Cryptocurrency has become quite the hot topic when it comes to trading and investments. Day trading, relying on consistent trades throughout the day to make a profit, seems to have found a home in the crypto markets of late. These markets are open 24/7 and don’t require any type of account to trade in.
Like any new technology or product, crypto is looked at as an exciting industry to get into by many. But just like with any investment, there are risks when it comes to investing in them, and those that have chosen to do day trading in the crypto market always want to know how to pick crypto that will work the best for day trading.
With more and more cryptocurrencies coming into being almost every day, you have to look at a lot of factors to figure out which ones are best and how to pick the right one for you. Our team at Capitalist Exploits knows many people are excited about this new prospect and thought they would help us with some guidance on how to pick crypto for day trading.
Crypto Day Trading Defined
There are a lot of different options when it comes to day trading. But one thing that you should understand is that crypto day trading is vastly different from any other buy and hold strategies utilized in the past.
For those day traders who work in traditional investment options, it is a consistent buying and selling process. Sometimes within minutes of each other. In this case, you’re looking for the highest profit for the least effort, but with crypto day trading, it’s more about smaller profit margins and is even faster than the traditional day trading of stocks and options.
No matter what, though, it is still day trading. This means that when you’re looking to trade in crypto as a day trader, you will be making several purchases and sales throughout the day to maximize your financial gains.
Two Terms to Understand
Before we dive into how to pick crypto for day trading, there are a couple of terms (jargon, if you will) that our team insiders think you should really understand when it comes to day trading crypto.
Pairs
When you’ve chosen to dive into the world of cryptocurrency for your day trading, you’ll need to understand that digital currency is different when it comes to the purchasing process. In fact, digital currency is purchased in pairs (this means it’s all sold in pairs as well). When it comes to this, there are two different categories that these purchases fall into:
- Fiat to Crypto – This is a pair that has a cryptocurrency tide with a physical currency. These pairs are simpler to trade as a day trader and are usually based value-wise on a preferred currency by the trader.
- Crypto Cross Pairs – This is when two types of cryptocurrency are bought together. This is a riskier option and, for beginners, definitely not the best choice.
Trading Orders
Along with the idea of pairs, a person who is getting into day trading in cryptocurrency needs to understand the idea of orders. There are several different types of orders, but the most important are:
- Sell/Buy Orders – A buy order is used to get into the market. To finish out the transaction, you would use a sell order. However, when you’re short selling, that is not the case; it’s actually the opposite.
- Limited/Market Orders – Limited orders permit you to choose the price you start with. If you’re looking to trade quickly for the best price, you might also use a market order.
- Stop-Loss Orders – This type of order can hedge your risks and allow you not to lose too much money during the trading process.
- Take-Profit Orders – If you’re looking for something that makes profit targets stay in place, then you can do this with a take-profit order.
How to Pick Crypto for Day Trading
So now that you have an idea of what day trading is like with crypto and some key terms that will play a role in your crypto day trading, we can now look at how to pick the right crypto for you.
Here are some tips that should help you:
Platform
The first step in the process is to choose the platform that you want to use. When doing this, you need to understand the rules of the process. For instance, if you are a US-based day trader, you are only allowed to use domestically regulated platforms. So this should be key when you are researching which platforms you will go with.
Along with this, there are several other factors you should look at when choosing your platform. Things like:
- How long has the platform been active?
- Which cryptocurrencies are supported by the platform?
- Are there any transaction fees or other types of charges when it comes to using the platform?
- Which deposit methods are available for you?
- Read user reviews
- Research the speed and simplicity of accessing an exchange
- Look into how long it takes to convert one asset into another
Investments
Now that you have chosen the platform, you want to look at the available options for you to invest in. When you look at the cryptocurrencies that are available to you, you should look at things like market volatility and liquidity. Another factor to consider is trading volume. All of these together will help you identify the right crypto for your day trade.
Trading Strategy
Choosing the right cryptos for your today trade-in is important but understanding what trading strategy will work best for you is key too. There are a lot of different techniques used in the industry to ensure elevated results. There are some platforms and websites that you can use to gain market insights to make more educated decisions on what strategy you are planning on using.
Here are some of the most popular strategies that many people utilize in crypto day trading:
Arbitrage
This strategy is when day traders utilize crypto as their investment and buy it on one platform and sell it on another at a higher price.
Bot
Some day traders choose to use automated software, bot trading, to buy and sell at designated times or under defined terms. Ideally, this is done to help improve profits and hedge losses and risks.
Long Straddle
This strategy is when a day trader buys both a put and call order. Typically this is done in the same cryptocurrency at the same striking price and expiration date.
Range
When it comes to range trading these days, traders are looking at non-trending markets. This is done by looking at the highs and lows of the prices, the charge of resistance, and support levels. These days traders look for timeframes where the crypto is oversold and then sell when it is overbought to increase their profits.
Final Thoughts
Like with any other type of trading, crypto day trading is risky. This is because you are consistently buying and selling to build your profit. But by understanding the process and some of the strategies, you should be able to pick the right crypto for your needs and be financially successful.
That being said, always having access to resources to keep up to date on the market is vitally important. There are many options online, such as websites and newsletters like ours, Insider Newsletter, that you can utilize to improve your results even more.