The crypto market has over the past few years spawned an army of both day traders and long-term believers in the blockchain. Many, until December 2018 had dreams of retiring both early and rich.
At the time of the great crypto bull, they were capitalised on crazy market momentum and were fed a diet of news and analysis proclaiming anything crypto was going to da the moon.
They were disappointed, the subsequent crash dented all that sentiment.
In this article, I’ll show you how to approach bitcoin and crypto day trading; not as a blind believer in blockchain but as a calculated speculator who knows exactly when to hold 'em and when to fold 'em.
Before we get to the nuts and bolts of a day trading crypto strategy, a little perspective’s needed.
Bear with me, this story is long but relevant.
2018 will forever be remembered as the great crypto bull market that even went on to surpass the Dutch Tulip Mania of the 1630s. For much of that year, I was clueless as to what cryptos even were, preferring to trade stock indices or Gold CFDs.
But wherever I went, I kept hearing conversations of Bitcoin, Ethereum, Ripple and a whole host of other weird and wonderful names.
This whole blockchain stuff was new to me so I decided to investigate.
I had friends heavily invested in Bitcoin. some even having the audacity to tell me, I didn’t understand trading at all and needed to get in Bitcoin asap.
They were boasting how much money they were making; spending obscene amounts of money at the local bar, and some were even quitting day jobs to focus solely on day trading cryptos. They often asked me, if I’d ever made a few hundred % on any investment in my trading career?
I kept my mouth shut. I like to keep my market maneuvers to myself.
With leverage that CFD trading offers, a few hundred % on a single trade outcome (relative to the risk taken) is quite normal but they would never understand that.
At the time, Bitcoin was trading at $6k. I was impressed at the move but told my buddies it was probably going to hit the psychological barrier $10K, and then collapse.
A bubble’s a bubble, whether its tulips, real estate, pork bellies or corn. As far as money goes, human nature never changes.
I waited – Bitcoin shot straight through $10K – making me look idiotic – and didn’t stop till it hit $20K.
I could see guys getting rich all around me and here I was, having traded markets for over 15 years, feeling like a pauper in comparison!
I was going to have to rethink my whole premise of how markets worked. I had to admit the argument for investing in cryptocurrencies seemed compelling at that moment.
● The blockchain was going to revolutionise the world.
● It could be used for world trade
● Bitcoin allowed anonymity.
● There was a limited supply
● The Fed couldn’t print it out of thin air.
● It was the first completely online bull market open to mass participation
● It was giving back power to the people
● It was going to a $100,00 or more apparently
Compelling reasons, particularly the last.
However, I resisted the urge. And was secretly shaking my head, hoping Bitcoin would return to gravity so I could load up.
It wasn’t long before things started going awry
Governments were concerned, JPMorgan's Jamie Dimon was concerned, the Fed were concerned, and regulators started to ban exchanges.
And the price started falling hard. I watched friends slowly stop talking about Bitcoin. And one after another started seeing their dreams go up in smoke. None of this causes me satisfaction.
I mention it for one very important reason – to trade the markets successfully, any market whether its crypto CFDs, stock index CFDs, or Gold CFDs you need a trading plan.
None of my friends had one, and it came back to bite them in the butt.
As a full-time trader, I’ll make one thing clear – if you don’t have an exit plan your doomed to failure in this business.
The bizarre idea of HODL
When I first heard this I couldn’t believe it. If you’re unaware of this funny acronym It stands for hold on for dear life.
I mean are you kidding me?
I was shocked that so-called serious investors were spouting this nonsense as a legitimate investment mantra. It goes to show how clueless most crypto investors were back then, I’m sorry to say.
Listen, If you’re going to make money with Bitcoin, any other crypto, and if you’re going to day trade cryptos for sure, you’re going to need both an entry and exit plan.
In the two years since then, I’ve traded Bitcoin many times. But never once did it through a wallet or exchange. It was always with Contracts for Difference, as can be traded here at Mitrade.
One of the reasons I shied away from buying into the crypto bull (no pun intended) is because I cut my teeth trading CFDs; it’s what I’m used to, and the idea of using anything different fills me with dread.
I was delighted when the Chicago Merc decided to start a Bitcoin futures contract, I knew Bitcoin CFDs wouldn’t be far behind.
I couldn’t give a damn about blockchain applications, ICOs, or how cryptos are going to change humanity for the better. I don’t even care if it ever surpasses $20K again.
To me, Bitcoin and the other main cryptocurrencies are good for a different reason.
They’re easy to trade – if you know what you're doing that is.
Price moves are dramatic. Collapses are stunning. Consolidations are followed by massive increases in volatility. This is a language I can talk – not how revolutionary blockchain is.
Have A Day Trading Crypto Strategy
None of my friends talks about crypto these days – ironically it's me doing all that!
But none of them had a system or methodology of any kind either.
It was Jesse Livermore who first observed different stocks and markets have different personalities. That was nearly a hundred years ago.
But his observations are just as accurate today as they were then.
The reason I love the crypto market so much is, short-term trading strategies that I typically use on a daily chart, work a charm intraday on Bitcoin and the others.
I’ll be going to introduce you to such a simple day trading strategy you’ll fall out of your seat.
There’s a perception that to day trade, you need multiple screens, need to watch multiple timeframes and have access to a constant diatribe of news.
If this is what you want, that’s fine; but it’s far from necessary.
I’ve made a career out of trading the most insanely simplest patterns there are.
The only indicator I ever employ is a short-term simple moving average. Let's look at the simplest day trading strategy in the world.
Timeframes 2 hours
I am going to use a 2-hour chart.
Anything lower than this IMO has far too much random noise. Whilst anything higher and you’re getting into the realms of swing trading, not day trading.
The 2-hour chart, in the crypto market, seems to work well for the system I’m going to teach you.
The only two things you are going to be looking for a trading setup are:
● A red candlestick bar
● A 10-bar simple moving average
The filtering process
In trading, we always need to filter market noise from tradeable market edges. The hardest part of day trading is passing up lower probability set-ups and waiting for the higher probability ones.
The filter system works as such:
● The most recently closed candle must be red
● It must also be above the 10 bar SMA.
● Or, if below, it must be touching the moving average.
If the most recently closed bar is red, and one of the other criteria are met we then:
● Place a buy entry stop order 2 points above the high of the red bar.
● Place a protective sell stop at the value of the low of the red bar.
Cancelling – a secondary filter
If the order isn’t triggered by the close of the next bar (in 2 hours ) then cancel it. The setup has lost its effectiveness. And we look for a new opportunity.
If the order is triggered then we prepare to protect our trading position. This can mean either open profits or reducing the risk exposure.
This is done via the trailing stop.
After the first candle in our trade is closed:
● Move the protective stop to the value of the low of that bar.
● If the value is lower than the value of the original stop loss do nothing.
● As each bar moves consecutively higher, move the stop to new low
● Do this until stopped out
Here are three images of this strategy in action
Don’t dismiss this system because it’s simple. I have made a career out of this type of thing.
Many traders choose to fill up their charts with all sorts of things. Trendlines, support resistance levels, fib levels, MACD, RSI etc
When you're day trading you need to be able to think quickly, and if you're processing too much data or metrics it is going to confuse.
Day trading is hard enough because you can spend long hours at the pc, waiting for a setup to come along. This can lead to lapses in concentration.
After sitting for hours, worrying when a setup will come along, and questioning whether you are going to make money that day it's easy to start placing trades you shouldn’t.
Also, trading is the most emotional type of trading there is. Money can be made, and lost in record time, which can lead to overconfidence or fear of the market.
You need a clear head when day trading cryptos.
If you win money quickly, you can become greedy. If you lose money too quickly it can start you on a path of revenge trading.
Yep, day trading is hard – but is also why we are compensated so highly for it.
Successful trading is a business, not a hobby. Like any business, you have profits and expenses. How you manage them both determines how far you go.
Nowhere is this truer than when day trading forex or CFDs.
Day trading cryptos offer fantastic rewards, regardless of whether it goes to $100K or never again goes about $20k.
The volatility in this asset class is truly immense and it is a day traders dream.
Have you ever known a business that required no customers, no selling, was location independent, no stock purchases and no marketing?
Have you ever known a business that was location independent and didn't require a special business premise? Or that didn’t require a special license? Or one where you could make up your work hours?
There is no business in the world like that, except one. Trading.
Here at Mitrade we want to help you make your trading journey both as enjoyable and as profitable as it can be.
Day trading cryptocurrencies CFDs is just one of several routes to do that.
Discover countless trading possibilities with market volatility！
Note: Trading is not suitable for everyone. You should consider whether you can afford to take the high risk of losing money.
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