From the advent of Bitcoin in 2008 up to the present, cryptocurrencies have featured opportunities for handsome profits and, unfortunately, painful losses. Because a cryptocurrency like Bitcoin offers no dividends, does not pay interest, and is not a company that generates profits, long term investment is based purely on speculation. On the other hand, day trading cryptocurrency provides ample chances for profit in fluctuating markets and limited exposure to the broad market swings that have turned Bitcoin millionaires into Bitcoin paupers.

Cryptocurrency Day Trading Rules

Cryptocurrency day trading is not governed by any regulatory agency up to this point. Thus, unlike with stocks, there are no pattern day trading rules. One does not need to maintain a margin account with a brokerage but that means one is not able to borrow from the brokerage to short a cryptocurrency. That having been said, crypto exchanges have been fined millions of dollars for allowing those from sanctioned countries like Syria, North Korea, Iran, or Venezuela to buy, sell, or day trade on their exchanges. If you are a US citizen you can day trade for the time being with no governmental oversight.

Day Trading Cryptocurrency Strategy

Although cryptocurrencies don’t have the kinds of fundamentals that stocks do, Bitcoin has reliably tracked with the Nasdaq for more than a year. A reasonable day trading cryptocurrency strategy is to keep in mind the fundamentals that drive the Nasdaq while using technical indicators for hour by hour or even minute by minute trading. The most successful crypto day traders will be those who have learned how to professionally enter, manage, and exit their trades.

How to Learn Day Trading Cryptocurrency

The first thing to learn in regard to crypto day trading is that there is and has always been a lot of hype in this trading arena. Be aware of it as a factor that could drive prices but do not blindly follow social media hype! And, in the Bitcoin market as many as fifty percent of all trades are wash trades. That means a person buys and sells simultaneously to give the appearance of high market volume and interest when there is none. Learn how to follow technical indicators when day trading crypto but be especially aware that volume indicators may be false.

Platform for Day Trading Cryptocurrency

At DayTradeSafe we suggest the NinjaTrader platform for trading commodity futures, currencies, stocks, and crypto. This platform provides a trade simulator, advanced charts, and ways to develop strategies and back test. You can connect directly to the NinjaTrader Brokerage through this platform or to other brokerages like TD Ameritrade or Interactive Brokers. This platform allows you to trade commodity futures, foreign currencies, stocks, and options as well as crypto currencies.

Day Trading Cryptocurrency Taxes

Because cryptocurrencies were designed to work outside of the traditional financial system many believed that one need not concern oneself with taxes in regard to cryptocurrencies. Anyone day trading or investing long term in cryptocurrencies needs to quickly disavow themselves of that notion. Profits on cryptocurrency transactions are taxed as capital gains. Anyone who neglects to report such gains and pay taxes will be in trouble with the IRS. While losses are deductible the limit is $3,000 a year which is the same as with stocks but not commodity futures.

How to Start Day Trading Cryptocurrency

The hard and fast rule for day trading anything is to learn how to trade before risking your money on any trade and especially on tips. A minimum a novice day trader should trade in simulation until they reliably make profits. This includes developing and perfecting a trading strategy, knowing how to hedge risk, set trading stops to limit losses and lock in gains. The best route to day trading success is to learn from a professional and become a benchmarked professional.