Before we start our trading journey it is important to understand that day trading cryptocurrencies is not for everyone and there is a lot to consider before you get started. In fact, it is estimated that almost 95% of all day traders eventually fail. Think twice before choosing the best bitcoin exchange for day trading.
What is Bitcoin Day Trading?
Day trading is very short-term trading, and it can mean holding an asset for just a few seconds, to a couple of hours. The idea is that you sell your asset before the end of the day, hoping to make a small, but quick profit. The main idea is that you look for opportunities to make a quick profit. If you are planning on holding on to a cryptocurrency for longer, this is called long-term trading.
Day Trading Methods
There are lots of different methods that people use to day trade, but the main two are based on either speculation or chart analysis.
Speculation is when a trader believes a price will go up or down because of a certain event. E.g. you’re going to purchase Bitcoin because you saw some positive news story. There is no guarantee that the price would go up, but you speculate that it would, based on your own opinion.
- Chart Analysis
Chart analysis is another day trading cryptocurrency strategy that is often used. This is where traders study the price movement of a particular cryptocurrency and try to guess which way it will go, based on historical price movements. When analyzing charts, you can look at how the price moves every few seconds, minutes or even hours.
Extremely Volatile Market
One of the main attractions of day trading Bitcoin (BTC), Ether (ETH), Ripple (XRP) or any one of the other liquid coins is volatility. Prices that fluctuate rapidly and/or in a wide range are said to be ‘highly volatile’. This volatility is one of the main draws for short-term/day traders as it gives them the opportunity to get in and out of the market, hopefully with gains.
It is not unusual for the price of a coin to rise or fall by more than 10%-50% in a single day. In some circumstances, even more. For example, in February 2018, a cryptocurrency called E-Coin increased in value by more than 4000% in just 24 hours, only to fall straight back down to where it started.
Anyone that bought the coin towards the start of the day would have made a lot of money, however, the people that bought it at its highest price would have lost the majority of their investment.
Now you’re almost ready to make serious cash but are there any potential risks and if so, what are they?
- Regulation –cryptocurrencies are relatively new, making their future somewhat uncertain. People don’t know how governments will react further down the line and how stringent regulations will be.
- Dangers of volatility – Bitcoin is the most volatile of all assets, including the stock and gold markets. Whilst volatility brings with it opportunity to day trade profit, it also brings doubt and unpredictability.
- Exchange risk – Whilst your Bitcoins can’t disappear, the transactions you do are permanent and only the recipient can refund them. This means you must only do business with those you either know, trust or are widely reputable.
- Payments / Charges – If buying and selling BTC directly, transactions costs can vary wildly. CFDs and binary options (or any derivative) can mitigate this risk.
- Margin Trading – Derivate can often be traded on margin. While this can increase profit potential, it also increases the risk. Losses can exceed deposits when trading on margin.
How to Get Started?
- Find a good exchange. A cryptocurrency exchange will allow you to buy and sell coins 24 hours per day. It is important to think about what kind of cryptocurrencies you are looking to get involved with. If you are looking to day trade full time, then it is well worth choosing and exchange that has lots of difference pairings listed.
- It is also important to find an exchange that has lots of liquidity. This will ensure that you can always be matched with a buyer or seller, otherwise you might not be able to close your trade when the price is falling!
- Once you have opened an account with an exchange, it is then time to deposit some funds. Most cryptocurrency exchanges do not allow you to deposit using a debit/credit card or bank account, however some do.
- You also need to consider how much you are planning to deposit. Never forget that the cryptocurrency markets are really volatile, so there is always a chance you could lose your entire investment. Start off with smaller amounts.
- Take some time to understand the different features on the trading screen. Learning how these tools work is really important as it will allow you to identify when there is a good chance that a coin is going to rise or fall. However, once again, there is no guarantee that your prediction will be right, so always make sure you are ready to exit a trade if things go badly!
TOP 6 Best Exchanges for Day Trading
Finally, it is time to find the best exchange to buy bitcoin and to sell bitcoin.
If you are a trader and doesn’t want to get involved in the technical side of the blockchain, then CFD is a right option for you. With CFD you can buy and sell bitcoins just like bitcoin exchange, but with an advantage of not waiting for the confirmation from the blockchain, which is time-consuming.
Trading on regular bitcoin exchanges
There are many platforms that involve bitcoin exchanges, but these platforms charge some fee for the transactions. It is better if all the sites are checked and compared before trading. Here you should look out for high fees as they can quickly add up and eat up your profits.
There are some platforms that offer extra features along as low fees for using them (which is perfect for day trading).
Binance is mainly about crypto-crypto trading and if you wish to trade Bitcoin – it can be done via altcoins or USDT, which is merely a virtual equivalent of USD. Binance has over 100 coins to trade.
Binance fee structure is also unique. They claim to have 0.1% trading fee, which is already quite less than other peers. You can even reduce your fee further if you pay your trading fee in BNB.
Binance doesn’t require account verification for Level 1 users, who are allowed to withdraw up to 2 BTC per day. If you’d like to withdraw more than that, you need to upload a photo ID and wait for manual approval.
It offers two types of interface – basic and advanced. These two options show less and more information to traders depending on what is the preference. However, beginners might find it difficult to work with this site, as the interface is quite complex. The website doesn’t lag which is an advantage for day traders.
- No lag issues;
- Low trading fee.
- Complicated UI, not the best option for newbies.
BitMex apply a maker-taker trading fee structure, with even offering a 0.025% rebate as maker fee. The exchange doesn’t charge any fees for deposits or withdrawals apart from the transaction fees on the network.
It is one of the exchanges with the widest spectrum of trading services offered in the world. The interface is designed nicely, but it can be overwhelming for newbies. In most of the cases, only experienced users will manage to find their way around the website. The website is relatively fast and responsive, at it looks good on mobile platforms as well.
BitMEX claims to have high leverage on its derivatives products and strong site-wide security protocols.
BitMEX uses multi-signature wallets for both client and exchange accounts. All withdrawals are handled manually and processed at a designated time once a day. Funds are kept in offline cold storage, rather than “hot wallets.” The combination of these features gives BitMEX a very solid security infrastructure when it comes to handling client funds.
- “Sandbox” environment for users to practice trading.
- Secure multi-signature wallets.
- Manual processing of all withdrawals.
- May not be ideal for inexperienced traders.
- Not available in all countries, including the US
- No fiat deposits or withdrawals.
- Low volume on altcoin assets.
CEX.IO offers trading cryptocurrency against several fiat options – USD, EUR, GBP, RUB. It serves two purposes:
1) traditional cryptocurrency exchange service – it allows buying and selling cryptocurrency for fiat instantly;
2) advanced cryptocurrency trading platform – users are able to place market and limit orders, engage in margin trading (up to 1:3 leverage) and use API solutions for automated trading.
When it comes to trading fees, they vary with a monthly trade volume for all pairs. According to the CEX.IO fee schedule, traders are charged 0%-0.25%. For the market makers the fee is set in the range of 0%-0.16%, and for the takers, it is 0.1%-0.25%. Margin trading fees differ and include an open fee (0.2%), rollover fee (0.01%) and close fee (0%).
When buying bitcoin on CEX.IO, you need to purchase a minimum of 0.01 BTC with a maximum of 10 BTC. The limits are the same for selling bitcoin. You can withdraw an unlimited amount in bitcoin — this means you can send as many BTC to your recipient as you’d like. The minimum transfer amount is 0.01 BTC. The platform also claims that it allows withdrawals to credit cards.
- Open to all countries;
- No commission for bank deposits; reasonable fees for withdrawals;
- Credit card and bank-based transfers are not available in some countries
- Low maximum transfer amount with basic account.
The company is based in Hong Kong, and it started live trading in January 2016. The founder of Whale Club is Perry Steegen, a former banker and technology enthusiast. The exchange is providing service in over 190 countries, allowing traders from all around the world to buy and sell cryptocurrencies with ease
This exchange is a bit specific, as it only offers margin trading. Standard open book trading without leverage is not supported. The five different order types offer risk management solutions for day traders as well.
There are no fees when it comes to deposits, withdrawals, and trading on WhaleClub and the exchange doesn’t have any limits as well. However, they only accept cryptocurrency deposits and withdrawals so you need to own bitcoins before you can start trading on WhaleClub platform.
The exchange doesn’t charge any fees on deposits, balances, executions and inactivity. The withdrawal fee is 0.001BTC – which is basically the amount charged by the network for transaction confirmations.
Whale Club has one of the best user interfaces out there, it is both intuitive and fast at the same time. There are no apps for Android and iOS, but the design is responsive and looks good on mobile devices. They also have a great API, which serves a large number of traders.
- No identity verification required
- No trading fees
- Excellent user experience
- Bitcoin-only deposits
- High leverage interest fees
Bitfinex is a full-featured cryptocurrency exchange that is used by millions of traders worldwide. It has the reputation of being one of the world’s biggest and most advanced cryptocurrency exchanges. Advanced trading features, deep liquidity and access to multiple altcoins make Bitfinex a contender for serious traders who want all of the options at their fingertips to help them make money from cryptocurrency.
The platform applies a make-take fee model, where trading fees start at 0.1 percent for the maker and 0.2 for the taker. The trading platform is very sophisticated, and it offers a lot of trading options and several different advanced order types which helps the risk management side of day trading.
The user interface is simple and suitable for beginners as well. It offers customized user interface which is a unique feature. This site provides advanced security measures.
- Deep liquidity
- Advanced trading features and order types
- Mobile app supported
- May not be suitable for beginners or those unfamiliar with trading platforms
Cryptopia is a combined cryptocurrency exchange, trading platform and marketplace located in New Zealand.
Traders can buy altcoins at whatever prices are being offered by other people on the platform, and sell them for the price they think they’ll get.
It’s also possible to browse various sale listings, and potentially buy almost anything from gift cards to headphones to a car, with cryptocurrency.
One of the main benefits might be the ability to transfer bitcoin and other currencies between users free of charge, as it’s being passed through Cryptopia rather than along the blockchain. It also offers a range of features that you might find useful, including:
- Marketplace: The listings marketplace for buying and selling with cryptocurrencies.
- Arbitrage: An information section where you can see the prices of coins listed on other exchanges. This can help you pick out the better value for money listings and make more informed decisions.
- Coin info: Up to date information on over 500 of the altcoins being traded at Cryptopia.
- Paytopia: Cryptopia’s own products and services, including various promotional tools to use with your listings, available on per-month subscriptions and payable with Dotcoin.
Anyone with a verified account can use it, from anywhere in the world. However, the only fiat currency it supports is New Zealand dollars, and you can only make bank transfers from New Zealand bank accounts.
- You can verify an account with email only.
- Low to no fees.
- Features like the arbitrage and marketplace.
- Can only make fiat currency transfers using NZD.
- No advanced trading features.
As you have probably noticed, there are a lot of steps to consider before you begin your trading career. In reality, it will take a really long time before you are able to trade successfully. If you want to do things correctly, you will need to build things up slowly.