Day trading bitcoin and other cryptocurrencies has become increasingly popular. At first glance, bitcoin is ideal for day traders who rely on technical analysis indicators for trading cues. Unlike when you day trade commodity futures, stocks, foreign currencies, or options on any of these, when you trade a cryptocurrency there are no fundamentals to consult as the price of bitcoin is based on nothing except what the market thinks it is worth. This makes the bitcoin market subject to periods of euphoria and panic much more so than the usual fear and greed seen in other markets. To buy and sell bitcoin and other cryptocurrencies you need a cryptocurrency exchange and if you want to try day trading bitcoin, you need a broker.

Can You Make Money Day Trading Bitcoin

The short answer is, yes. The potential is there to make a huge amount of money day trading bitcoin. Bitcoin’s price goes up and down in huge jumps making huge profits possible but also laying the day trader open to horrendous losses as well. As this snapshot of the market demonstrates, bitcoin can go up or down by as much as 20% of its value within a trading day. Because bitcoin and other cryptocurrencies move so quickly and dramatically on positive or negative news about government regulation or similar news, much of bitcoin day trading more-closely resembles a trip to the casino than normal day trading.

Day Trading Bitcoin Cash

In order to day trade bitcoin you need to buy some and have a bitcoin “cash account” with a broker. The first worrisome thing you should note if you go this route is that while bitcoin brokers let you learn for free how to buy and sell bitcoin, they typically do not offer trading platforms where you can simulation trade in order to learn how to most-effectively enter, manage, and exit trades. Fortunately, NinjaTrader offers a platform for trading bitcoin micro futures so, if you go the bitcoin day trading route, you will have a professional platform where you can simulation trade before risking your own bitcoin cash.

Bitcoin Day Trading Rules

Because bitcoin trading is not governed by the SEC or the Commodity Futures Trading Commission, there are no trading hours except when your broker or trading platform does maintenance. There are also no limits unless your broker imposes them. If you go this route make sure that the broker offers limit orders. There are no specific margin requirements with bitcoin unlike those seen with the pattern day trading rules with stocks. For some traders this may seem like a breath of fresh air until one realizes that the rules imposed on commodity futures, stock, Forex, and options traders are meant to protect those who are trading.

Day Trading Bitcoin Strategy

Bitcoin has no fundamentals unlike a commodity like coffee where a drought in Brazil sends prices up and the prospect of adequate rainfall drives prices down. On the other hand, the governments of the world have not settled on how to treat bitcoin so every comment by a large central bank drives prices wildly up or down. Thus, watching the news can be helpful but the main bitcoin trading strategy is to pay attention to market sentiment and trade in small amounts in search of profits and hopes of being in the right place at the right time to luckily place a trade that results in huge profits. The skills you can learn from professional instruction with DayTradeSafe are doubly important if you plan to enter this arena.

Day Trading Bitcoin Tips

As the chart of bitcoin prices for the first half of 2021 demonstrates, this is a market with huge price swings. In regard to tips, always remember that there are no fundamentals for bitcoin so, unlike with coffee futures, your friend won’t get a phone call from his friend in Sao Paulo, Brazil telling him about the spring rains that are going to save the next coffee crop. The best tips for day trading bitcoin are to keep your trades small, always use limit orders, and pay attention when the IRS, Fed or other central banks start talking about taxing and regulating cryptocurrencies.

Best Bitcoin Exchange for Day Trading

The largest bitcoin exchange is Binance, followed by Mandala, OKEx, UPbit, Venus, Coinbase, and dozens of others. Most traders consider Coinbase the best crypto exchange for US day traders. Coinbase offers the trader high liquidity and their interface is quite simple to use.  Importantly, they are insured against data breaches and the cash you invest through them is deposited in FDIC-insured bank accounts which is a protection against the losses many exchanges have incurred from hackers.

Day Trading Bitcoin Taxes

This is the fly in the ointment for many who would otherwise like to buy and sell bitcoin. The original idea behind cryptocurrencies was that this was a means of exchange free of regulation and government oversight. Well, the IRS took exception to that when bitcoin and others went from a few cents in value to tens of thousands of dollars. The IRS prevailed in several lawsuits and now cryptocurrency exchanges need to report when their clients reap profits during any given year. So, if you decide that bitcoin is what you want to day trade and you make money at it you will need to concern yourself with day trading bitcoin taxes!

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