Tip 2: Stick to the Popular Cryptos
All cryptocurrencies are not created the same and therefore do not have the same characteristics. You cannot compare cryptocurrencies like Bitcoin, Bitcoin Cash, Ethereum, Monero and Ripple which are ranked by TradingBeasts as the best cryptocurrencies to day trade with deadbeat coins that are probably listed on one deadbeat exchange and which hardly even gets a look-in from the trading public.
The popular cryptocurrencies are your money-makers. They have more volatility, greater trading volume and therefore are more likely to deliver the kinds of movements you need to see within a few hours to make profitable intraday trading possible.
It is best you stick to pairings that feature the cryptos mentioned above, so you can be sure you have a good range of movement to make your crypto trading profitable. You can also scan the markets to see which of the listed cryptocurrency pairs on your platforms are doing very well in terms of range of movement.
Tip 3: Ensure Your Account Is Adequately Funded
The margin requirements for cryptocurrency CFD trading are very high: usually, you will be asked to provide half of the cost of setting up a position on your selected cryptocurrency as margin. Let’s take for instance you want to trade a Mini-Lot of the BTCUSD pair (i.e. 0.1 lots). Some brokers may charge up to $200 to setup a mini-lot position on the BTCUSD pair. What this means is that you would have to come up with half of this amount as margin, which would be $100.
The risk management rule requires that no more than 3% of your account size must go into a trade. If you were to trade BTCUSD with a margin of $100, you would need an account size of a minimum of $5,000 to be able to trade such a lot size. The reason is simple. A loss of 3% of your account will not cause undue problems for your account size. However, a loss that translates to 20% or 30% of your account is a major loss. Your account will struggle to recover thereafter. When you have an adequately funded account, it will enable
Tip 4: Low Capital? Trade Other Less Demanding Cryptocurrencies
Bitcoin is the cryptocurrency that demands the highest margin of all traded cryptos. You can always trade other cryptocurrencies that do not attract high margin requirements. For instance, the trading of other cryptocurrencies such as Ripple and Litecoin attracts margin costs which are far lower than that of Bitcoin.
Indeed, a platform we reviewed showed that the margin requirement for a Standard Lot position for Litecoin was $7.37, while that for Bitcoin on the same platform was $1,733, nearly 235 times more than the LTCUSD position. Litecoin and Bitcoin Cash are correlated with the price movements of Bitcoin, so you can use them as mirror assets of Bitcoin, at highly reduced trade costs.
Tip 5: Use Correlations to Improve Your Outcomes
Bitcoin Cash and Litecoin are highly correlated with the price of Bitcoin. They were both designed using the Bitcoin blockchain and therefore track the price moves of Bitcoin with a high degree of accuracy. Ripple also correlates with Bitcoin’s movements, but to a lesser degree.
Sometimes, you have to know what is happening in one correlated asset in order to predict what may happen with the other correlated asset. There are instances where one asset makes a move before its correlated asset. Use this to your advantage.
Tip 6: Pay Attention to the News
You have to really be on top of things when it comes to trading cryptocurrencies using the news. The snag here is that unlike what is obtainable in the FX market, the cryptocurrency market has no news calendar that is specific to it. Therefore, you have to find a way to source for the latest crypto news, especially when you notice some very abrupt, sharp price moves on any crypto.
The best news sources for crypto market-moving events are usually the social media platforms. There are many people who have made it their job to track events in the crypto market and report on it. So when there is news of a partnership between a crypto project and a mainstream company, they tend to hear it faster than others because of the networks they have built. It is your job to identify such sources and use them as your news sources.
Conclusion on tips for day trading cryptocurrencies
These are the actionable tips you can use to improve your chances of success as you engage in crypto day trading. Ensure you follow these tips to the letter.