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Key Elements of Day Trading with Crypto

Key Elements of Day Trading with Crypto – Official Olymp Trade Blog

What are the most effective day trading crypto strategies? What is the best crypto for day trading? These and other questions will be examined in this article as building a solid day trading strategy with cryptocurrencies is a question many traders are seeking to resolve. To address it correctly, the essentials of crypto day trading need to be kept in mind.


Essentials of a Solid Crypto Strategy

Cryptocurrencies are attractive because of their volatility and higher profit potential compared to many other trading instrument types.

That’s why understanding how to best do day trading of crypto is a question multitudes of traders want to answer. It is a complex one and requires correctly choosing the best crypto for day trading and the most suitable strategy to make consistent gains with it.

We recommend starting trading cryptocurrencies with Bitcoin. Primarily because it is a major driver for all the other coins’ movements.

Next, it is essential to remember that successful crypto trading requires more than just an efficient strategy. There is a larger picture of the trading environment that helps generate consistent profits. That picture consists of several elements, such as bypassing the most common psychological “traps” of trading, efficiently managing personal funds, and finally, choosing and applying a trading strategy. The latter is only one of the elements and can hardly be accomplished without sorting the others.

Using RSI in Crypto Strategies

Interpretation of cryptocurrencies’ behavior differs from that of traditional instrument types and conventional indicators. Therefore, understanding the specifics of crypto signals is key to making adequate trades on them.

Bitcoin’s weekly chart below shows several episodes where RSI stayed in the overbought zone for extended periods while practically never falling into the oversold zone. Such behavior is particular to cryptocurrencies and is rarely seen with traditional trading instrument indicators.

Bitcoin Weekly Chart - Olymp Trade - Blog - 31.05.2022
Fig. 1. Bitcoin chart on a Weekly time frame with the RSI indicator

This example is just one of the many facets where crypto intraday strategies differ from the classic ones applicable to other market sectors.

Using MACD in Day Trading Crypto Strategies

Support and resistance levels, trend lines, and other elements of graphical analysis are effective tools for analyzing cryptocurrency markets. We recommended using them as the main signal sources within your day trading crypto strategy. Among them, trendline or level breakouts usually provide the clearest signals.

Cryptocurrencies often move in strong trends with almost no reversals.

Keeping in mind the above statement, MACD may be effectively used to detect an impulse for a level breakout and a new strong trend. Let’s explore how it works.

Set the MACD Indicator on the Platform

On the Olymp Trade platform, you can disable the MACD and the Signal line and select the Area display of the histogram.

Bitcoin Five-minute Chart - Olymp Trade - Blog - 31.05.2022
Fig. 2. Bitcoin chart on a five-minute time frame with MACD

Watch MACD Against the Support Level Breakouts

Draw the resistance and support levels on the chart. After that, wait for the moment when either gets broken by the price. When such a moment comes, observe MACD.

Bitcoin Five-minute Chart - Olymp Trade - Blog - 31.05.2022
Fig. 3. Bitcoin chart on a five-minute time frame with MACD

If the support level is broken, the indicator histogram should be completely below the zero level, at least until the previous candle touches this level.

The longer the histogram is below zero, the greater the probability of an impulse breakout and the start of a new trend.

While MACD is in the negative zone, you can open Down trades on the new Downtrend.

Watch MACD Against the Resistance Level Breakouts

A similar scenario works with upward movements and resistance level breakouts. In such a case, the MACD needs to be above the zero level.

While MACD is in the positive zone, you can open Up trades on the new Uptrend.

Bitcoin Five-minute Chart - Olymp Trade - Blog - 31.05.2022
Fig. 4. Bitcoin chart on a five-minute time frame with MACD

Best Tools for Crypto Day Trading

While a clear track record of Forex market presence is key to finding a reliable crypto exchange or broker for day trading, knowing and using the best tools required for crypto intraday trading is most important. Olymp Trade’s Fixed Time and Forex trading modes used with multipliers are such tools. The main crypto instruments are offered both on Forex and Fixed Time. Therefore, you can trade Bitcoin FX, Ethereum FX, Litecoin FX and Bitcoin FTT, Ethereum FTT, Litecoin FTT. On top of that, the Basic Altcoin Index is offered in the Fixed Time mode.

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Risk warning: The content of the article does not constitute investment advice and you are solely responsible for your trading activity and/or trading results.