How to Day Trade Cryptocurrencies in Two Hours or Less (Extensive Guide)

Last Updated July 23rd 2021
20 Min Read

Is it Possible to Day Trade Crypto?

Trading cryptocurrencies can be challenging, especially for a novice trader. But, with some education, focus and patience, it is possible to day trade cryptocurrencies in two hours or less and make a profit.

The cryptocurrency market isn't traded on a regulated exchange, unlike trading stocks and commodities with regulated hours for trading. What makes trading cryptocurrencies appealing is that the crypto market is available for trading 24/7, 365 days a year across many crypto exchanges.

Day trading cryptocurrency is popular because you are in and out of the market on the same day.

There are many day traders in the Forex, commodities and stock markets, but how about crypto day trading? Is day trading cryptocurrencies a good idea, and can you make money as a crypto day trader?

Yes, it is possible to make money from day trading cryptocurrencies because the fundamental premise for all day traders is to make money from fluctuations in price. And cryptocurrency is no different. You make a profit from day trading cryptocurrencies by correctly identifying price fluctuations.

Because cryptocurrencies are so volatile, many day traders wonder if it possible to day trade crypto.

In this article, you will find out how to pick crypto for day trading. You will discover how much you need to day trade crypto and find out what is the best time to day trade cryptocurrencies.

We'll show you how to find cryptocurrencies to trade and a good strategy for day trading cryptocurrencies.

By the conclusion, you will know if day trading cryptocurrencies in two hours or less will work for you.

Contents:

How Much Money Can Cryptocurrency Day Traders Make?

Day trading cryptocurrencies can be lucrative. The returns for successful day trading cryptos can be spectacular.

But, equally, the losses can quickly add up.

To become a successful crypto day trader requires the ability to make fast decisions, and you must be able to execute a crypto trade quickly.

Any hesitation and the moment is gone. Once the momentum starts for a cryptocurrency, you're too late to catch the move and will have to either wait for the next move or choose another cryptocurrency to trade.

The speed of crypto price moves can be frustrating and cause you to over-trade, trade impulsively or increase your risks.

Day trading cryptocurrencies can be stressful and demanding. It is not best suited to novice crypto day traders unless you have spent time practising how to day trade cryptocurrencies.

For many inexperienced crypto traders, trading cryptos can be boom or bust.

As with all trading practices, you need a solid cryptocurrency trading plan. And you'll need a backtested cryptocurrency trading strategy. Cryptocurrencies are volatile, and the market moves can be significant. It's much harder to trade cryptos with a tight stop loss, and the novice crypto trader could find their trades stopped out more times than they return a profit.

So is day trading crypto worth it?

We can't answer that question honestly because of all the variables involved. Successful crypto day traders work hard, develop patience and discipline and commit to learning how to day trade cryptocurrencies in less than two hours. When you have mastered the process, making a good income from day trading crypto is possible.

How Long Does it Take to Learn Cryptocurrencies?

It depends on your trading experience.

If you have been trading stocks, commodities or Forex, you already understand the trading principles. Trading cryptocurrencies have the same basic rules, but the heightened volatility makes it more of a challenge.

If you are brand new to trading, there's not much chance of succeeding with day trading cryptocurrencies until you have learned the basics of trading. Without trading education, you will lose money fast.

If you wish to learn how to day trade cryptocurrencies in two hours or less, you can start by practising with a demo account.

Choose a recommended cryptocurrency exchange and download the software. The guidelines below will help to shape your plan to become a successful cryptocurrency day trader:

  1. Spend at least three months of daily practice – don't expect spectacular results from day trading crypto at first. It takes time to learn about cryptocurrencies and how to day trade crypto. Ideally, six months of solid practice would prepare you for day trading cryptocurrencies with real money.
  2. Double your demo account balance – when you set up your demo account, choose the amount closest to the dollar amount you will be depositing. It makes trading more realistic than setting up a $50k demo account. Your mind needs to become disciplined at generating small regular profits from day trading cryptocurrency. If you start with $1000 demo money, get ready to begin live day trading crypto when your account is $2000, and you have doubled it by safe, low-risk crypto strategies and money management.
  3. Stick to two hours or less trading crypto – if you want to trade cryptocurrencies in two hours or less, then spend less than two hours trading crypto. Initially, you might want to trade for longer in the demo account but notice how you become tired after a few hours and start making mistakes. It's the beauty of trading crypto for two hours or less. You enjoy day trading crypto and leave your trading station feeling optimistic and fresh for the next days crypto trading. When you are tired, you lose money. It's a simple principle to understand.

Read Also: Learn How to Trade the Cryptocurrency Market in 5 Steps

How Much do you Need to Day Trade Crypto?

Trading cryptocurrencies isn't out of reach for the average Joe, so how much money to start day trading crypto?

Because of high volatility, a few hundred dollars is unlikely to work for day trading cryptocurrencies in two hours or less.

If you want a decent return for day trading cryptocurrencies, you may need a larger capital base. Start with a minimum of $1000, and as part of your trading plan, your risk should be no greater than 1% of your capital.

Check Out: Blueprint for Trading Crypto with $1000 (or less)

How to Day Trade Cryptocurrencies for Profit

Day trading cryptocurrencies have similar guidelines as a day trader would follow for trading Forex, stocks or commodities:

  1. Find a reliable cryptocurrency exchange – crypto day trading is growing in popularity, and many scam crypto exchanges have appeared online. Choose an established and recommended cryptocurrency exchange before depositing your money
  2. Find a cryptocurrency with liquidity and volatility – there are thousands of cryptocurrencies on the market. Many emerging cryptos are at the bottom end and have no liquidity. It may seem tempting to buy crypto for $0.02, but if it doesn't move for six months, it's a waste. Some traders buy crypto and HODL (hold on for dear life), riding the ups and downs, waiting for the big moves when they can withdraw some profits. But, this is the opposite of day trading cryptocurrencies.
  3. Have a good trading plan – decide on a few cryptos to trade. Watch and become familiar with how these cryptos work and wait for a good entry signal. Decide upon your risk to reward ratio (RTR) and aim for a good return such as 2 to 1 or higher.
  4. Choose a cryptocurrency strategy – you will need a backtested cryptocurrency strategy. Otherwise, you won't know what to look for in the crypto market. You could end up trading blind and losing money. Practice with a demo account with one or two crypto strategies until you have nailed it and know 100% what signal you are looking for when day trading cryptos.
  5. Learn technical analysis – when you are checking the charts for day trading cryptos, it helps if you have a good working knowledge of technical analysis. You can also check fundamental analysis by setting alerts for the crypto company news. Anything that happens with a crypto company can create the market sentiment, which affects the crypto price.

Read More: How to Identify Cryptocurrency Market Trends

What is the Best Time to Trade Cryptocurrencies?

There is no set best time to day trade cryptocurrencies, and you have 24/7, 365 days of the year to choose.

What is more important is that you have a consistent trading routine. For instance, you may choose to trade cryptocurrencies from 9 AM to 11 AM, so every day at that time, you look for cryptos to trade.

Before you start day trading cryptocurrencies, spend time looking at what happened overnight and the day before. Check if the crypto price has hit support or resistance or stuck in a range. Was it trending and now in a pullback?

Thirty minutes of these pre-trading checks can set you up on some excellent day trade crypto setups. 

How to Find Cryptos to Day Trade

Learn how to pick crypto for day trading. It's not that difficult. Look for cryptocurrencies with good trading volume. If a crypto coin hits the news, people tend to start buying or trading it, which increases trading volume.

You can search historical prices for cryptocurrencies by viewing live crypto prices. Or check Cryptocurrency exchanges and then select the high liquidity cryptocurrencies to trade.

 Check Out: 10 Cryptocurrencies with Strong Buy Ratings

Do I Need to do my 'Homework' or Watch the News Before or During the Crypto Trading Day?

Not really. Trading cryptocurrencies is unlike trading Forex, stock or commodities. As cryptocurrencies are decentralised, they aren't affected by economic news.

That said, it does pay to register for alerts about the cryptocurrencies you plan to trade. You can check the company website or install a crypto app on your mobile phone so you keep up to date with the cryptocurrency progress.

Many uneducated traders randomly buy and sell cryptos without the knowledge you have, so it is worth keeping up to date.

Crypto Day Trading Strategies

the main thing with day trading cryptocurrencies in two hours or less is to keep it simple.

Cryptocurrency markets can move fast. Working with complicated strategies can cause delays in entering or exiting a crypto trade, resulting in missing out on a nice profit or busting out with a big loss.

the two strategies below are simple, easy to understand, and implement:

1. Range Trading 

Cryptocurrencies often trade for a long time in a range, and they can be an excellent opportunity for a crypto day trade. Big market movers can influence the crypto price to take their profits from the range. The trick is to spot early on if the crypto price is ranging. Then you can buy at the low and sell at the high until the price breaks out, which then presents another opportunity for a break and retest strategy - as seen in the image below.

ETH/USD chart

The above image is ETH/USD.

Etherium (ETH) is getting a lot of attention recently (May 2021). In the highlighted box, the price bounced between $3400 to $3590 between 6th and 8th May 2021. This scenario was a perfect opportunity for multiple trades for range trading crypto as a day trading strategy.

2. Scalping

Scalping is a popular strategy for all financial instruments, and it can work well with crypto day trading. To succeed, scalping cryptocurrencies as a day trading strategy, your technical analysis and price action skills need to be spot on.

You are looking for small fluctuations in price, and it is best to go with the flow of the market. If the trend and momentum are rising, wait for a pullback to the last higher low. If price fails to make a higher low or lower high, it's an opportunity to scalp a few pips and exit the trade.

Scalping crypto is a developed skill where you take advantage of volatility with multiple trades in your two-hour cryptocurrency trading session. It can be exhausting. The ideal trading time for day trading cryptocurrencies is two hours or less.

There are indicators you can use to improve the probability of making a profit from day trading cryptocurrencies, and the Money Flow Index indicator is one such indicator.

How to Use the Money Flow Index (MFI) Indicator for Day Trading Cryptocurrencies

To trade crypto, you need a day trading cryptocurrency strategy. Or ideally, two or three crypto strategies to suit the market at the time of day trading cryptocurrencies.

There are thousands of indicators available, but it is best to stick with one to three so your crypto charts don't become cluttered and difficult to read.

No indicator is foolproof, and you can never rely on one 100% as a guaranteed method for day trading cryptocurrencies.

The MFI indicator is used as a guideline to assess where money is flowing into the crypto market.

You can add other indicators for further confirmation, but below is an outline for a simple strategy for making profits from day trading cryptocurrencies in two hours or less using the MFI indicator -

  1. Choose cryptocurrencies with high volatility and high liquidity - there are over 1500 crypto coins to choose from, but it is better to focus on the top list of coins because volatility and liquidity are higher
  2. Add the Money Flow Index indicator (MFI) to the 5-minute chart – this clever indicator shows the activity from the big boys with the high levels of money in the market. Set the MFI indicator to 3 periods
  3. Wait for the MFI indicator to reach the 100 level – then watch and wait for the price to hold up at this level. If it drops at the first two levels, it is more likely that the price will move on down for the day
  4. MFI indicator holds at 100, and a bullish candle follows – wait for the close of the candle and look for one with a small wick. A large wick indicates weakness
  5. Put your stop loss below the low of the day – if the price action breaks below this low, the market sentiment may be shifting
  6. Take profit within the hour – even if the price looks like continuing the trend, start taking profits. Move your stop loss to breakeven and filter off some profits

As mentioned, don't rely on the MFI indicator as a guaranteed strategy. Add other confirmations to this strategy suited to your style and preference. You could add the Relative Strength Index indicator, which shows areas where cryptocurrency is overbought or oversold.

Read Also: The Top 7 Crypto Trading Tools You Should Use

How Do I Day Trade Cryptocurrencies Using Price Action?

Trading pure price action can make you a successful cryptocurrency day trader, but you need to get good at it.

Typically, novice day traders tend to become overly focused on the direction of a trade. When the trade goes against them, they hold onto the trade too long instead of getting out and reviewing the price action.

Price action teaches you not to be attached to the cryptocurrency direction but to trade what you see on the chart.

When day trading cryptocurrencies, having a detached focus can make all the difference between loss or profit.

If you consider buying a cryptocurrency, analyse the cryptocurrency for a potential sell. Doing this helps to prevent confirmation bias, where our brains can only see confirmation signals to back up a decision.

If you are already in the trade and it starts to shift against you, it isn't necessary to hold on until the price hits your stop loss. Exit the trade and watch to see what happens next.

  1.   Look for areas of buying or selling sentiment – emotions drive market movement. If the crypto price is at a historical support or resistance area, watch the order flow and volume. Don't be in a rush to enter a crypto trade. Watch and wait for the perfect setup
  2.   Wait for a pullback or retest – when a crypto price makes a new high or a new low, it may return to the previous price point to retest. Avoid entering a cryptocurrency trade if the price flies quickly back to the price zone. It is better to see price struggling a bit which shows on the chart as slow or choppy price action. If the price fails to hit the previous price or bounces off, this could be an excellent signal to take the crypto trade
  3.   Wait for the candle close – if you are day trading cryptocurrencies, always wait for the candle close. For instance, if you are trading the 1-hour chart, wait for the 1-hour candle to complete. You could be watching a large green candle rising, but it can drop back and turn red in the last few minutes. Be patient. Let FOMO not be a part of your day trading cryptocurrencies

 

Placing Day Trading Orders for Cryptocurrencies in the Real World

You have spent time trading cryptocurrencies in a demo account, so you know how to execute a crypto trade. Depending on your strategy, you know where to set your profit targets and stop losses.

With skill, you can confidently place your market order for cryptocurrencies.

Sometimes, the crypto volatility may cause slippage, which means your trade exits for a different price to the one you set when you opened the trade. Slippage happens, it's part of trading, but it isn't something for concern. Overall, slippage shouldn't affect your cryptocurrency day trading profitability.

As you are day trading cryptocurrencies, your stop losses won't be huge. If you are worried about a cryptocurrency looking more volatile than usual, leave it alone. Look for another crypto that is a little less volatile.

If you are already in a crypto trade and concerned that it is going against you, never be afraid to exit for a slight loss. Often, it is more beneficial to get out a trade and assess price action, even if the trade then works out. Over time, crypto day traders develop an instinct for what may happen with price action. They learn that ignoring this instinct often ends up in a loss.

Don't Miss: 7 Tips When To Buy A Crypto And When To Sell A Crypto

Recap of How to Day Trade Cryptocurrencies

It is possible to day trade cryptocurrencies and make a decent return.

You now have a guideline for how to day trade cryptocurrencies for profit and how to find cryptos to trade. You understand there are no best times to trade the cryptocurrencies market. The most important premise is that you create a consistent routine for day trading cryptocurrencies.

The cryptocurrency market is available 24/7, 365 days a year on many crypto exchanges, making it highly accessible for crypto day traders.

Choose the cryptocurrency to day trade by selecting cryptos with high volume and volatility and become familiar with a few cryptos, so you learn the price action patterns on the charts.

Follow the crypto company alerts to be in the flow with market sentiment and use price action as a guide for when to enter a trade for the day.

Use a simple indicator like the Money Flow Index (MFI), so you can assess where the volume is and reduce risks of being stopped out. The MFI indicator is no guarantee for profitable crypto day trading, but it is a valuable indicator to use.

Have a base of 2-3 cryptocurrency strategies for day trading crypto. It will help you to recognise market signals to enter a crypto trade.

To learn how to day trade cryptocurrencies takes patience and discipline, but the rewards are significant. Once you understand and master how to day trade cryptocurrencies, it becomes much easier to make consistent profits from trading cryptos.

Please note that the above information is not providing advice on tax, investment, or financial services. We provide the above information without consideration for risk tolerance and a specific investor's financial circumstances.

Trading or investing in financial instruments such as cryptocurrencies may not be suitable for all investors. It does involve risk and the possibility of a loss of capital.

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