The crypto market offers tremendous profit opportunities for traders that understand how the market works, when to invest and when to sell assets. Today there are more than 10,000 crypto coins and tokens on the market, along with more than 400 crypto trading platforms, which amounts to a total market cap of more than 2.5 trillion USD.
When Bitcoin (BTC), the first cryptocurrency, appeared in 2009, financial experts and professionals from the traditional finance sector were mostly skeptical and some went even so far as to claim that BTC and similar projects are in fact unsustainable scams. A decade later, millions of people around the globe have accepted digital currencies as a legit financial asset and trade billions of US dollars worth of coins on a daily basis.
Although it’s quite possible to earn huge amounts of cash through crypto trading, there are various risks involved and you should definitely take time to get informed about all the aspects of crypto trading before you decide to dive in. If you want to start crypto day trading, you don’t need an enormous amount of money, in fact, you can start with as little as 1,000 USD and see some nice gains if you make a solid plan and stick to a chosen trading strategy.
Let’s take a detailed look at all the key aspects of crypto day trading, popular trading strategies, and factors you should take into consideration.
Trading cryptocurrencies can become a great source of additional monthly income, but it can also evolve further and become your main source of profit. Keep in mind, however, that you won’t start making piles of cash overnight. When you begin trading you’ll probably go through some stress because the whole process is new to you and that’s why it’s important to learn as much as you can in advance, to minimize that stress and possible financial losses.
If you just quickly open an account on a random crypto exchange platform and invest 1,000 USD in Bitcoin, Ethereum (ETH) or some other crypto without any plan or strategy, you’ll probably lose that initial cash very quickly. This happens to a lot of crypto beginners every day because they are eager to join the crypto market, but they don’t take their time to get informed about trading strategies, analyze the market, and do thorough research about various coins and platform fees. In order to avoid such unpleasant situations, it’s very important to make a trading plan and stick to it.
Maybe you want to invest some cash in a promising crypto project and hold those coins until the asset considerably rises in value. In that case, you need to study the chosen project carefully and find out whether it has any potential or it’s just a marketing bubble with no real value, designed only to attract initial investors, without a sustainable development roadmap.
Or maybe you’re an entirely different type of trader, who doesn’t simply want to hold cryptos, but trade them on a daily basis, looking to profit from short term price changes. Active trading can earn you much more profits than holding coins in your wallet, but it’s also far riskier.
How Do You Become a Crypto Day Trader?
The most common type of active crypto traders is day traders. Day trading is when you don’t hold your crypto purchase for more than one day, instead, you monitor the market and buy an asset when the price dips; or you estimate that its price is going up and sell it when it does. Day trading positions can take place within a few seconds if you notice an attractive opportunity such as buying some BTC on one exchange for a lower price and then selling them on another exchange where the price is higher right away.
With day trading, you don’t need to invest a lot of money to get started. With 1,000 USD you can already start investing in selected cryptos and making sales once the prices increase a bit, which is very common on the crypto market. A price swing of several percentages within a couple of hours is quite common among top trending cryptos, but so is a price crash. That’s why you need to pay extra attention to your investments and utilize various trading orders such as stop-loss orders to minimize your losses.
Your day trading profits won’t be very high in the beginning, but when you get more agile in making the right decisions, you’ll see a steady increase in profits, especially because you’ll be able to gradually increase the amount of invested cash. Just don’t rush in the beginning and always stick to a plan.
Cryptocurrency Exchange Platforms
You can’t start trading before you choose the right crypto exchange platform, which considering the number of options these days can be a nightmare for beginners. It’s best to go with some of the most popular exchange platforms that are trusted by millions of users and that handle high daily trading volumes. The popularity of a crypto exchange is a sure sign that it’s reliable and not some sort of scam or low-security platform where your funds can get compromised by cyber attackers.
At first, one platform will be enough for your trading needs, but as you advance and become more experienced, you’ll surely start using multiple exchange platforms simultaneously to take advantage of the price differences of the assets you’re interested in.
It’s totally normal for an active day trader to use numerous crypto exchanges and monitor asset prices on them simultaneously using a crypto portfolio tracking app or even manually checking the prices.
While day trading cryptos, centralized crypto exchanges will be your main type of exchange platform, because they offer a huge variety of trading orders, advanced trading tools, interactive market charts and detailed information about selected trading pairs.
Centralized exchange platforms offer a wide range of services such as crypto storage, staking options, educational resources, and high security. These platforms are run by a single company that guarantees the safety of all traded assets and acts as a middle man who guarantees the validity of all trading deals. Some of the most popular centralized crypto exchanges include Binance, Coinbase, Huobi, eToro, Robinhood, KuCoin, Kraken and Gemini.
Before you open a user account on an exchange platform be sure to check the fee policy, so you won’t be surprised with the additional costs of day trading thanks to platform fees. For instance, Binance, the largest crypto exchange in the world, is known for its very low fees, while Coinbase is regarded as a platform with exceptionally high platform fees. Kraken and Gemini are known as platforms with affordable, moderate trading fees.
Even though centralized crypto exchanges are the platform type you’ll mostly be using as a day trader, at one point, you’ll begin using decentralized exchange platforms to get your hands on some altcoin projects that trade at lower prices.
Decentralized exchanges don’t require you to create a user account since there’s no central authority that regulates the exchange. Instead, these platforms work as a medium for automatic connections between buyers and sellers. The trading deals are usually facilitated through smart contracts that make sure no one can pull a scam on the other trading party. All you need to do is connect your crypto wallet to the decentralized exchange of your choice and you can begin trading.
How to Choose the Right Cryptocurrency
If you’re a crypto beginner who wants to start trading digital currency, you’ll easily become overwhelmed with the enormous amount of tradable assets. Everyone who has heard about cryptocurrencies knows about Bitcoin and maybe Ethereum, but there are lots of other altcoin projects that bring real innovation and value to the crypto market.
When you start trading you need to make the right choices and it’s a good idea to stick to the top 100 cryptos on Coinmarketcap while you develop your trading skills. These coins and tokens are assets that are traded by millions of people and you can rest assured they aren’t scams.
Let’s have a look at some of the top trending cryptos on the market.
Bitcoin is the first and most valuable cryptocurrency in the world. When BTC was launched in 2009, it created a real digital revolution by introducing the first, decentralized digital cash based on a blockchain network with no central authority. The idea behind BTC was to transcend traditional, centralized payment services and the limitations of fiat money.
Through the BTC blockchain, people could easily send each other funds anywhere in the world in just 10 minutes, without any additional paperwork or bureaucracy associated with bank transfers.
Bitcoin inspired hundreds of developer teams to launch their own altcoin projects offering many different services, innovating the world of finance in the process. The coin went a long way from being worth barely a few USD to more than 60,000 USD per coin, and it’s responsible for a huge portion of the total market cap of the whole crypto market.
After BTC, most cryptos that were launched in the following years tried to provide users with similar digital cash services, up until the launch of Ethereum in 2015, by crypto enthusiast Vitalik Buterin. Ethereum used a similar Proof of Work blockchain mechanism like Bitcoin, but it provided developers with a huge range of resources for launching smart contracts, decentralized apps and their own cryptos built on the ETH blockchain. It’s important to note that although ETH is PoW based, the developers behind Ethereum are implementing a slow transition towards a Proof of Stake mechanism called Ethereum 2.0.
The Ethereum native programming language Solidity and the Ethereum Virtual Machine are open-source resources created by the ETH developer team so that anyone could use all sorts of decentralized apps and self-executing smart contracts. These technologies became especially popular in the field of finance, introducing the concept of decentralized finance (DeFi) that makes payment services, asset staking, lending and other similar services far more versatile and user friendly.
Numerous popular altcoins are actually ERC20 tokens, built on the ETH blockchain, which makes Ethereum a crypto powerhouse with its native token Ether constantly on the rise.
Cardano was launched in 2017 by a team of developers headed by Charles Hoskinson, one of the original Ethereum team members. ADA is famous for being developed through a rigorous peer review system along with numerous scientific analyses with the aim to create a next-level cryptocurrency.
Cardano enables users to create decentralized apps and smart contracts through its own open-source programming code similar to Ethereum, except that Cardano uses a totally different type of blockchain.
Instead of a PoW mechanism that consumes a lot of electricity, Cardano uses a Proof of Stake (PoS) blockchain, which doesn’t require a lot of computing power because users stake their ADA tokens as a guarantee for validating legit transactions. This eliminates the need for miners and the blockchain is also a lot faster compared to proof of work networks.
ADA is praised by many investors as crypto with huge potential because it’s already in the top 10 crypto assets by market cap, even though it has a lot of developing stages still ahead of it.
Dogecoin is an example of how unpredictable the crypto market can be. The coin was launched in 2013 as a meme coin that served basically as a joke cryptocurrency worth barely a few cents. The value of DOGE skyrocketed in 2021, reaching an all-time high of over 0.7 USD per coin after Elon Musk and his company Tesla endorsed the coin.
This is something that happens with cryptocurrencies all the time, a project that doesn’t seem to have any special purpose or perspective suddenly explodes in popularity, attracting a huge market cap in the process. Cryptos like DOGE can be a highly profitable investment but it’s important to carefully monitor what’s happening with these projects in order to avoid sudden price crashes.
Ripple is an example of a cryptocurrency that’s brought authentic payment process innovation to the crypto market. It has a specific blockchain network that uses a series of servers for automatic transfer validation and the network can process up to 1,500 transactions in just one second. This extremely high processing speed makes XRP ideal for facilitating payment services.
Also, Ripple is a great choice for cross-border payments, because you can instantaneously send funds to anyone in the world, in literally one second. The XRP network has built-in currency conversion software that automatically pulls the best fiat money conversion rates from multiple sources in order to convert the sender’s currency to the receiver’s currency.
LTC is one of the first altcoins on the market, launched in 2011, just two years after BTC. The idea behind Litecoin was similar to the one behind BTC, to provide people with decentralized digital cash. The twist with the LTC project is that it was developed to have a much higher transaction speed than Bitcoin, thanks to the ability to process more transactions in a single blockchain data block by compressing the transaction data.
Even though Litecoin never managed to even remotely endanger the leading market position of Bitcoin, it’s still considered one of the most stable altcoins that are here to stay in the top 20 cryptocurrencies by market cap.
Stablecoins play a very important role in the crypto market. These digital currencies are designed to stay at a certain value, usually tied to the US dollar, without any market volatility by being backed by either fiat money collateral, crypto collateral or by computer algorithms that keep their price stable. Tether (USDT), Binance USD (BUSD) and Dai (DAI) are some examples of popular stablecoins.
These cryptos are great for cashing out your profits but still keeping them in the form of digital currency for later investments or for bank account cashouts. If you just keep your profits in the form of highly volatile crypto, you might lose considerable amounts of that cash during a market crash.
You need to be very careful when dealing with low-cap altcoins. These are coins and tokens with extremely high market volatility and high gains that you can find in the Biggest Gainers section of Coinmarketcap. Many of these coins show gains of several hundred to even several thousand percent during a 24-hour period, but beware that just as these coins can be pumped, so too they can get dumped and you can lose all of your investments.
Trading with low-cap altcoins is something you should only engage in when you’ve become an experienced trader who knows how to estimate risks and manage possible losses efficiently.
Portfolio Tracking Apps
Crypto day traders need to stay in the loop with the price changes of the assets they’re trading and also be able to monitor the fluctuation of other cryptos they might invest in in the future. This can be extremely hard for an individual to manage manually because they would have to constantly look at their phone and monitor dozens of exchange platform websites to see all the price changes.
Beginner crypto traders that only follow a couple of crypto exchanges as their relevant markets can manage to do this manually, but it’s highly recommended to start using a crypto portfolio tracking app as soon as possible. These apps are designed to systematically pull information from hundreds of crypto exchanges and show you price changes of monitored assets in real-time.
Some of the most popular crypto portfolio tracking apps are FTX, Delta and Coinmarketcap. These apps are very user-friendly and offer you a detailed overview of the market position of any crypto you select. You can also fill in the details about how many of these cryptos you own in your wallet and follow the price change of your total portfolio. Some of these apps even allow you to buy, sell and exchange assets thanks to their integration with several popular exchange platforms.
A lot of traders use crypto trading bots to automate their crypto trading business. Using crypto bots isn’t recommended for beginner crypto traders because beginners don’t have the necessary knowledge to optimize the trading bot’s parameters in order to maximize their gains. You can even end up losing money instead of profiting from a trading bot if you don’t know how to optimize it properly.
However, for intermediate traders, bots can be very useful because they offer a variety of advanced trading features that can be fully automated. You can programme a trading bot to follow both simple and complex trading strategies that include regular purchases or future ones (at the moment when your target asset reaches a previously set price). A well-optimized bot can help you achieve huge profits, but you mustn’t leave it without supervision, even though bot developers often brag about how their bots don’t need to be supervised after the initial optimization.
Some trading bots don’t charge you any upfront cash fees, instead, they take a percentage of your monthly profits or incur a fixed monthly price. However, beware of bots that require a monthly fee before you even make any profits. The most popular crypto bots on the market are 3Commas, Trality and Cryptohopper.
Day Trading Crypto: Consider This Before You Start
Creating exchange platform accounts, selecting attractive cryptocurrencies and installing portfolio tracking apps are essential before you start day trading digital currency, but there are also several key factors you should consider before you invest cash and start the trading process.
Cryptocurrencies are the most volatile class of financial assets on the market. Forex (Foreign Exchange) stock market trading or trading resources such as oil and gold is also risky, but it’s nothing compared to cryptocurrencies. The price of stocks, oil, and gold can drop or rise a few percent but the price doesn’t make a sudden dramatic leap, not even during the most volatile market conditions, while cryptocurrencies can suddenly jump or crash much more.
This is why trading cryptos is much riskier than stock trading, but the potential profits are also much higher. It isn’t uncommon for Bitcoin or Ethereum to have multiple drastic price swings in a single month. Not to mention other altcoins whose price can skyrocket on a whim. The lower the market cap of crypto, the higher the volatility and unpredictability of the asset.
When you start looking at cryptos below the 50th position on Coinmarketcap, you can easily see 24-hour price movements of 20, 30 percent or even higher. This volatility is very attractive for traders who are able to quickly buy certain crypto when the price dips and then resell it a few hours later when the price rises again a few percent. Making fast decisions whether to buy or sell an asset can cause a real adrenaline rush but it’s very important to stay cool and avoid situations that are too risky.
You can make a lot of money from day trading but there’s no need to rush it. Don’t get greedy when you’ve made some profits from the market volatility and always keep the risks in mind.
Set Clear Goals
The instability of the crypto market can quickly lead you into a situation where you’re buying and selling cryptos without a plan, just because a certain investment seems like a good opportunity to make a quick dollar. Of course, you should invest in projects you decide are worth it, but always try to set clear goals.
For example, if there’s an 8% dip in the price of Ripple and you want to buy it to profit from a possible price increase later during the day, make a plan and decide how much you will wait for the price to increase. Will you sell your XRP if the price rises 2% or will you wait for it to rise at least 5%? Ask yourself questions like these and whatever you do, stick to your goals, because you can end up losing your money real quick if you don’t have any specific goal while day trading.
Stop Your Losses
Because of the high volatility of the market, you’ll surely have trading losses. There’s absolutely no way you’re going to start day trading crypto and never have any losses. You need to be psychologically prepared to lose some cash and that’s why it’s important to invest only as much money as you’re prepared to lose. Never go over that boundary.
Think of the cash you invest in day trading as something that might already be lost, so if you do lose it, you don’t get stressed about it and if you manage to make some profit, you’ll be quite happy.
When losing cash during day trading, you should always have a loss limit. This is called stopping your losses and it’s usually done automatically thanks to stop-loss orders on exchange platforms. These orders enable users to set a certain price for an asset and if this price is reached, the asset will automatically be sold, to save you some money and stop your losses. If you just let your investment’s price crash unfold, hoping that the price will stop falling, you might end up losing even more. That’s why you should always stop your losses on time and invest that cash in other assets.
Don’t Chase Your Losses
If you’re losing money, it’s absolutely mandatory that you don’t chase your losses by investing even more money in high-risk assets hoping that you’ll regain your lost cash. Losing money while trading is always stressful, but you mustn’t allow the stress to cloud your judgement and make you start investing in even riskier trading pairs to get that money back.
It’s a good idea to have a risk management plan such as stopping your daily trading cycle after two or three consecutive losses. When you’re losing money it’s best to take a time-out that day and stop trading. When you’re stressed out you probably won’t make the best trading decisions and it’s totally fine to stop your trading session instead of risking an even higher loss.
There’s no way that your day trading will go smoothly right away. You’ll surely make some mistakes and wrong investment decisions along the way, and that’s why it’s important not to invest more cash than you can afford to lose. Plus, another reason why low starting sums are recommended is that you can get to practice your trading skills. For this, you should choose a crypto exchange that offers paper trading features through a demo account. This means that you can trade in real-time without investing or gaining money, which is perfect for practising your trading skills without risking any cash.
When you start trading you shouldn’t have massive profits in mind right away. Instead, you should try to experiment with different trading strategies and modest amounts of cash, to test your skills and understand how the crypto market works. Don’t get frustrated if your strategies don’t work out right away. That doesn’t mean that what you’re doing is wrong because it’s possible that you aren’t implementing a certain strategy the right way.
Investing small portions of your initial 1,000 USD trading budget is a good method for building some trading experience. It takes a lot of practice to become successful in crypto day trading and you need to be prepared for that journey.
Make a Day Trading Action Plan
Creating a day trading action plan is essential to your success as a day trader. You need to cover these five key aspects that constitute a good trading plan.
Choose Your Assets Carefully
Always be very careful when choosing which assets you’re going to invest in. Get informed in full detail about the crypto projects that look interesting to you. For example, if you think that Cardano might be a nice investment opportunity, check the official ADA website, browse through social media threads and forums to see what does the crypto community say about Cardano.
Also, don’t forget to check crypto-related media outlets and mainstream media through a detailed Google search to see what financial experts and crypto influencers are saying about ADA. Checking the price fluctuation of your selected asset is also a must because if you notice a long term downtrend, that might be a signal that crypto isn’t really worth investing in.
This selection process should be the same for every cryptocurrency you want to invest in if it’s a totally new coin for you. If you’re already acquainted with a project and have trading experience with it, you should focus on monitoring the price charts and official developer team communication to see if there are any significant development milestones ahead that might cause a price jump.
Select a Maximum of Two Trading Strategies
You need to have a trading strategy before you start day trading cryptos. A strategy isn’t the same as a plan. Your trading plan is the set of rules you follow regarding your trading process such as which cryptos to invest in, what your daily trading schedule will look like and what kind of exit plan you will have. A trading strategy however is the method you use to successfully day trade and profit.
Whichever strategy you choose, it’s important to stick to it for a certain period of time and let it unfold to be sure if it’s working for you or not. Also, never practice more than one trading strategy in the same trading cycle. You’ll just mix up different trading methods and end up losing cash. Choosing a maximum of two strategies that you’ll try out in different trading sessions is quite enough.
Have an Exit Plan
An exit plan is of key importance when day trading cryptos. For example, set yourself a daily profit or loss limit and if you reach one of those limits, it’s definitely time to end your daily trading session.
Analyze the Market
Analyze market patterns of selected cryptos. This is called technical analysis. You need to learn how to read crypto market charts and recognize price change patterns that will help you make the right trading decisions. It isn’t enough to just look at a price chart and the general upwards/downwards trend, because there are various chart patterns that can give you a hint of whether to expect a further price increase or fall.
Fundamental analysis is also something you should always practice. This means installing a crypto tracking app like the ones described in this guide, because apart from technical characteristics, these apps also pull news articles from numerous media outlets, giving you an overview of the media sentiment regarding a certain crypto. News of large-scale investments in crypto projects are known to boost the price of a digital currency.
Have a Trading Schedule
Set yourself a day trading schedule and stick to it by trading every day at the same time. This is especially useful for putting a clear boundary between crypto trading and your private life, work or time with friends and family. Choose a few hours that will be reserved for day trading and always tend to be active within that set timeframe.
Day Trading Strategies You Can Try With 1000 USD
In crypto trading, there are countless strategies, in fact, every trader can develop their own distinctive custom strategy, but to create a really effective strategy by yourself, you need to have a lot of crypto knowledge and experience. That’s why it’s best to pick a popular existing strategy and try it out.
Don’t worry if you fail right away, because most people do. You shouldn’t give up on a selected strategy after the first time it fails. Instead, you should give it some time to succeed or maybe definitely prove a bad choice for you. If you’re starting day trading with 1,000 USD, you should take a portion of that cash, 50 or 100 USD, and dedicate it to a single strategy, just to try it out.
Here’s a selection of four popular day trading strategies which are used by crypto traders worldwide on an everyday basis.
Arbitrage trading is a popular day trading strategy that requires you to monitor the same trading pairs on multiple exchange platforms. If you’re using a portfolio tracking app you can get a clear overview of the price of certain crypto on multiple exchanges. When you notice a profitable price difference between two exchanges, you just buy the selected crypto on an exchange platform with a lower price and immediately sell it on another exchange that offers a higher price.
Arbitrage trading is a great strategy to make quick cash, but you really need to be fast and you’ll probably have to open multiple exchange platform accounts on several platforms to be able to immediately facilitate a trade. The price difference can change real quick and if you’re not fast enough you might lose the arbitrage opportunity because the other exchange also lowered their buying price for the crypto you wish to sell.
Large exchange platforms usually offer lower prices for cryptos, while smaller exchange platforms with lower liquidity levels sell and buy digital currency at higher prices, so it’s a good idea to monitor the price difference between industry-leading platforms and smaller exchanges.
The long straddle is a very simple day trading strategy suitable for beginners. You need to select a cryptocurrency and then simultaneously place a put and call order. When placing these two orders you need to also select the same order expiration time and striking price.
Using this strategy means that you’re relying on the volatility of selected crypto markets and the huge probability that the price of your chosen cryptos will rise or fall. You’ll profit if the price changes before your order expires regardless of whether the price went up or down. You will lose money only in case the price remains the same.
Crypto Bot Trading
Crypto bot trading is another popular strategy. This strategy includes using a crypto bot like one of the bots recommended in this guide. With a trading bot, you can set detailed instructions regarding what, how, when and how much to purchase or sell. You need to optimize your trading bot before it can start trading for you and you need to connect your exchange platform accounts and crypto wallets to the bot.
The most important aspect of using a crypto bot for trading is to monitor it and set all the trading parameters according to a backtested strategy. If you’re a crypto beginner, the crypto bot trading strategy might be a bit too complicated for you, but it’s a great solution once you gain some experience.
One of the most popular day trading strategies is crypto scalping. This is a strategy that requires you to be fast and control your risk appetite. With scalping, you buy a certain amount of a selected coin and then quickly resell it once the price increases enough to make some profits after taking into account the involved trading fees.
Even a small price increase of 1-2% is something day traders take advantage of when scalping. On a daily basis, you won’t make a lot of money, but in the long run, you can earn some serious cash from scalping, especially because the risk is very low when using this trading strategy.
A Few Final Words…
Day trading cryptos isn’t something you can start right away. As you can see from this guide, you need to learn a lot about the crypto market, available digital currencies, exchange platforms and trading strategies before you start spending cash on day trading. However, once you get hold of the basics, you can start trading with as little as 1,000 USD.