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A Guide to Day Trading Bitcoin & Other Cryptocurrencies

A Guide to Day Trading Bitcoin & Other Cryptocurrencies

Nick Cawley, Senior Strategist


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Learn to trade bitcoin and other cryptocurrencies with this guide.

This guide is designed to help day traders navigate the cryptocurrency marketwith control and confidence and is built on decades of experience garnered by DailyFX analysts and authors. We will study a wide range of fundamental, technical and psychological trading techniques that will help you master short-term trading in one of the most talked about and volatile marketplaces.

Before we start our trading journey it is important to understand that day trading cryptocurrencies, be they Bitcoin, Ethereum, Litecoin, Ripple or any of the other liquid digital coins, is not for everyone. The techniques and experiences however in this guide are fully transportable to other asset classes, be they currency pairs, commodities or indices.


A simple question yet one that any day trader should take some time to answer honestly. The cryptocurrency market is still in its early stages yet has gathered more column inches and press coverage than any other asset class in the last two years. This coverage ranges from doom and gloom and ‘bubble bursting’ predictions to tales of instant millionaires, a jet-set lifestyle and garishly coloured Lamborghinis. Ignore Them.

Traders must know when they enter this volatile marketplace their primary objectives, be they short-term trading, long-term investing, part-time trader, full-time traderor just someone who wants to use the crypto-currency space to become comfortable with volatility before moving to another asset class.


To become comfortable and confident with the market you need to practice and learn, and keep doing this throughout your journey. As one of the world’s greatest golfers Gary Player once said, “The harder I practice, the luckier I get”. And this is a truism as practice breeds confidence, not from just showing you what you are doing right, and helping you ingrain that in your daily trading activity, but equally importantly it also shows you what you are doing wrong. Online Trading Academies are also a valuable source of information and should be used at all stages of your trading journey.

New traders should open a demo account before they commit any money to the market and apply different technical trading techniques alongside rigorous fundamental market analysis and execution set-ups.

When learning lessons remember how you got there by recording both winning and losing trades, why you entered the trade, why you put specified profit and loss limits, why you put that particular amount of money at risk and how you felt after the trade was closed. Again, be honest as these experiences will help you in the future by giving you a real-life example of how and why trades go right or wrong. Do not take any short-cuts in your trading analysis.

When you set up for the day ahead of entering the market you must feel in a good, positive mood and welcome the challenge ahead. If you are tired, in a bad mood, rushed or feeling ill, do not trade, turn off your computer and reassess where you are. The cryptocurrency market is a day trader’s dream market with enough volatility each day for you to follow your dreams. Do not force trades, do not trade if you are ill, tired or angry; your discipline will falter and you will end up on the losing side.

When trading bitcoin, become comfortable the market's movements by trying a practice account.


One of the main attractions of day trading Bitcoin (BTC), Ether (ETH), Ripple (XRP) or any one of the other liquid coins is volatility – prices that fluctuate rapidly and/or in a wide range are said to be ‘highly volatile’. This volatility is one of the main draws for short-term/day traders as it gives them the opportunity to get in and out of the market, hopefully with gains.

We have mentioned liquidity before and this is a must have when day trading and should be a major influence on not only the cryptocurrencies that you are trading but also the marketplace where you are trading. The current top four cryptocurrency coins by size – Bitcoin, Ether, Ripple and Bitcoin Cash – all currently have market capitalizations in excess of $20 billion, providing an ample source of liquidity. Keep an eye on your chosen coin/s market size – and maybe the next four coins below – to make sure liquidity is constant.

Also check the total number of a particular coin in circulation and whether more coins can be printed or if an original partner/owner in that particular coin has a substantial holding.

Volatility in bitcoin has made it a popular trading vehicle for day traders.


It is not just the capitalization of a coin that makes it liquid, the exchange/marketplace where you trade that coinis equally important. There have been numerous examples of exchanges – and remember these are mainly unregulated – that have halted trading in times of extreme volatility or because they have been hacked or they cannot handle the volume of trades. There have been many examples of cryptocurrency exchanges that have suddenly closed down with clients losing some or all of their money. So, choose your market place carefully and make sure liquidity, reliability and if possible market regulation are at the top of your list before entering any trade. Investment firms like IG ‘ring fence’ client funds by using segregated accounts at regulated banks and are authorised and regulated by the Financial Conduct Authority (FCA).

In addition trading is about being comfortable, and being able, to go both long and short in any of the coins you decide to trade. If you are unable to short a coin – sell a coin that you don’t own – your chances of making money on a regular basis are severely curtailed. Check that the marketplace that you are going to use gives you maximum flexibility and reliability.

Know the risks when trading bitcoin by researching the platform provider.


As we have mentioned earlier, it is extremely important to know why you are trading cryptocurrencies and what you are looking to get out of it. Stick to your goals and don’t let the market bully you into trading when you do not want to.

When entering a trade, identify your entry price, your stop loss level and your target price. Do not enter a trade without a stop-loss, without fail. Even better if your provider can offer you a guaranteed stop-loss – normally for a small premium – you should consider it carefully. Market volatility can force prices straight through a stop loss - slippage - which can leave you at the mercy of your provider for your eventual fill.

Margin trading, if offered by your provider, ramps up volatility and unless you are absolutely clear that you are able to use it correctly, leave it. Traders should also consider Contracts for Difference (CFDs) very carefully before using them. The market has enough volatility of its own and will continue to offer you opportunities to trade profitably.

One of the main ways that traders lose money is by losing discipline and chasing losing trades or by ‘doubling-down’ on positions that are going against them. This is the market controlling you and taking your money right in front of your eyes.

Just. Don’t. Do. It…Ever.


In all walks of life it is vitally important to enjoy your chosen profession and day trading or any other marketis no different. A full-time day trader will need to spend hours every day studying the market, reviewing past trades, looking at potential new trade set-ups while constantly researching and updating a wide range of fundamental and technical trading techniques. It is a full-time job and should be treated with the same dedication and respect as other professions.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.