Why intra-day trading crypto can be better than holding

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Coinmonks

7 min readMay 7, 2018

If you are relatively new to trading crypto currencies, then this tutorial is what you need. In this tutorial I will try to explain how you can use crypto to grow your capital base by at least 1% per day.

Don’t just Hodl

Hodling (a.k.a. holding currencies) is the strategy of buying some crypto asset (e.g. Litecoin) and holding it for many days, weeks, months or even years. This may be a good strategy for newly launched ICOs that may double, triple or quadruple in value soon. But I personally advise you against holding, in other words, don’t follow the herd and don’t be a headless chicken.

In my examples I’ll be using the Binance exchange. Keep in mind that I am not affiliated with Binance in any shape or form.

The reason why holding isn’t a very practical move for well established coins is because of their volatility. For instance, Bitcoin (see chart below), increased by ±30% over a period of ±20 days. But it doesn’t mean it had a linear increase of 1.5% per day, some days went down while others went up.

Risk of holding

Assume you use the chart above to forecast Bitcoin’s growth — by looking at the chart the price should reach $12.4k in another 20 days or so. The reality on the other hand is not some linear calculation — there is no way one can predict the price to reach even $10k by tomorrow. The price could even crash to $8k. And so your investment of $9.6k would then be worth much less because you took a wild guess and lost. Holding is more like gambling than trading, simply because the risk is too high and there’s too much uncertainty.

My strategy is to trade them continuously. I am a huge believer that assets unused diminish — meaning: whatever you don’t use, you lose. Saving piles of coins under your bed, hoping their value will increase isn’t always the best way — unless you are willing to take that risk or you know with high certainty that the price of some crypto coin will go up in the next few days, weeks or months.

Also Read: Best Crypto Trading Bots

Day Trading

Trading assets on a regular basis could be a safer bet and might be more profitable for you. From the previous section we learned that Bitcoin grew by an average of 1.5% per day (during the past 20 days). So you can actually take the risk of buying today and selling tomorrow or within the next couple of days. There is no guarantee that tomorrow’s price will be higher than your current buy price — but it’s still better than crossing your fingers and holding indefinitely.

You can set a limit to how low the price may go, for instance, if your investment decreases by 5% and keeps going down, then you should sell to avoid more losses. On the other hand, keep holding until you’ve got an increase of at least 1%. In this context, day trading is less risky than holding — because it’s more calculated.

Intra-Day Trading

I always vouch for day trading over holding, but can we actually do better than 1% per day? How about we generate 1% two times, three, four or even five times a day? This is possible and the proof is in the numbers.

If you analyze many crypto currencies, you’ll notice that they have high volatility, that is they can go up or down in value really quick by a significant amount. Have a look at the chart below, which shows Bitcoin’s price at 30-minute intervals:

In matter of hours the price can go up or down by 1%, 2%, 3% and sometimes even more. This is a great thing, because all we need to do is wait for a good entry position (i.e. buying) and then sell a couple hours later once it has gone up by some percentage. By repeating this process, you can make a decent ROI on a daily basis. Even during down trend periods (where the down trend is visible on the daily chart), the intra-day intervals will still have these high margin opportunities.

Using indicators

Many traders use indicators (such as MACD, EMA, SMA, RSI, …) to stay ahead of the game and detect their golden buy/sell opportunity. These indicators “can” work but never rely on them blindly.

The “wave riding” strategy

Remember that profits come from buying as low as possible and consequently selling as high as possible. So everything starts with finding a good low entry position. On the chart below I have drawn orange rectangles to indicate good buy positions.

In this strategy you wait for at least 2–3 hours, and if (almost) every candlestick was green, then you should buy. Then wait until you’ve reached your desired ROI (e.g. 1%) or until the price starts dropping. But don’t be scared because you will encounter a few red candlesticks along the way. And remember, not every trade you make will be profitable, but if you keep at it then you’ll have more wins than losses.

The “turn-around” strategy

On the chart above I’ve used 30-minute candlesticks to trade by. Alternatively you may want to use shorter intervals. We may, for instance, use 5-minute candlesticks. By using smaller intervals we’ll usually aim for a lower ROI such as 0.5%, and on the other hand have more opportunities.

The 5-minute interval strategy is to look for “turn-around points”. I have marked these on my chart below. These are moments when there is a “U” or “V” shape in the candlesticks. Once you detect these then it is time to buy. An even better position is to buy at the lowest point (the valley) of the “U” shape, but this requires guesswork and isn’t practical to detect.

Notice that I’ve used two different rectangles: orange and blue ones. The orange one shows entry positions where a profit can be made, by buying in that region (preferably the lowest point) and then selling a few intervals down the road. The blue ones are the trades that would result in a loss or break-even situation.

The idea is to avoid making trades that are categorized by the blue rectangles, and focus only on the orange marked ones. This isn’t practical for us humans, because of uncertainties and the complexity of the market. This is a quest we are trying to solve by using machine learning and A.I. technology.

Conclusion

In this post I explained three methods for making a daily ROI of at least 1% by trading crypto currencies, Bitcoin in particular. Even though trading can be a risky business, it is only so if you don’t have a clue of what you’re doing. But once you have a basic plan that works, you are set. I hope this post served useful to many aspiring crypto traders. Remember: An ROI of just 1% per day turns into 3396% in 365 days — which is a heck of a lot.

Thanks for reading & have a great day!
- Ilya Nevolin