What is crypto day trading: Beginners' guide

What is day trading?

Day trading is a short-term strategy where traders buy and sell financial instruments, including stocks, forex and cryptocurrencies, within the same day – with the goal being to profit from the small price fluctuations of these assets within their highly liquid markets. 

Unlike long-term investing, which relies on an asset’s performance over years or even decades, day traders aim to capitalise on intraday volatility and typically close all positions before the market closes (or within 24 hours in crypto markets, which are usually open 24/7).

Day trading has its roots in the traditional stock market, gaining popularity in the 1990s with the rise of electronic trading platforms. As access to real-time data and low-cost brokerages has improved, particularly during the pandemic, more individuals than ever have begun actively day trading.

Importantly, day trading differs significantly from investing. While long-term investors focus on fundamentals and value discovery over time, traders rely on technical analysis, market trends and rapid decision-making. They may execute dozens of trades in a single day, seeking to benefit from small, quick gains. 

This approach requires discipline, risk management and a clear strategy, making it less suited to passive participants or those new to the markets.

Can you day trade crypto?

Yes, day trading crypto is more accessible than ever thanks to platforms like Crypto.com. 

For context, the cryptocurrency market is very well-suited to day trading due to its 24/7 availability (assuming no downtime), high volatility and deep liquidity in popular coins like Bitcoin and Ethereum. Where many traditional markets close overnight and over the weekend, crypto markets are continuously active, creating more opportunities for short-term trades around the clock.

Crypto day trading offers several unique advantages over other asset classes. Its high volatility can result in significant price swings within hours, minutes or even seconds, providing multiple chances to profit in a single day. There’s also a low financial barrier to entry, with many exchanges offering fractional coin purchases and instant access.

However, day trading crypto also comes with serious inherent risks. Sudden news events, thin liquidity in some altcoins and extreme price volatility can lead to unexpected losses. Additionally, the lack of regulation in some jurisdictions means there is a risk of fraud.

Despite these challenges, crypto day trading has exploded in popularity. From retail traders using mobile apps to professionals fine-tuning high-frequency algorithms, millions are now active participants, mirroring the adoption of digital assets more widely.

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Is crypto day trading profitable?

Crypto day trading can be profitable, but success depends on several key factors, including market volatility, trading experience, discipline and risk management. The crypto market’s constant price swings can generate substantial gains in a short time, especially during bull markets – but the converse is also true.

Like all markets, experienced traders with strong technical analysis skills, a clear strategy and deep pockets may generally be more likely to succeed. On the other hand, beginners often struggle due to their emotional decision-making, poor timing, lack of knowledge and smaller trading pots.

According to a 2023 report by the Bank for International Settlements, the majority of short-term retail traders in highly volatile markets, including crypto, tend to underperform over time, frequently incurring losses during periods of heightened volatility. This tracks with the realities of trading CFDs and spread betting in traditional markets.

Most beginner day traders should expect a learning curve and not immediate profits, with many traders either breaking even or expecting to lose money in their first year.

Of course, the traders who do profit can be very successful – and profitability can improve with time, education and experience. The key concept to grasp is that crypto day trading is not a guaranteed way to get rich quickly, but a high risk, high-effort activity that requires careful planning and mental fortitude.

How much can a crypto day trader make?

Consistent potential earnings from crypto day trading vary widely and depend on various factors, including starting capital, market conditions, risk tolerance and trading strategy. Some experienced traders with large portfolios and tried-and-tested crypto trading strategies that work for them may earn hundreds or even thousands of dollars per day. 

For example, a 2022 TokenInsight report found that professional crypto day traders can generate monthly returns of between 5% and 20%, though this seems unrealistic when you consider the effects of compound returns. But clearly, there are some professionals generating substantial capital.

For beginners with limited cash to get started, realistic crypto day trading profitability may be in the realm of just a few dollars to maybe tens of dollars per day, assuming positive returns. Gains can be larger on leverage, but this also increases the risk of liquidation and loss.

It’s important to understand that many traders lose money, especially early on. There are no fixed income levels in day trading, and sustainable profits typically come only with experience and strict risk management.

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How to get started day trading crypto

If you want to get started day trading crypto, you need the right tools and strategy. Here’s a simple step-by-step guide:

1. Choose a reliable platform

Day trading success starts with choosing the right platform. Look for one that offers security, low fees, user-friendly tools and most importantly for crypto day trading, reliable execution. 

The Crypto.com app and web platform are popular choices both for beginners and advanced traders. Known for our strong security protocols and intuitive interface, Crypto.com also provides helpful educational resources and market insights, making it easier to learn as you trade.

2. Set your goals and timeframe

It’s critically important to define your goals before placing your first trade. For example, are you looking for small, frequent profits or larger gains over longer intraday windows? Day traders typically operate on short timeframes (usually one minute to one hour charts). 

For beginners, starting with a 15-minute or one-hour timeframe may offer a balanced pace because it provides enough trading signals, without the overwhelming speed requirements of ultra-short timeframes.

3. Pick suitable cryptocurrencies

Not all cryptocurrencies are ideal for day trading. You might want to focus on coins with higher liquidity, strong daily volume and clear price movements. 

Bitcoin, Ethereum and major altcoins like Solana or Cardano – or any top 20 coin – could be good starting points as they tend to have tighter spreads, better technical reliability and more consistent market activity. Once you’ve perfected your strategy, you then might try more esoteric coins.

4. Learn and apply technical analysis

Technical analysis is the theory behind how to day trade crypto, and involves crypto trading basics like studying price charts, identifying trends and using indicators like moving averages, the RSI and Bollinger bands to anticipate price movements. 

Crypto.com makes this process simple with built-in charting and technical tools on both the app and our desktop platform. Beginners can use these features to analyse real-time data and place trades, all in one place, which can be beneficial for day traders who usually have to use different tools across a variety of platforms.

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5. Manage your risk

Risk management is one of the most important aspects of successful crypto day trading. Even the best strategy can fail without proper safeguards in place. Key tools include the stop-loss order, which automatically closes your position at a predetermined loss level, and the take-profit order, so you automatically lock in any gains instead of letting winning trades reverse.

Many seasoned traders believe in risking no more than 1–2% of your total capital on a single trade, as this prevents a few bad trades from wiping out your entire account. But the key thing is to predefine your risk before entering a trade and stick to your plan.

What are the best cryptocurrencies for day trading?

The ‘best’ cryptocurrency to day trade is very much a matter of personal opinion. However, as a general rule, the most popular coins sport high liquidity, allowing you to enter and exit positions quickly without any significant price slippage. They also show consistent volatility, providing the price movements needed to make profitable trades within short timeframes. 

Of course, any clear trend or major market news will also play a big role in determining which coins perform well on any given day.

Bitcoin and Ethereum remain consistently popular choices simply due to their market depth and wide adoption. However, it’s worth considering that for every edge you think you might have, there’s often somebody else on the other side of the trade with a similar strength of conviction.

It’s important to be careful about specific coin recommendations, especially from unreliable sources. Always conduct your own research and focus on coins that meet your trading criteria and risk tolerance rather than following the crowd or chasing hype.

Best indicators for crypto day trading

Using technical indicators can help you make data-driven trading decisions, which can improve profitability. Three of the most popular crypto day trading indicators include:

1. Moving averages

Moving averages smooth out price data to highlight price trends, with the most basic version, the simple moving average (SMA), calculating the average price over a set period. When the short-term average crosses above the long-term, it’s often a buy signal, while crossing below can signal a sell. For example, a 10-day SMA crossing above a 50-day SMA may suggest upward momentum.

2. Relative strength index (RSI)

The RSI measures the speed and change of price movements, ranging from 0 to 100. Values above 70 may indicate overbought conditions, while below 30 suggests oversold. For example, if Bitcoin’s RSI hits 75, it could mean the asset is overbought and due for a pullback.

3. Bollinger bands

Bollinger bands plot standard deviations above and below a moving average, indicating volatility. When the price touches the upper band, it may signal overextension, but touching the lower band could indicate a buying opportunity. For example, Solana bouncing off its lower Bollinger band might hint at a short-term rebound.

Remember that all indicators are just that; they are not guarantees. As always, past performance is not an indicator of future results, and indicators do not account for a fundamental positive or negative change in a coin’s investment case.

Best crypto day trading strategies

Successful crypto day traders often use specific strategies tailored to market conditions and personal trading styles. Here are three popular approaches:

1. Scalping

Scalping involves making very quick trades to capture small price movements. Traders hold positions for seconds or minutes, aiming to accumulate many small profits throughout the day. This strategy works best in highly liquid markets with tight spreads, where rapid price changes occur frequently. Scalping requires intense focus, fast execution and strict risk management. It’s arguably the most mentally taxing way to trade.

2. Range trading

Range trading capitalises on the price bouncing between well-defined support and resistance levels. Range traders buy near the support and sell near the resistance, assuming that the price will usually stay within this range. 

This strategy is most effective when the market is consolidating within a clear trend and is therefore less stressful than scalping and better suited for traders who prefer steadier setups. Of course, ranges only exist for a defined period, so you might want to set a stop loss at the limits of your range.

3. Breakout trading

Breakout trading focuses on entering a position when the price moves decisively beyond a key support or resistance level. Breakouts can signal the start of a new trend, offering opportunities for larger gains. This strategy often works well in volatile markets or during major news events, though often what looks like a breakout ends up being a one-off movement. 

Each strategy comes with its own risks and rewards, so beginners may wish to try each with small amounts of money to see which suits them best.

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Crypto day trading vs swing trading

Crypto day trading and swing trading are two popular but very different approaches. Day trading involves buying and selling assets within the same day, relying on quick decisions, technical analysis and capitalising on short-term price volatility. This approach is high-risk and requires constant market monitoring.

In contrast, swing trading involves holding positions for several days to weeks, aiming to profit from medium-term price trends. Swing traders typically use a combination of technical and fundamental analysis and face lower stress levels and time commitments since trades don’t require constant attention.

Day trading offers the advantage of immediate results and no overnight risk but requires significant time and experience. By contrast, swing trading allows for more flexibility and potentially larger gains per trade but exposes traders to overnight market swings and requires more patience.

Choosing between them depends on how you value your time, your risk tolerance and trading style preferences.

FAQs about crypto day trading

Can I make a living off crypto day trading?

Making a full-time living from crypto day trader income is possible, but it’s important to be realistic. Successful day traders often have years of experience, solid strategies and strong risk management skills. Many beginners face a steep learning curve and can experience losses before generating profit.

Some traders achieve steady income, but many struggle due to market unpredictability and high competition. It’s generally more common for day trading income to be a side hustle, especially when starting out.

Is crypto day trading legal?

Yes, crypto day trading is legal in most countries, but regulations vary widely. Many jurisdictions allow individuals to trade cryptocurrencies on licensed exchanges or platforms, provided traders comply with local laws.

However, some countries have banned or restricted crypto trading altogether, so it’s essential to check the official legal status in your region before you start.

What do I need to start day trading crypto?

To start day trading crypto, you’ll need, at a minimum, a reliable trading platform, some capital you hope to increase but can afford to lose, some solid technical knowledge and a risk management plan. 

A common fallacy when your first trade ends in profit is to think that each subsequent trade will perform just as well. Consistency is the name of the game.

Important information: This is informational content sponsored by Crypto.com and should not be considered as an investment recommendation. Trading cryptocurrencies carries risks, such as price volatility and market risks. Before deciding to trade cryptocurrencies, consider your risk appetite.