Day trading Bitcoin – guide
- Is Bitcoin good for day trading?
- Finding a broker for Bitcoin trading
- Selecting best time frame
- Strategies you may use to trade Bitcoin
- The risks of day trading Bitcoin
- Day trading and scalping guide - menu:
Forget Forex and stock markets. Bitcoin remains to be popular among individual investors and traders. Many of them simply buy and hold Bitcoin, because it will be worth 1,000,000$ one day 😉 Three are some experienced traders who wonder if you can day trade Bitcoin? I try to answer in that part of the guide. I also give you some recommended strategies.
Is Bitcoin good for day trading?
In general, yes. I wouldn’t say that it is good for scalping. On Bitcoin, you can see strong trends. If you are a scalper who likes to open a trade to get some small profit it may not be the best thing.
Finding a broker for Bitcoin trading
There are few brokers with Bitcoin and other crypto coins in their offer. For example, even XM added it to their offer.
My recomandation would be a crypto account from FX Open:
You can open an account with a small deposit (starts from 10$), you have Metatrader 4 platform and cryptocurrencies offer is good.
Find all details here.
Selecting best time frame
It depends from your trading style, but 1-m time frame may not be the best choice:
You can try 15m, but in my opinion this time frame is better to catch swings which can last for few days. Below 15m chart of Bitcoin, white vertical lines seperate single days:
You have to try it with your trading strategy. If you still want to trade 1m chart then I still believe that EUR/USD will be a better choice.
Strategies you may use to trade Bitcoin
Let’s check some good strategies you can use when you day trade on Bitcoin. We can use here normal tools and strategies from Forex or futures day trading.
Below are some of my favorite techniques, but you can also check other strategies in practice.
Trailing stop loss
Trailing stop loss is a great strategy. It allows you to follow trend easily. When you are in profit, you can hold to the trend for a longer period and stop loss line is clear.
I like to join trailing stop loss with other tools which helps me to verify the current trend. In the example below you can see trailing stop joined with Bollinger Bands and 100 average on 5m Bitcoin chart:
Another idea is to join trailing stop loss with averages. They can work both as support/resistance and trend indicator. Thanks to them you have better chances to invest in the right direction.
The best way to trade with trailing stop loss is to trade with the trend. Especially on lower time frames. You just have to wait for best setup of averages and trailing stop loss. Below Bitcoin again, 5m chart:
Settings for this trailing stop:Take a closer look at two charts above. You can see that both are 5m Bitcoin. On both, with trailing stop loss you could catch most of the 1000$ move. All that on 5m chart! That is the true power of trading with trailing stop loss.
You can download templates from examples here:
Remember that you also have to install trailing stop loss. You can download it here:
Ichimoku is an old trading indicator which works great in trending conditions. You can also use it with Bitcoin trading. My advice would be to change standard settings to the ones below:
You can use it on 1m chart like below:
Dwonload Ichimoku template here.
Fibonacci tools and Bitcoin
If you read my blog long enough then you know that Fibonacci is my favorite trading tool. You can trade with Fibonaccis number with many different approaches. My recommendation is to trade ABCD patterns. You can use it in any time frame, all you need is trending price and swings.
Below example of ABCD pattern from 1m time frame for Bitcoin:
Similar pattern on 5m time frame. Here we could see a short pause at 127 extensions, but later Bitcoin price went straight up to 200 extensions.
You can read more about trading with Fibonacci in my guide here.
You have to set up retracement and extension lines by yourself. I wrote a short guide how to set up Fibonacci tools here.
Pivot Points are great because they show you where are potential support and resistance areas. You can build a good strategy with that information.
There are many Pivot indicators for Metatrader. I recommend to use that one.
When you add Pivot indicator to the chart, you have to decide on which period it will be calculated. Standard is daily but there are many others to choose from:
If you trade on 1m or 5m time frames then it can be a good idea to trade with Pivot Points calculated on 1h or 4h. You switch that in settings window which I showed you in the beginning. Below you can see 1m time frame. See how Pivot works when they are calculated on 1h (so every hour we have new Pivot lines). It is clear that Bitcoin price reacts with these levels which can be support or resistance for the Bitcoin price:
If you trade on 5m time frame then it is a good idea to try Pivot Points based on 4-hours period (every 4 hours we have new Pivot lines plotted on chart). Again, Bitcoin price finds support and resistance at these lines. Below 5m Bitcoin chart with Pivot Points plotted every 4 hours:
On charts above you can see that I joined Pivot Points with MACD, Stochastic and averages. You can use other technical tools. I just like to have a confirmation of trend and signal to open and close position. I think that setup above works just fine.
Download template from examples here.
Remember that you need to install pivot points from here.
The risks of day trading Bitcoin
You can day trade Bitcoin, but there are some risks which you should be aware of:
Price can change in few minutes
So many people think that Bitcoin goes only up. They are wrong. When you check lower time frames you can see that Bitcoin can go few hundreds dollars up or down in few minutes. Just like that:
Of course, if you have a trade opened in a direction of that move then great for you. There will be times when this price will go against you so proper position management is super important here.
It is hard to find broker with low spread for day trading
Bitcoin is right now around 10,000$. Because of that price spread is rather wide. It is hard to find a good broker with low spread to day trade Bitcoin.
When you trade normal forex pair you have a calendar of economic publications. You know in advance when some major economic data will be published.
With Bitcoin it is a different story. There are many unexpected newses from central banks banning Bitcon etc. Because of that price of Bitcoin can go down in a short time:
As you see, you should be careful. I showed you that normal trading tools work just fine on Bitcoin. You can trade it like any other pair. But there are some risks and you should be disciplined.
There are many more trading strategies and indicators you can use when you day trade Bitcoin. I presented you some of my favorite trading tools which I tested on Forex. As you can see, they work great also when you day trade Bitcoin.
Basic info about day trading:
- Forex scalping and day trading for beginners
- Best Forex broker, fx pairs, trading hours for scalping and day trading
- Day trading Bitcoin
- Forex scalping and day trading without indicators
- Time frames in day trading
- Trading desk
Management in day trading:
Indicators in day trading
- Forex ATR – trailing stop loss
- Forex Parabolic SAR
- Moving averages
- Bollinger bands
- Fibonacci retracement
- Support and resistance, Pivot Points