Cryptocurrency has been the hottest kid on the block for the past six years. Everyone is talking about how people are making a fortune in day trading crypto. Heck, I also made an incredible $5000 from a meager $260 and couldn’t stop talking about it.
But hold up; it’s not all sunshine in the crypto world. No one talks of the millions losing their money in cryptocurrency. So how do you invest in cryptocurrency in 2023 like a pro?
Before diving into the details of how you can grow your money through crypto, it’s vital that you understand what cryptocurrency is and some definitions. According to the book, The Richest Man In Babylon, by George S Clason, you should never invest in what you don’t understand.
Cryptocurrency is a peer-to-peer electronic cash system with no trusted third party. This unique characteristic means that crypto is decentralized, unlike traditional currency. It all began on November 1, 2008, courtesy of a programmer code-named Satoshi Nakamoto with the development of Bitcoin.
In October 2009, the first transaction was made where 5,050 Bitcoins were sold for a mere $5.02! A lot has changed to date, with each Bitcoin going for about $23,000.
- Stablecoins- cryptocurrency whose value remains constant because it is backed by physical assets, e.g., Tether (USDT)
- Tokens- crypto used as a medium of exchange for a particular startup running on the blockchain technology, e.g., RBIS token by Arbismart
- Market cap- total value of a particular crypto asset in US dollars
- Volume- the value of a specific crypto asset exchanged over a certain period, for instance, 24-hour volume
- Exchange- a platform that allows you to buy and sell cryptocurrency, e.g., Binance, LATOKEN, Kraken
If all the above definitions do not sound familiar, you should watch videos on YouTube to familiarize yourself with cryptocurrency before you think of investing. It will save your hard-earned money.
How to Invest in Crypto
The world of cryptocurrency allows you limitless investing opportunities. However, the easiest ways to get into and make some reasonable money are the following:
- Day trading
- Swing trading
Day Trading Cryptocurrency in 2023
What most people won’t tell you is that the crypto world is very volatile. Imagine having a $100 banknote in your wallet that could as easily turn into $500 as it could turn into $10 in a matter of hours. Yes, that’s how wild the crypto world is and will remain for a long time. But that right there is an opportunity that can make you good money as a day trader.
Day trading involves buying an asset when the price is low and selling it at a high price within a matter of seconds, minutes, or hours.
If you think that is more like trading stocks, then you are right. It follows the same rules and utilizes the same strategies. There are however three exceptions when it comes to crypto:
- You can’t short (borrow assets and sell them at a high price, hoping the price goes lower so that you can buy back the same amount of assets and have a profit)
- The market is open 24/7
- The value is highly volatile- experienced stock traders stay away from crypto
As a crypto trader, your two jobs should be analyzing the cryptocurrency assets you want to trade and managing risk. It will surprise you how simple it is to day trade. And once you get good at crypto trading, you can use the same skills on the stock markets. You will be all set on a journey to financial freedom.
How to Day Trade Crypto like a Pro
Millions of people trade crypto every day. Retail traders deal in small volumes of an asset, and whales own over 10% of a single crypto asset. When you trade, you are essentially trading against both the system and the other traders. Unless you trade like a pro, failure is inevitable. That’s why everywhere you turn, there is someone who has lost their money however small in crypto.
Here is how to trade like a pro and even make a living from day trading:
I can never stress this point enough. You have to LEARN. Without learning, you will fail. Learn then remove the ‘L.’ Nobody wakes up, reads a single article or book, and then starts treating people as a doctor, right? You don’t read an instructional leaflet and start driving on the highway without learning, right? Why would you start trading crypto on the first day you hear about it?
Lucky for you, there are countless resources you can turn to for trading skills. And as I mentioned earlier, day trading crypto is like trading stocks, and therefore any resource on the topic of trading stocks will be as valuable in crypto as it is in stocks. These resources include:
- Books– read at least one foundational book, for instance, How to Day Trade for a Living by Andrew Aziz
- Videos– watch videos on YouTube about day trading, for instance, Wysetrader videos
- Experts– find an expert, whether in person or online, who day trades crypto and learn from their experience
Most of these resources are free, but they will fast-track your learning. You will be able to avoid the most common mistakes people make. It will save you money and allow you to start making profits early on.
If you perused through my phone or laptop, you would come across books, PDF documents, Telegram groups, subscriptions to YouTube channels, and many other resources geared towards day trading and cryptocurrency. I let day trading consume me so that when I log into my trading account, I can literally see opportunities jump off the screen.
Once you understand how day trading and crypto work, you will need practice. There is no shortcut. You have to put the strategies you learn to the test with a small amount of money. Only invest a significant amount when you have been making consistent profits with the small amount used for practice.
I used $50 for practice because my platform, LATOKEN, allows me to trade any amount including $0.01. Binance, on the other hand, only allows trades equal to or more than $10, and therefore you should use at least $100 for practice.
Patience is key. Keep going even when you are consistently making losses. The success trajectory is not linear but somewhat curved. You would instead make losses with a small amount than your hard-earned money.
Some of the key things to have when practicing include the following:
- Targets– set a daily profit target, whether a percentage of the capital or an absolute amount
- Strategies– focus on one strategy until you master it before moving to the next
Dr. Andrew Aziz describes day trading as guerilla warfare, where you identify an opportunity, attack, and then get back into hiding. No words were truer. Timing is everything in day trading. It is what separates a good trader from a poor trader. Here are some critical aspects that need precise timing:
1. Market Timing
Although the crypto markets are open 24/7, it doesn’t mean you can trade at any time. I have learned from experience that the crypto market has some correlation to the stock markets. Therefore, you will find significant trading activity when the various stock markets open. Keep an eye on the Asian, European, and New York stock exchange opening times.
I usually assess the assets I would like to trade on based on their activity during those stock exchange opening times to identify trading opportunities. My favorite is buying around the opening of the NYSE and then trading for about two hours. There is always significant price movement.
The European trading hours have always been a no-go zone for me as they have consistently brought most crypto prices tumbling down when their markets open. They usually find the prices high and rush to sell at a profit. But they serve their purpose, to get the crypto prices low enough for retail traders to buy in anticipation of the spike when the American market comes into play.
2. Asset Timing
You have to look at the crypto asset price performance in the recent past before deciding whether to trade. Most tokens have a predictable lifetime. They start at a low price, then have a sharp rise before they start tumbling down irreversibly.
I was lucky enough to hold RBIS long enough to experience the entire curve. It began at a price of about $1 per RBIS token. What followed was a progressive rise to an astonishing $20, where I sold my tokens for over $5000. But that was too soon. The price shot to a wild $1750, which would have made me $455,000. It then tumbled down to $0.25 per RBIS. All these events happened in less than a month.
I didn’t know day trading back then. If I did, I would have made a fortune from this curve. The bottom line is; you have to study the graph in a larger time frame to establish the general trend of the asset before jumping in. Generally, trade assets with at least an average upward trend in the past week.
3. Trade Timing
Placing the individual trade should also be precisely timed. You need to buy when the price is low enough, which increases your chances of a profit. Devote some time to understanding the candle chart for better chances at timing your trades. Countless videos on YouTube explain the Candle charts; therefore, I will not take the time to explain what to look for in them.
A very important aspect of trading is psychology. Unfortunately, you will have to learn to study people and their trading behaviors. It is not that hard, though. In fact, by studying your trading behavior, you can understand how the other traders are thinking. When you see a trending asset, remember millions of others are seeing the same chart. And remember you are trading against the other traders and the system.
Your best bet at beating the other traders and the system is understanding strategies well and being disciplined enough to stick to them. It’s time to get your emotions out of the trading. Be mentally in the right place, stay away from hope, and analyze the charts as a computer would; that’s your edge.
Finally, find a forum where people discuss matters to do with day trading cryptocurrency. It could be a telegram group, social media group, website, or apps like coinmarketcap. You will be able to stay in the know about the direction of the market and certain assets.
Some of the ways you can benefit from forums include:
- Assessing how people are using similar strategies
- Sharing screenshots of how you traded for positive criticism
- Asking for advice from expert traders
Day Trading Crypto Strategies
I know you have been waiting for these strategies since you started reading the article. It’s totally understandable. The human brain craves knowledge that leads to direct action. But I intentionally decided to put the strategies towards the end so that you have a firm foundation of what day trading is all about before you dive into this labyrinth.
There are countless chart patterns you can use to make a profit. However, the easiest and most popular day trading strategies for crypto include the following:
- ABCD pattern strategy
- Reversal trading
- Support or Resistance Trading
- Bull flag momentum
ABCD Pattern Strategy
Perhaps the most straightforward strategy is the ABCD pattern. The price starts at point A and rises to point B due to buying pressure. As the buyers get to this peak, some start selling to take a profit (psychology). When they sell, the price falls to point C which is usually a bit higher than point A, confirming a bullish market (upward trending market).
As the price hits that low, traders want to get in on the action and buy the asset. That starts pushing the price up again. Your entry should be as soon as the first candle confirms price reversal and the volume is in green, indicating more buying pressure than selling pressure. You will ride the price from point C and sell at point D, a new peak.
As a beginner, focus on buying at C and selling at D, no matter how strongly you feel about the price going higher. As you gain experience, you will be able to see the bigger trend and sell only a part of your asset, allowing the other to go higher for more profit.
Bottom Reversal Trading
Whatever goes up must come down, and whatever goes down must go back up. The crypto price is no different. Watch the price chart closely to establish the general trend. Your next move will be to buy when the price goes down and shows evidence of reversal (green candle). It is a simple strategy that even an absolute beginner can use.
However, it is more complex than it looks. You have to have your eyes on a couple of indicators. The volume bar at the bottom should indicate significant buying pressure (green). Additionally, the RSI should be below the lower line, which points you toward buying.
You will need to practice for some time to become proficient with this strategy, or else you will end up doing what traders call jumping on a falling knife.
Support or Resistance Strategy
As you start looking at the candles on the chart, it will look random to your beginner’s eye. However, the price action is not random but rather based on several aspects, including the support and resistance lines.
Support is an area where the selling pressure cannot push the price any lower as the volume by buyers can no longer be overcome. The price should have hit this area and bounced back more than once. Draw the line at the previous bottom, and you will notice that it has been hit at least once. There can be several support levels.
Resistance is an area where the buying pressure can no longer overcome the selling pressure; therefore, the price will bounce back down when it hits this point. You can draw a horizontal line at the previous highest price and see if the price has been bouncing back at this point. There can be several resistance levels.
Always remember that the support or resistance level is not accurate. It is an area rather than a line. Buy when the price hits the support and starts bouncing back, and sell when it hits the resistance.
Breaking the support or resistance level means there is a trend continuation or reversal. As a beginner, do not wait for the trend confirmation or change; just buy and sell at the specific points first.
Bull Flag Momentum
Sometimes you will buy an asset expecting the price to rise and then end up with minimal change vertically even as time progresses. If the trading volume is significant enough and the buyers (green volume bars) are more than the sellers (red volume bars), the price could be preparing for a sharp upward spike. In the trading world, it is called the Bull Flag momentum strategy.
You will need to evaluate the previous price performance before you use this strategy. There is always a risk of the flag part being protracted, which is not suitable for day traders. According to the Art of War, you need to win fast, as there is no benefit in ‘laying a siege.’
The best way to use this strategy is to wait until one bullish spike happens and then jump on the next as you anticipate a repeat of the same.
Currently, there are so many chart pattern strategies you can use in day trading. I’m aware of about 25 of them. However, I rely on the above popular ones. You will be sure to make a profit in an active market. Once you are comfortable with the above strategies, you can progress to others.
Always remember, there is no ‘holy grail strategy’ when it comes to trading. How much you make depends on how well you use the strategy. They are merely tools. Find a strategy that works for you and stick to it. You can always adjust your strategy over time.
7 Golden Rules of Day Trading Crypto
If you want consistent success, you should stick to the following rules. Whenever you run into losses, check back and see which of the rules you broke. You can print them and hang them in your trading area. Memorize and know them by heart, for they will save you money.
- Day trading crypto is not a get-rich-quick scheme
- Trading is a serious business like any other career
- Never hold crypto assets overnight
- Always analyze the crypto asset to trade and the general market (bitcoin)
- Manage risk- profit to risk ratio of at least 2:1
- Pick the right asset based on volume, price, and news
- Exercise the right timing like guerilla warfare
These rules will be discussed in subsequent articles in our cryptocurrency category. However, ensure you stick by them no matter how enticing an opportunity looks.
Pros and Cons of Day Trading Crypto
Of course, day trading cryptocurrency has its own advantages and disadvantages. Here is what you should know before you enter that world as a professional trader.
Pros of Day Trading Crypto
- Allows active management of your money, which minimizes losses
- Makes huge profits possible due to the right timing
- Allows investing in a variety of assets without increasing the risk
- Equips you with trading skills usable in stock trading
- Low startup capital
Cons of Day Trading Cryptocurrency
- Steep learning curve
- It can be risky without proper knowledge and skills
Other Ways of Investing in Crypto
Seemingly, making the details exhaustive means, this article will be way too long. You can read about the other ways of investing in crypto in 2023 in the subsequent articles in the cryptocurrency category. I have chosen to make the articles exhaustive so as to give you everything you need to get started in making profits.
The other articles will deal with:
- Swing trading
- Holding crypto
Nothing in the financial world is as exciting as cryptocurrency. While you may be excited to have entered the crypto world, you are simply standing at the door, peeping into the vast world of digital money. Day trading crypto is one sure way to earn some good profit while you get a better grasp of this volatile world. It will take you about six months to start making a consistent profit that can be enough to sustain the lifestyle you desire. All the very best as you embark on this wild yet highly rewarding journey.