lagging by definition, and they can not predict price movement. In my experience, focusing on price action is much more effective than a lagging indicator that distracts you.

A crypto day trader can use an increase in trading volume or very high trading volume as a confirming indicator.

Trading Indicators such as RSI and MACD are lagging. It is more effective to focus on pure price action.


10. What is the difference between Day Trading, Swing Trading, and Position Trading?

Day Trading focuses on a daily timeframe (1-2 days) using charting timeframes such as the 15-minute chart for technical analysis.

Swing Trading focuses on daily and weekly timeframes using charting timeframes such as daily and hourly charts for technical analysis.

Position trading focuses on weekly and monthly timeframes, using charting timeframes such as the weekly and daily charts for technical analysis.

Day Trading has the shortest trading timeframe, Position Trading has the longest, and Swing Trading is in the between the two.


11. Which are some of the most successful traders?

There are several successful traders that you can follow. Examples are Mark Minvervini, who focuses mainly on stocks, and Peter Brandt, a futures trader who trades currencies, commodities, and crypto and is very familiar with various financial instruments.

There are very few successful traders percentage-wise, but they exist.

Mark Minverini and Peter Brandt are two highly successful traders.


12. What is the difference between Trading and Investing?

Unfortunately, most people can not trade successfully.

People that are trying to trade often make a lot of common beginner mistakes that include:

  • active trading and a lot of buying and selling
  • Penny stock trading usually has terrible fundamentals.
  • Using CFD, Futures, and Options, which are complex derivatives, and not understanding how these financial instruments work.
  • using high leverage (especially true in day trading cryptocurrency) and losing money even more quickly
  • Focus on short-term profits (e.g., trying to get rich quick)
  • Applying short selling, which has limited upside and unlimited downside
  • Betting the whole portfolio on one trade (gambler mentality)
  • Very short-term thinking (days instead of years)
  • Focus on price action alone without consideration of fundamentals
  • buying low-quality assets (e.g., Dogecoin)
  • Are too aggressive or too conservative
  • Getting overwhelmed by their own emotions (buying the top, selling the bottom)
The Difference between Trading and Investing

The professionals are often investors with the following characteristics:

  • Pursue investing instead of trading: Buying and Holding assets
  • Only buying high-quality assets and avoiding low-quality assets.
  • Don't use derivatives because of the inherent risks and complexities.
  • Don't use leverage, and therefore have are much less likely to blow up. The exception is real estate, where leverage is much safer.
  • Focus on long-term wealth growth
  • Use proper position sizing and risk management techniques.
  • Concentrated positions with reasonable diversification.
  • Think in years instead of days
  • Focus on fundamental and technical analysis
  • Using rationality to make investment decisions
  • Behave anti-cyclical (buying the bottom and selling the top).

In summary, you have a much higher probability of consistently growing your wealth if you approach financial markets like an investor and avoid short-term trading such as crypto day trading.


13. How can you effectively build wealth with crypto and investing in general?

The important thing is to invest in yourself first, which has the highest investment return. Learn from proven investors, shorten your learning curve, gain know-how, establish a transparent investment system, and invest systematically in high-quality assets such as crypto assets.

One of the most effective ways to build wealth with crypto:

  1. Only buy high-quality crypto assets (e.g., Bitcoin and Ethereum)
  2. Continuously buy them with a transparent system (you want to own more and more of them over time).
  3. Try not to sell, and hold the assets. Appreciation will come.
  4. Don't get distracted by the fear-mongering in the news from so-called "experts". Stay calm and collected at all times. Ignore the noise.
  5. Secure your crypto assets safely (e.g., Hardware wallet, and safely secure your private keys)

There are a few resources that you can use, some free and some not.

Some of the free resources include:

Some of the paid resources include:


Buy high-quality crypto assets such as Bitcoin and hold them long-term with a mentality of an investor.

Disclaimer: Please do your research. This analysis is not financial or investment advice and only for entertainment and educational purposes. You are responsible for your actions.

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I hope this article is helpful to you.

Until next time.

Best,
Harry

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