Cryptocurrencies are one of the most volatile assets in the finance world. Despite the big pullback in the cryptocurrency markets this year, there is still a ton of money to be made as day traders, since you are just entering the markets to capitalize on short term volatility. In order to capitalize in the crypto markets this year as a day trader, it is crucial that you are trading the correct cryptocurrencies on the right exchanges. Before we talk about the best cryptocurrencies for day trading, let’s talk about the common characteristics that makes them ideal for day traders:
One of the best things about day trading is that you can capture big percentage moves in a very short period of time. In order to make big percentage returns in a few hours, you need to find cryptos that are volatile, meaning they will make large moves in a short period of time. However not all cryptocurrencies make big moves in a short period of time. Bitcoin will usually only move around 5%-10% per day. This is considered volatile to most people, but there even more volatile cryptocurrencies out there, which are better for day trading.
All 5 of the cryptocurrencies mentioned below often make 10%-20% moves in just a few hours. It is crucial that you manage your risk correctly when trading volatile cryptos. You can make a lot of money in a short period of time trading these, but you can also lose a lot of money in the same amount of time if you do not have proper risk management.
Another important component characteristic of these cryptos is liquidity. Trading an illiquid crypto can make entering and exiting your positions tricky, especially if you are trading larger position sizes. When you are day trading you will be entering and exiting positions often. If you are trading something illiquid you could lose a lot of money because of slippage. Slippage is when your orders are either sold at a lower price than you intended, and buying at prices higher than you are looking for. This will cause you to lose more money entering and exiting your positions.
Trade On The Best Exchanges
Not all exchanges have good liquidity for trading cryptocurrencies, even if it is a well known cryptocurrency. It is crucial that you trade on exchanges that have coins with good volume, and also have platforms that have fast execution speeds. My favorite exchanges to day trade coins with are Coinbase Pro, Binance, and Kraken. I also use Bittrex.
Now that you understand the characteristics of the best cryptocurrencies for day trading, here are my 5 favorite I recommend for day traders:
Ethereum is the 2nd biggest cryptocurrency in the world, and it tends to closely follow the price action of Bitcoin, similar to most of the major altcoins out there. One of the best things about day trading Ethereum is that you can short sell it on the Kraken exchange. This means you can make money on it when its’ price goes down. We have been shorting Ethereum a ton this year, since all of the crypto markets have been in a non-stop downtrend this year. You can trade ETH on Coinbase Pro, and you can short ETH using Kraken.
Binance Coin (BNB)
Binance Coin is the token of the Binance Exchange. It has been one of the stronger altcoins this year, showing some relative strength to Bitcoin and the other altcoins mentioned here. You can see on its daily chart how it has been holding up in the higher part of its range. You can trade BNB on the Binance Exchange.
NEO is a great altcoin for day trading because it will not always just follow the trend of Bitcoin like other altcoins. It will often go on big runs on its own, and show relative strength to Bitcoin at times. It has been in a down trend the past few weeks, but in the last couple days it has shown some signs of life. You can trade NEO on Bittrex, Binance, or Bitfinex.
EOS recently went on a massive run following news surrounding the potential applications of its blockchain. It has retraced a lot the past few weeks from its massive run due to some tech issues, but has still offered some great bounce plays. You can trade EOS on Kraken, Binance, or Bitfinex.
Ethereum Classic (ETC)
Ethereum Classic is the least volatile out of all altcoins mentioned above. It is worth mentioning in case you are looking for a slightly less volatile altcoin to day trade. ETC was recently added to Coinbase which helped give it momentum. Bitcoin is also a good option, but ETC has slightly more range to play around with. You can trade ETC on Kraken, Coinbase, Binance, or Bitfinex.