Crypto Day Trading For Beginners

The development of cryptocurrencies has created new ways for people to earn. In this article, we’ll discuss one of the most profitable options—day trading. We'll share helpful tips for beginners and recommend effective strategies to avoid common pitfalls and mistakes.

What Is Day Trading?

Day trading in crypto is a method where traders open and close positions within 24 hours. The main principle is to close all points at the end of your personal day. This term came to the cryptocurrency market from traditional, which operates within set hours. However, unlike stock markets, the cryptocurrency doesn’t have time restrictions, allowing you to set the start and end of your personal needs.

In day trading, the duration of holding assets usually ranges from a few minutes to several hours. The choice of timeframes depends on the trader's mood and style. Each approach can offer unique advantages and drawbacks. Read on to find out the most popular and effective strategies.

Most Popular Crypto Day Trading Strategies

Scalping

Scalping is a short-term approach where traders aim to profit from small price fluctuations. Scalpers make many purchases throughout the day and hold positions from a few seconds to several minutes. So, they make a small profit on each trade. The main principle of scalping involves accumulating a lot of micro wins, which can collectively yield significant profits. This approach requires a high frequency of trades and quick reactions to market changes.

Scalpers typically work with cryptocurrencies with high liquidity, such as Bitcoin, Ethereum, XRP, Solana and others, where the spreads between the buying and selling prices are minimal. The key advantage of scalping lies in the trader's ability to minimize the risk of large losses due to the short-period nature of transactions and still make frequent profits.

Breakout Trading

Breakout trading is a strategy where traders aim to profit from sharp price movements. It occurs when they breach key support or resistance levels. The main idea is that when the price of an asset breaks through significant points, it often continues to move in the same direction with increased momentum. Traders open positions at the time of the breakout in hopes of profiting from the next action.

Support and resistance levels play a crucial role in this method. Support is the phase where the coin's price stabilizes during a decline. Resistance is a point when the cost increase halts. Breakout trading proves to be an effective strategy, especially during periods of heightened volatility, but it requires a clear understanding of technical analysis and risk management.

Trend Trading

Trend trading is a way where sellers open positions in the direction of the existing trend. It aims to profit from prolonged price movements. An uptrend features a series of rising highs and lows, while a downtrend presents decreasing stages.

Traders buy during an uptrend and sell during a downtrend. They use indicators such as moving averages, MACD, and ADX to assess the direction and strength. These tools help to identify moments for entering and exiting purchases.

Success requires patience and discipline, as trends can experience short-term corrections and pullbacks. Traders use stop-loss orders to protect their capital and minimize losses during sudden market changes. The main goal is to hold a position for as long as possible while the trend remains active. And also to exit the trade at the first signs of reversal in order to fix the profit.

How To Pick Cryptocurrency For Day Trading?

In general, a good coin is one for which you have an appropriate strategy. If you look at cryptocurrency charts and don’t understand what to expect from its price, it’s better to search for another type. However, if you see that backtesting your strategy on this coin’s cost chart yields good results, that’s a positive sign.

Additionally, choose liquid digital assets with a large market capitalization, especially for beginner deals. New cryptocurrencies with low capitalization exhibit higher volatility and pose greater risks than popular and established ones. Another problem with new funds is that the limited historical data makes technical analysis a difficult task.

How Much Can You Make From Day Trading Crypto?

The amount from day trading heavily depends on various factors: starting capital, the trader's experience, strategy, and current market conditions. Day seller’s profit from small price fluctuations throughout 24 hours. They open and close positions within minutes.

The volatility of cryptocurrencies can also be quite significant and create opportunities for good profits. Cryptocurrencies are well-known for their volatility, and massive price swings can occur over a single trading day. For example, with a successful way, a trader might earn 1-5% of their capital in a day. On average, beginners can make $100 on a crypto day trade. However, this requires considerable time, attention, and quick reactions to price changes.

Experienced traders recognize the importance of risk management, using stop-loss orders, and minimizing emotional decisions. So, don't expect instant profits—earnings can be unpredictable. For beginners, it’s crucial to understand that lucky deals require time to learn and develop a personal strategy because success doesn’t always come immediately.

Taxation Of Day Trading

Buying, selling, and day trading crypto assets is legal in the US and most other countries. So, cryptocurrency taxation in the U.S. follows the rules set by the Internal Revenue Service (IRS). Cryptocurrencies function as property rather than currency. Therefore, all transactions with them (purchase, sale, exchange) are subject to taxation. If you sell virtual currency for a profit, it gets taxed as capital gains.

The tax rate depends on the duration of saving your assets. If you sell the coins one year or more after purchasing them, a preferential tariff for long-term capital gains applies (up to 20%). But if you trade within a year, you face short-term capital gains tax, which corresponds to your ordinary income tax fare (up to 37%).

Additionally, obligations can arise when receiving cryptocurrency as payment for goods or services. In this case, the coin counts as income and gets taxed at the same rate as regular wages. In this case, it’s essential to keep track of all operations.

Violating tax rules can lead to fines and additional charges. In other countries, cryptocurrency tax laws vary significantly, so it’s advisable to familiarize yourself with the legislation in your country or consult a tax professional in advance.

Risks Of Day Trading

Day trading involves high profits but also a number of risks that greatly affect capital. One of the main problems is the high market volatility. Cryptocurrencies experience important price fluctuations over short periods, increasing the likelihood of losses. For example, the cost drops sharply by 10% within a few hours. It leads to substantial losses for traders who fail to exit their positions in time.

Psychological aspects also play a big role. Emotions such as greed and fear lead to irrational decisions. Traders sometimes make the mistake of panicking when prices are falling or, on the contrary, they invest in assets at their peak and hope for further growth. Therefore, managing emotions and maintaining discipline are critically notable for profitable trading.

Finally, liquidity risks. When trading on lesser-known exchanges, selling funds at the desired price can be a challenge. It may result in financial losses. So, it’s crucial to understand a careful approach, thorough analysis, and awareness of all possible risks.

Tips For Successful Day Trading

Experience is always necessary for effective trades. However, to save your time, we have compiled a list of tips to help you avoid mistakes.

• Follow BTC Price
  Some cryptocurrencies may deviate from market trends, but Bitcoin remains the leader and price driver. For example, when BTC drops, most altcoins tend to drop significantly. Conversely, when the price of BTC increases, nearly all altcoins rise as well. For this reason, if you engage in day trading cryptocurrencies, keep a close eye on BTC price movements.

• Pay Attention to Time Zones
  Since cryptocurrency trading occurs 24/7, it’s essential to consider the main time zones where most participants are active. For example, market growth often happens right after the new day begins in North America (UTC-5) and Asia (primarily in China—UTC+8). Be prepared for these periods of active trading and observe how the market reacts to changes.

• Don't Trade with All Your Capital
  There’s no need for extensive explanation here. However, traders caught up in bullish sentiment often open positions using all their capital and get trapped during a rapid decline. Day trading requires careful capital preservation since you need to constantly move money between positions to grow your portfolio. By opening new trades with smaller amounts, you can benefit from dollar-cost averaging, allowing you to balance potentially unsuccessful trades.

Thus, we can say that cryptocurrency day trading offers many opportunities but also involves significant risks and volatility. We recommend carefully planning your strategy.

Additionally, make sure to set up a crypto wallet for storing your assets. The Cryptomus wallet can be an excellent option, as the platform securely stores your data and is always ready to assist in case of any confusion. While you stay calm about the protection of your funds, the tips and instructions in this article can help you make more informed decisions.

Do you practice day trading? Share your experience in the comments.