Trading

Best three day trading Bitcoin strategies 

September 12, 2019


Recently, we discussed some of the best crypto trading strategies, which can be applied to trade BitShares on BitSpark’s DEX. Similarly, today we will discuss three of the most popular day trading bitcoin strategies. Day trading is defined as an act of buying and selling an asset within the same day. 

The majority of day traders won’t hold trades over night as they buy and sell multiple times over the course of a day. It’s a similar trading approach to scalpers, however, scalpers usually operate on lower time frames and look for quick gains. Here, we present three profitable day trading strategies for trading bitcoin and other digital coins.

1. Breakout

The breakout trade opportunity comes up when the asset clears a predefined level of support or resistance. Once the level is broken, the asset continues to trade in the same direction as the volume, ideally, increases. The inability of the asset to close above/below the important level and the ultimate return to the previous trading zone is called a failed breakout. 


Breakout daily trading strategy sample (Source: TradingView)
Breakout daily trading strategy sample (Source: TradingView)


The price chart above shows the BTC/USD on a 30 mins time frame. On the left hand side, we have a level which played an important part in hindering the bulls from advancing higher. As this is a recognised resistance now, the bulls will try to regain this level as the optimism has increased since.

We are looking for a potential break of this level with a clear close above it. In the first attempt, the bulls clear this level, close higher above. It’s very important to monitor volumes behind this move. The higher the volume the stronger the move. Once the bulls cleared the first resistance, we use the prior price action to identify the second level of resistance. Ultimately, the price hits the profit-taking zone approximately 13 hours after the initial break occurred. The stop-loss order is placed below the first resistance zone. 

2. Retest of the breakout

Similar to the breakout strategy, the breakout retest strategy emphasised breakouts of previously defined important levels. However, traders who are trading using this strategy are not interested in the initial breakout; instead they set their focus on a potential retest of the cleared level.

The line of thought behind this strategy is that a consolidation, or minor pull back, is healthy as the trending asset regroups before continuing higher. Hence, the most likely place to consolidate is the “return to the scene of the crime” i.e. the level of interest. 


Retest daily trading strategy sample (Source: TradingView)
Retest daily trading strategy sample (Source: TradingView)


We use the same situation as for strategy 1 since it offers the setup we are looking for. The bulls clear the first resistance level, move higher, get tired and rotate back lower to retest the previous resistance, which now acts as a support. The higher volume behind the retest suggests that the price will either break the support and return back below the previous resistance or bounce and make a new swing high. 

The latter scenario is at play here as the bulls take the price to the second level of resistance after regrouping near the first resistance. It took bitcoin around 3 hours to travel from the first to the second resistance level. Again, the stop-loss is set below the support level. 

3. Bounce

By performing basic technical analysis on a chart, we identify clear support and resistance levels. The bounce day trading strategy can be used to look for a bounce off of the trend line, MA, pivot point etc. In this particular case, we have a BTC/USD 30 mins chart moving upwards. By drawing a trend line to connect the two most recent swing low, we look closely to try and capitalise on the potential third touch of the trend line. 


Bounce daily trading strategy sample (Source: TradingView)
Bounce daily trading strategy sample (Source: TradingView)


As this is a day-trading strategy, we are only looking for a bounce, not a complete reversal. Judging from the two previous occasions, the price rebounded strongly off the trend line, providing us with the optimism the same may happen for the third time. The stop loss is both below the trend line, as well as below the horizontal support (the previous swing low).

Setting the profit-taking level for this strategy is optional. One can either look for a specific indicator - Fibonacci retracement, MA, pivot point etc. - or simply close the trade once the bounce occurs. We are looking to close if the price hits the 20 MA. Ultimately, the bulls push the price towards our profit-taking zone in just two hours. 

Find your own trading style

In this blog post, we briefly described three day trading strategies for trading bitcoin. We used the same situation for the first two strategies on purpose to show that the same chart can offer multiple opportunities to make money. Some of the more experienced crypto traders would even split the strategies i.e. get half of the funds intended for this trade behind the breakout and then reload the second half once the retest takes place. In case the bulls never return for a retest, at least the half-sized trade hit the profit-taking level.

The third strategy is more of a scalping nature as we are only interested in a bounce off of the identified level. By applying any, or all, of the three Bitcoin day trading strategies, a trader is well-positioned to open and close multiple positions within the same day and ultimately make a profit.

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