A rounding bottom pattern is a technical analysis trading strategy used to identify potential reversal points in an asset’s price. Find out how it works here.

is often recommended when you’re especially bullish on a specific coin or token. This often involves the deployment of funds and capital to accumulate the preferred cryptocurrency following a substantial dip in its price. While this can be tough because crypto traders can never fully time the market or denote when there’ll be a market reversal, they can significantly improve their odds with the help of

and recognizing chart patterns. That’s where bullish reversal patterns such as the rounding bottom come into play. 

By recognizing the formation of an upcoming “U” shaped bottom, traders with knowledge of technical analysis can secure an upper hand and establish a position before the charting pattern fully plays out. 

Keen to find out how to profit from the upward trend reversal? In this guide, we’ll look at how crypto traders can use the rounding bottom chart pattern to their advantage in trading.

A rounding bottom pattern is a technical analysis trading strategy used to identify potential reversal points in an asset’s price. It’s identified by the gradual decrease of an asset’s price, followed by an abrupt shift that completes the rounding motion and marks the formation of a recognizable “U” shaped bottom.

As one of the most sought-after chart patterns to trade off of, the rounding bottom pattern typically occurs when the overall

surrounding an asset turns from neutral or bearish to bullish. As the sentiment shifts, traders can jump on the opportunity to capitalize on a price reversal by entering long positions, and potentially profit thanks to the appreciating price. This can lead to considerable profits for better crypto traders when they realize the formation of the rounding bottom pattern and

While there’s no way to confirm with complete accuracy that a rounding bottom pattern is about to emerge on a trading chart, crypto traders can still study its formation to better understand and recognize its formation. As a trend reversal pattern that can potentially result in a breakout, the rounding bottom pattern is characterized by a sudden upward trend that emerges from a gradual decline. This often represents a shift in trader expectations and sentiment, as the momentum changes from bearish to bullish. 

Depending upon the overall market sentiment, crypto traders can look to enter a long position if they believe an asset’s price will reverse course, given existing price action and momentum.

To break the rounding bottom pattern down, traders can look out for the three stages that form its “U” shaped curve.

In the first stage, known as the markdown or buildup stage, an asset’s price begins to gradually decline in a steady fashion. In what some may call a

, the decline in price sees weak price action, and lacks the large volume that’s usually seen in more momentum-based price movements. Traders may also notice that the asset’s price tends to face short-term bounces off support lines before resuming its gradual decline.

In the second stage, there’s an abrupt shift in price that turns sentiment surrounding the asset’s valuation around. This causes a flagging pattern that consists of a couple of neutral candlesticks signaling a stagnation in the asset’s price, and the halting of the price decline. On top of marking the completion of a rounded portion of the rounding bottom’s “U” shape, the flagging pattern signals that a potential reversal could be coming soon.

Finally, in the third stage of the rounding bottom pattern, traders might notice buying pressure buildup and the asset’s price trending upward as bullish candlesticks appear to signify the end of the flagging pattern. This is typically accompanied by a sudden increase in trading volume, confirming the asset's bullish momentum and upward price movement. During this portion, breakout traders usually start to enter into long positions with confidence, as the price action is confirmed with the surge in buying volume.

When a rounding bottom pattern is identified, it typically suggests that the overall market sentiment surrounding the asset has shifted from neutral or bearish to bullish. In order for the pattern to be confirmed, traders must observe a gradual decline of the asset’s price followed by an abrupt shift, which completes the “U” shaped bottom. After the reversal has been confirmed, traders may capitalize on the opportunity to enter long positions.

When Does the Rounding Bottom Pattern Breakout Occur?

According to breakout traders, a breakout occurs when the price of an asset reaches a new high beyond the resistance level that it previously couldn’t cross. This is typically seen when an asset’s price goes above the “U shaped neckline,” or highest point on the "U" shaped pattern. Once this occurs, it signals to traders with a technical analysis background that the reversal of sentiment has been completed, and that they should enter long positions in order to capitalize on potential gains. 

Additionally, when there’s a confirmed rounding bottom pattern, traders can simultaneously watch for volume increases, as this suggests that more buyers are getting involved, and could be indicative of higher prices moving forward because of the potential

Benefits of Using the Rounding Bottom Pattern

As with the recognition and trading of most bullish reversal chart patterns, there are numerous benefits to taking advantage of the rounding bottom pattern.

Increased Odds of a Good Entry and Exit Price

First, the rounding bottom pattern gives crypto traders an indication of when to enter and exit a position. Breakout traders can look to build a long position once the coin or token price is above the neckline. They can then establish their own take-profit and stop-loss levels, according to the resistance and support levels present on the chart. 

Thus, by recognizing the emerging formation of a rounding bottom pattern, crypto traders can plan ahead and follow through with their trading plan when it comes to entering and exiting a potential trade.

Use of Volume Surges to Confirm the Pattern

While crypto traders may feel uncertain about trading off a single rounding bottom chart pattern, they can look for any signs of increasing volume during the pattern formation. This will confirm the emerging pattern and give traders more confidence in executing the trade, as it hints at the possibility of prices moving higher in the short term.

Risks of Using the Rounding Bottom Pattern

Despite the potential profits that crypto traders can gain from recognizing the rounding bottom pattern, there are also risks associated with its use.

Unlike with other chart patterns, it’s crucial to recognize that the second stage of the rounding bottom pattern may take months or years to fully play out. This can be a pain point for crypto traders with a shorter time horizon, who prefer to

throughout the day and lack the patience to

in order to realize a full recovery in stock price. 

Due to the potential amount of time a trader may need to see the rounding bottom pattern play out, they might be better off incorporating a different charting pattern as part of their strategy.

Volatility May Impact the Rounding Bottom Pattern’s Formation

Given the volatility involved when trading cryptocurrency, the rounding bottom pattern may be considered non-viable given that it’s usually effective for trades with long time frames. While trading crypto, we may see price action suddenly shift directions and break out of an established trend without prior warning. This can result in crypto traders getting trapped in the trade after deciding to go long during the second phase of the rounding bottom pattern.

Rounding Bottom Pattern vs. Cup and Handle Pattern

are two common chart formations that traders look for when trading cryptocurrencies and wanting to trade a market reversal. 

Both patterns represent a bullish shift in market sentiment, with the former signaling a turnaround in an asset’s price from bearish to bullish, and the latter indicating a continuation of an asset’s price uptrend. 

The main difference between the two is in their formation. For the rounding bottom pattern, the bottom part of the pattern has to show a clear "U" shape, while for the cup and handle there will be two peaks within a single price range that form the cup shape. Additionally, the cup and handle pattern extends beyond the "U" shape, indicating an extended dip below the neckline before surging once the handle is fully formed.

When crypto traders spot a confirmation of the rounding bottom pattern, they should consider entering a long position upon noticing the price reversal at the bottom. This is so traders can make the most of the momentum swinging in their favor. Upon placing the buy order, traders should stay with their trading plan, and input their planned stop-loss and take-profit orders. This minimizes losses should the trade not work out as expected, and locks in profits if the price moves as expected.

Users may also look to capitalize on breakout trades by entering longs near the peak of the rounding pattern, as they can benefit from potential momentum surges. Experienced traders may leverage

to increase their exposure and capitalize on larger gains.

It's important for traders to keep an eye on certain metrics that can help confirm or deny that a reversal is taking place. These include volume confirmation,

By combining technical analysis with other methods such as

, traders can maximize their chances of profiting from a rounding bottom pattern in any market conditions.

Is the Rounding Bottom Pattern Worth Trying?

All in all, the rounding bottom pattern can be beneficial for both beginners and experienced traders, given that it helps traders identify the possibilities of a market or trend reversal. While basing one’s trading strategy on the rounding bottom pattern carries its own risks, proper trading discipline and order sizing will help minimize trading risk. For beginners, the pattern can help reduce their exposure to risk as they swing trade within a defined range. Experienced traders may also benefit from the inverse nature of the pattern, potentially capitalizing on larger gains when executing correctly.

Regardless of your level of experience and trading background, it’s important to understand how the rounding bottom pattern works in order to determine if it's right for you. This pattern ultimately requires patience and a sharp eye, as it typically forms over several weeks or months before becoming recognizable, instead of allowing traders to profit from short-term gains.

To summarize, the rounding bottom pattern is a long-term trading strategy that appeals to traders of all levels, and is an essential part of any trader’s arsenal of chart formations. It ultimately requires patience and an eye for detail, as it takes several weeks or months to become recognizable. 

Ultimately, the rounding bottom pattern works when traders can identify its key elements, namely the initial decline, plateau, and gradual rise in price. In doing so, they can prepare to go long while taking into account the potential risks of trading on short time frames, as well as volatility that can ruin the pattern’s formation.

Intermediate

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Rounding Bottom Pattern: How to Use It for Crypto Trading

Gap trading is a strategy that capitalizes on price gaps in the market, which are areas on a price chart where the price rapidly rallies or falls with little to no trading activity. 

 and play a significant role in a trading strategy. Experienced traders know that price gaps provide big clues about price movements and the market’s trend. Below, we’ll delve into what a gap is, as well as the markets in which gaps appear and the reasons behind gap formations, and then we’ll look at gap trading techniques.

A gap occurs when there’s an empty space or jump in price movement on a chart, indicating that little or no trading activity has taken place within a specific price range. Gaps typically occur overnight or during periods when the market is closed, resulting in a visible gap on the chart. They can appear on various time frame charts: Intraday, daily, weekly or even monthly.

Gaps can appear in price charts of any financial instrument, including stocks, commodities, currencies, cryptos and indices. They aren’t limited to a specific market or asset class, though certain asset prices are more prone to gaps. Any markets that open and close at specific times are the most common financial markets for price gaps. This is because the price moves during after-hours trading and then appears to "jump" when the market opens.

, a gap is commonly observed due to a break in trading sessions between a market’s open price as compared to the previous day's close. After the close of one trading session, new information can emerge, such as earnings reports, economic data or news events that impact trader sentiment. When the market reopens, it can result in a price gap, indicating a significant change in market expectations.

, price gapping may appear during a break in trading on an exchange. Price gaps can occur due to factors such as supply and demand imbalances, geopolitical events, weather conditions or economic data releases. These gaps can lead to significant price movements among commodities like gold, oil or agricultural products when a market reopens after a period of closure.

 (or forex) is continuously traded 24 hours a day, five days a week. Gaps in the forex market primarily occur during weekends or major holidays (such as Christmas and New Year’s), when trading is closed. Economic or political events that take place over a weekend could result in a price gap as trading resumes on Monday.

 are generally traded continuously (24/7) on most exchanges. Therefore, overnight and weekend gaps on price charts are rare. However, it’s crucial to note that price gaps still occur on crypto charts, but they aren’t visible on 

One trading strategy experienced crypto traders use is to look for gaps on 

 futures charts, as there are no overnight or weekend trading sessions.

Several factors contribute to the formation of gaps in price charts. The following are some common reasons why gaps occur.

: Significant news announcements during earnings season, economic data releases, mergers and acquisitions or regulatory changes can lead to gaps in stock prices. Positive or negative news can create a sudden shift in market sentiment, causing prices to gap up or down when the market reopens.

: Events that occur when market trading is closed — i.e., geopolitical news, global economic developments or corporate actions — can impact investor sentiment and create gaps. These can cause a significant change in market expectations, resulting in gaps when trading resumes. Back in September 2001, the U.S. stock market was closed for one week due to terrorist attacks. When trading resumed, prices gapped down significantly.

: In some markets, circuit breaker mechanisms halt trading when price movements exceed a predefined threshold. When trading resumes after such a halt, it can lead to gaps in price as the market adjusts to the new information. For example, there are three levels of market-wide circuit breaks when the S&P 500 moves 7%, 13% and 20% in one day, leading to a temporary halt in trading.

: Thinly traded or highly volatile markets are more susceptible to gaps, even during the same trading day. Lower liquidity levels or rapid price movements can cause gaps as the market struggles to match buy and sell orders at specific price points. This can be exacerbated when major news is released. 

These price gaps happen all the time, and are visible on a 15-second or shorter chart.

As previously noted, a price gap is a visible empty space on a price chart. After a gap is created, prices may reverse and fill the gap. In essence, the market’s price trades back to the pre-gap price level.

There is no expectation of when a price gap will fill. It can be completed within hours, days, weeks or months.

Most price gaps fill within a relatively short amount of time, but the market doesn’t have to. You can anticipate where the price gap will fill or not, depending on the gap type.

We can determine the type of gap, depending on the pattern and where it appears within a trend. In this section, we’ll explore four types of gaps: Common gaps, continuation gaps, breakaway gaps and exhaustion gaps.

Common gaps, also known as trading gaps or area gaps, are the most frequently occurring type. They often emerge due to regular market fluctuations, and can be found in any market environment. Common gaps typically

, as they tend to get filled relatively quickly.

Over a weekend, if prices gap in forex, traders will benefit on Monday, anticipating the gaps to fill. Generally speaking, these gaps are often considered less significant for making decisions, and traders may choose to focus on other types of gaps that offer stronger trading signals.

Continuation gaps (also known as runaway gaps) reinforce the prevailing trend in the market. They occur within an ongoing trend, and are a sign of solid market momentum accompanied by high volume, which supports the price spike. Continuation gaps usually suggest that the existing trend is likely to persist, and multiple gaps may appear sequentially. Traders can use the initial gap as a signal to enter, or to add to positions in line with the existing trend.

price breaks through a significant level of support or resistance

, resulting in a substantial price movement. These gaps often accompany important news, earnings releases or other market-moving events. Breakaway gaps are considered more significant than common gaps, as they indicate a potential shift in the market's sentiment and can lead to the formation of new trends.

Higher trading volumes often accompany breakaway gaps, as increased market participation validates the significance of the gap. Traders look for breakaway gaps as an opportunity to enter positions in the direction of the gap, anticipating a continuation of the new trend.

Exhaustion gaps signal a possible depletion of the current trend, indicating a potential 

trend reversal or a temporary pause in the prevailing trend’s direction

. These gaps typically occur near the end of a significant price move, and suggest that market sentiment is changing.

In an uptrend, an exhaustion gap appears as an upward gap, indicating a final surge in buying pressure. This gap often reflects a last-minute buying frenzy before the trend reverses or enters a consolidation phase. Conversely, in a downtrend, an exhaustion gap appears as a downward gap, signifying a final bout of selling pressure before the trend potentially reverses or pauses.

Each type of gap provides unique insights into market behavior and potential trading opportunities. By recognizing the characteristics of common gaps, continuation gaps, breakaway gaps and exhaustion gaps, traders can make more informed decisions and enhance their trading performance.

: Before initiating a trade, it's important to identify the gap you're dealing with. Consider whether it's a common, continuation, breakaway or exhaustion gap, as each type may require different trading strategies.

: Analyze the broader market context and sentiment to determine whether the gap aligns with the prevailing trend or represents a potential reversal or continuation. For example, a runaway (or continuation) gap will generally move in the same direction as the prevailing trend. On the other hand, an exhaustion gap suggests prices may soon move in the opposite direction.

: Utilize technical indicators to confirm the trading signals provided by the gap. 

 and other price patterns can help validate the gap's significance and corroborate potential trading opportunities.

: Establish clear entry and exit points for your trades based on your analysis. Consider using stop-loss orders to protect your position in case the trade goes against you. Then, set profit targets based on the potential price movement following the gap.

When considering a gap trading strategy, here are the two most common gap patterns to  consider adding to your trading repertoire.

: This strategy involves trading in the direction of the gap and anticipating that the price trend will continue, leaving the gap exposed. Continuation and breakout gaps are the best types to implement for this strategy.

 positions, expecting the price to rise further. If a stock 

, anticipating further downward movement. In neither scenario are traders expecting the price gap to be filled anytime soon.

Then, several weeks later, price gaps lower after a long red candle (point 2). A trader noticing this trend to the downside could sell short on the next open, and place a stop loss just above the pre-gap price.

This gap-fill strategy involves trading against the direction of a gap, expecting a reversion of price to fill or backfill the full gap. This strategy gauges the momentum of the current trend and uses gaps as price targets.

Then, one last exhaustion gap lower suckers the shorts in and opens the door for a price rally.

A trader noticing this setup could target the pre-gap price of the continuation gap. Prices often revert to fill old gaps. Several days later, in fact, the price does rally and fills that gap.

 to remember: When the price begins to fill the first portion of the gap, it usually completes the job and fills the entire gap. Therefore, you can target pre-gap price levels when trading this strategy.

Prices gap due to an imbalance of buyers and sellers. Gaps provide a significant clue to traders regarding both price action and price patterns on trading charts. Gap trading is a popular strategy experienced traders use as they anticipate a gap fill or a gap-and-go.

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Mastering Gap Trading: Strategies for Profiting From Market Gaps

Some of the 10 best crypto day trading strategies include: high-frequency trading, long straddle, and scalping. Read on to find out more about them. 

Day trading cryptocurrencies can be an exhilarating activity for traders. However, it’s also one of the more difficult time frames to trade. Cryptocurrencies tend to exhibit higher intraday volatility than in many other financial markets, thereby requiring a greater level of skill to trade short time frames successfully. 

As we navigate this dynamic landscape, we want to equip ourselves with the most effective strategies to maximize our gains and minimize risk. In this article, we’ll delve into the realm of crypto day trading and present a list of the top 10 strategies to consider. Whether you’re a seasoned trader or just beginning your trading journey, get ready to explore the fast-paced arena of crypto day trading.

Crypto day trading is defined by a trader’s expectation of entering and exiting a trade within the same day (also referred to as intraday, or one-day time horizon). Therefore, being able to interact with intraday price dynamics is critical. How a trader engages the market during the time horizon will depend on the strategy deployed.

Nevertheless, in general, traders will be looking for smaller price movements based on intraday market behavior. By trading intraday, traders can use tighter risk parameters than for longer time frames and adjust their allocation size accordingly, since the average size of a trade is larger than that used for a longer time horizon, given the smaller expected movement. In addition, there are no overnight holds in day trading, so that risk is eliminated.

 (HFT) is driven by automated mathematical algorithms that execute orders in fractions of a second based on pre-set criteria. These algorithms manage a high volume of orders, aiming to capitalize on minute price movements over extremely short time frames (often mere seconds or fractions of a second). The lightning-fast speed of HFT necessitates the use of trading bots. By handling substantial order sizes, HF traders contribute to the liquidity of the cryptocurrency market. The primary objective of a high-frequency trader is to optimize speed and minimize transaction costs, prioritizing efficient execution and cost-effective transactions.

 is a day trading options strategy that looks to profit from market volatility. It involves buying both a put and call contract for the same cryptocurrency, with the same strike price and expiration date. This strategy may also be referred to as a straddle or option straddle. In a long straddle, it’s expected that while one side of the trade may result in losses, the profit gained from the winning position will outweigh those losses, leading to an overall net gain.

Scalpers capitalize on short and rapid price movements, often utilizing automated bots to increase trade frequency in order to profit from tiny price fluctuations through resale. Compared to longer time frames, 

 involves higher frequency, larger trading volumes and bigger positions, as the targeted price changes are relatively smaller. Consequently, it’s essential to consider trading costs, as they can consume a significant portion of the trader’s revenue.

Scalping can be risky, as reliable patterns become more difficult to identify and exploit within a shorter time frame. Therefore, scalpers need to adhere to a strict exit strategy, ensuring that a single substantial loss does not negate the multiple small gains achieved.

Scalping can be approached in two ways. The first approach involves executing many trades at high volume to capitalize on concise and fast price movements. The second approach adopts a slower trading process, relative to high-frequency scalping, and focuses on slightly larger but still relatively small price movements, a lower number of trades, smaller position sizing and slightly longer holding periods.

Cryptocurrency markets are constantly oscillating between trending and consolidation environments. 

 involves leveraging consolidation periods to profit from a predefined price range. The range is defined by key levels of support and resistance, often represented by classic consolidation patterns such as 

 traders aim to capitalize on short-term price discrepancies between different cryptocurrency exchanges. They look to buy crypto on one exchange and swiftly sell it on another at a higher price. Alternatively, for shorts, they‘ll sell on one exchange and buy on another to close the position. Speed is crucial in crypto arbitrage trading, so automated tools are frequently used to swiftly seize arbitrage opportunities across exchanges. To fully optimize returns, keeping trading costs low is vital given the large volume of transactions.

 primarily uses chart patterns for trading strategies and risk management protocols. It operates on three principles: 

1) The market discounts everything. 2) Prices move in trends and countertrends. 3) History repeats itself.

The idea is that price action is repetitive, with certain recurring patterns that can then be used as a tool to navigate markets.

There are many ways to deploy a strategy based on technical analysis, including the use of technical indicators or studies, which are usually based on price and/or volume. The key lies in identifying specific price patterns that can give a trader an edge. There are two fundamental approaches to using technical analysis: trend following and countertrend trading.

Trend-following traders look to capture a prevailing trend as much as possible. The type of trend they focus on depends on their primary time horizon, which can be short, intermediate or long-term. Trends can be traded on any time frame chart, and traders frequently rely on trend indicators such as 

Price movements occur in trends, consisting of price advances in one direction (up or down) followed by retracements or countertrend moves. Countertrend traders seek to capitalize on these corrections within larger trends. This is considered a somewhat riskier strategy than trend trading, and requires greater skill. By trading against the larger trend, countertrend traders take on more risk, as they’re going against the dominant force (up or down) at the time.

 is crucial. It drives the rise and fall of markets based on changes in the confidence of market participants. Market sentiment represents the collective attitude of investors and traders toward a specific financial asset, or the overall market. By analyzing market sentiment, traders can identify changes in attitudes and confidence that can influence changes in supply and demand, and, consequently, prices. Some elements of market sentiment analysis include the Fear & Greed Index, Bitcoin dominance ratio, news, social media and Google Trends.

 acts like an emotional meter, measuring market sentiment on a scale from fear to greed, and everything in between. Traders closely monitor it for extreme readings in order to predict price movements. Excessive fear can lead to buying opportunities, as the sentiment may be on the verge of reversing. On the other hand, extreme greed indicates an overly bullish sentiment that may be due for a correction. 

The index uses a variety of inputs, including coin dominance, momentum and volume, social media, Google Trends and measuring volatility.

 (market value) of Bitcoin to the total market cap of the entire cryptocurrency market. This ratio wields an influence over the overall market, as many smaller capitalization coins follow Bitcoin’s trend or have some connection to it. A declining ratio suggests that altcoins are doing better relative to Bitcoin.

Monitoring news that might impact cryptocurrencies is another way to assess sentiment by looking at the ideas and points of view expressed. This can give traders a feel for attitudes in the market, and can be used as a complement to other analyses. Keeping track of news feeds in an 

) can expedite the review process. There are also subscription-based, event-driven news services that use sophisticated computer algorithms to identify news activity that might move a crypto token.

Observing social channels can provide insight into market sentiment. One way to do this is to use monitoring software, such as TweetDeck for Twitter. You can categorize and organize feeds to keep track of activity by sources you’ve deemed to be credible. This can help reduce the “noise” so that you mostly see posts and comments from your selected sources.

Social media sentiment indicators aggregate data from various social media sites, and then they analyze it to identify trends or increased activity related to a specific cryptocurrency, industry, region(s) or countries. 

Google Trends can be used to see how crypto-related topics or tokens are trending in Google Search. Analyzing whether certain searches — such as “bullish on Bitcoin” — are trending higher or lower may provide useful insight into the expectations and outlook for Bitcoin.

While long-term position trading may not be the main focus for all active day traders, it can still play a role in their approach. To execute this strategy, the larger time frame is analyzed by including monthly and quarterly price charts. If a trade setup triggers on a monthly chart, it’s expected to be held for a longer period of time than with many other strategies. The longer time horizon is necessary in order to exploit the potential price movement and fully maximize gains.

Breakout traders look to enter a trade when the price breaks out from a particular level, aiming to capitalize on the rapid acceleration in the direction of that movement. Breakouts can occur in either an upward or downward direction (breakdowns). The setups may include breakouts of trend reversal, or continuation patterns; price breaking out through a moving average; or prices establishing a new high or low trend.

A pullback strategy incorporates trend and pattern identification in its analysis. The objective is to enter a trend just as it’s about to resume its primary direction. This strategy can be used in both uptrends and downtrends. It relies on proficient analysis of key support levels and a technique to determine when the pullback is complete, signaling a potential reversal setup.

Three Tips to Successful Crypto Day Trading

This depends on the individual trader, though in general, trading over a shorter time frame is considered more complex than over a longer time frame. Therefore, day trading is more involved than holding assets for more than a day.

There is no universally superior day-trading strategy, as each trader is unique and needs to select a strategy that aligns with their understanding and comfort level. Some of the strategies more widely used by independent traders include technical analysis, scalping and range trading.

This depends on various factors, such as a trader’s experience level, skill and account size. Generally, it’s advisable to start trading in a lower-risk environment by choosing larger-cap coins with relatively high levels of volume. A good starting point to consider is the list of top 30 cryptocurrencies (based on market cap). You can then further narrow it down to your preferred choices from this list. If you seek more intraday volatility, then expand the list to include the next 30 cryptos by market cap.

10 best day crypto trading strategies in 2023.

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10 Best Crypto Day Trading Strategies in 2023

Having a well-planned trading plan helps to mitigate confusion and maximize profits. Learn how to trade crypto responsibly.

Having a solid, well-crafted trading plan is essential for market trading. It can spell the difference between market success, on the one hand, or — on the other — giving in to FOMO, forgetting to factor in vital information, or regretting a decision not to trade later. An effective trading plan considers your trading style, risk tolerance, as well as your understanding of 

, clear entry and exit rules and trading spread. It defines you as a trader, providing a road map for the way you trade. 

Whether you’re day trading, swing trading, shorting the market, or trading derivatives, formulating a trading plan is essential to identifying effective trades and capitalizing on them without anything getting in the way. 

We’ll take you through a step-by-step look at how to formulate a cryptocurrency trading plan while covering all the advantages of this essential strategic framework for informed traders. 

A trading plan is a blueprint for trading that organizes your trading techniques and strategies into a logical framework. This framework makes it easy to assess the viability of trades and stay focused on your trading strengths. 

Your trading plan is your map of risk, market focus, analytics and strategic approach. Every trader needs a plan to navigate cryptocurrency markets confidently. There are countless trading techniques, patterns, and strategies with successful track records, but only a few may suit each trader’s attitude, expertise and experience optimally. A trading plan hones your focus, keeping you motivated and targeted on the right trades. 

Cryptocurrency trading plans are the type of financial product that requires meticulous research and careful forethought. Once a crypto trading plan is created, it shouldn’t change whenever there’s a bump in the road. The only time that a trading plan changes is if the trader uncovers a better way of trading — and that takes extensive testing and logging of successful repeat trades.

A trading plan empowers the focused trader by providing several benefits. From risk reduction to easing away fear and guarding yourself against greed, a good crypto trading plan may not guarantee success, but it certainly makes a significant contribution toward it.

Here’s an overview of the main benefits of having a crypto trading plan formulated around your unique approach.

A trading plan aligns your market engagement with your trading strategy. It gives you a controlled environment in which to derive measured results. This allows you to track your trading performance and goals while making adjustments to improve potential outcomes. 

A good plan logs all of your trading positions and lists the specifics of your strategy. These details can include the type of 

 for each trade listed. In this way, it becomes easier to refine your approach and improve your chances of entering and exiting successful trades.

As management theorist and influencer Peter Drucker reportedly said, “If you can’t measure it, you can’t improve it.”

Using a crypto trading plan eliminates a great deal of stress that can accompany unprepared trading. Once you’ve created a trading plan, you’ll be able to follow the steps necessary to analyze price movements objectively. 

Gone is the greed that far too often fuels high-risk trading. This lets you enter into positions confidently, thanks to an organized rule set that’s been formulated without emotions, haste, or irrelevant information getting in the way.

High volatility and fast news flow have a powerful impact on cryptocurrency markets. It’s easy to get wrapped up in market sentiment, losing track of your trading vision. This can lead to impulsive decision-making. A pre-written plan provides the focus to stay within the bounds of a thoughtful strategy.

“Pressure is what you feel only when you don’t know what you’re doing.” - Former Pittsburgh Steelers Coach — Chuck Noll

Every reliable trading strategy requires testing and adjustment before you can use it to forecast success. Testing calls for trading discipline, repeating promising patterns and indicators and entering in similar market conditions over and over. Only through trial and error and carefully assessing your trading journal will you come to know which strategies are golden. 

A well-defined trading strategy involves comprehensive market research. With a continuously trading market, there’s very little time to stop and analyze market movements. Not only are you factoring in the constant flow of information supplied by 

, but you’re also analyzing trading patterns, slippage, and risk. 

The only way to stay organized is to have a specific trading plan devised beforehand. Ensure that your trading plan contains all the factors that you use to assess the viability of trades. These include market research criteria, news sources, and any other preferred indicators. 

A trading plan prevents overtrading. There’s no way to avoid losing trades at some point. However, managing your risk per trade is a simple way to keep portfolio losses from growing exponentially. In the midst of a high-conviction trade, this discipline may prove to be difficult. You can’t expect to get the timing right every time.

Whether you’re following a fixed risk-to-reward ratio, sticking to reasonable stop losses, or limiting trades to a percentage of your trading capital, stipulating your policy for managing risk ensures that you trade responsibly. 

Following a predetermined trading plan prevents you from trading during inopportune times. Trading impulsively when the market presents slim opportunities will quickly eat away at profits from your successful days. 

The scope of trading set out in your trading plan frees up time for analyzing patterns and trading opportunities. Your goal is to trade when you know you have a statistical advantage backed by insight instead of wasting time and money.

Here’s a step-by-step breakdown of how to create a cryptocurrency trading plan that sets you up for the best chances of success. 

Step 1: Refine Your Goals, Approach, and Time Available for Trading

Set out trading goals. This way, you’re motivated by (and learning from) all the small wins along the way to becoming a seasoned trader. Shape attainable goals bound to fixed, realistic time periods. With a 24-hour market, you may have to choose trading windows that make the most sense for you to track unless you’re using trading bots.

Take a look at your schedule and assign yourself daily trading periods based on how much time you have available to focus on. Certain trading styles will require more trading time than others, so weigh your options and availability carefully.

From day one, start logging your entry and exit positions in a trading journal. Use a spreadsheet stored online (in the cloud) so that you can access your trading activity from all your devices — and have a secure backup so that your data is never lost. 

If necessary, take screenshots of notable trades to learn from later. Keep them in your trading journal as well. Logging crypto trading activity is the best way to test various trading strategies reliably. It also allows you to measure the effect of adjustments to your approach. 

Step 3: Determine the Analytics That Work Best for You

Find the type of analytics that grant you the greatest market insight and stick to them. Use comparative analytics like on-chain metrics, transaction count, active addresses, and even predictable socioeconomic factors from reliable news sources.

Note on paper or computer the methodology that works for you, and never stop refining your strengths. Many experienced crypto traders keep a spreadsheet of fundamental and technical metrics as part of their trading plan. This technique makes assessing trends and growth easy at a glance.

Unless you’ve tried out various trading styles, it can be difficult to determine which one best suits your approach and personality. If you’ve already tried your hand at trading, then you’ll know whether you prefer scalping, day trading, range trading, swing trading, trading positions, or inter-exchange arbitrage. 

Scalpers hold trades for seconds to minutes at a time. Day traders trade within the span of a day, rarely holding positions overnight. Swing traders hold trading positions over a period of days to weeks following trends, while position traders hold their trades for weeks, months, or years.

Notes on trading styles should also include fundamental trading rules you’ve amassed while trading. 

Keep a record of general guidelines for trading.

 For example: Not chasing anything in an uptrend due to the chance of retracement catching you. Or: Waiting for downtrends to break entirely before pouring your money into a coin. You might even have a goal of determining how much you want to stabilize your portfolio by using a percentage of coins like Bitcoin and Ethereum.

Every trading style and strategy will require a different holding period. As mentioned above, scalpers will hold trades for minutes, whereas swing traders may hold trades for days or weeks. You may find that longer trading periods make you somewhat anxious. If so, you’ll prefer to stick with shorter ones. It all depends on how you’re trading. 

Your trading style largely defines your holding period. Therefore, specify the duration of your trading plan so that you’re always on top of your strategy and risk. 

Focus on identifiable patterns that are based on your knowledge and experience. With a bit of time and practice, you can learn how to spot and use indicators like 

, to name a few. Use the trading patterns and indicators that you understand and trust the most as your starting point, but never stop learning and adding to your arsenal as a new methodology presents itself.

List each of your trading strategies step-by-step, adding as much detail as possible. Set out a definitive list of each step it takes to open and close a successful trade. For example, a step-by-step trading strategy would note the current price of the cryptocurrency, the trading trigger for your chosen indicators, and your desired entry and exit points. This can apply even for minute-by-minute evaluation.

Step 7: Decide on a Risk Management Strategy

Choose the percentage of your portfolio that you’re willing to risk per trade. Always decide on an investment amount that doesn’t exceed what you’re willing to risk. Many traders opt instead for a risk-to-reward ratio to decide the value of trades. In this case, a risk-to-reward ratio of 1:5 would mean that risking $10 worth of Ethereum would potentially produce $50 of profit in a trade. Determine the trades that suit your 

, and note them in your cryptocurrency trading plan. 

Develop your own rules to assign to your trading plan. Examples could include: Avoid more than three consecutive losses on the same trade. Cut your trading budget if you run two or three days of trading losses. Always set a stop loss that limits loss on your trades by the value of your portfolio you’re willing to risk. 

Risk tolerance largely determines trading limits. Nevertheless, you can set percentages such as 5–10% of your trade amount to cut losses or 1% of your overall portfolio. Maximum loss percentages give you rules to follow when you might not otherwise have the will to lock in a loss. Risk-taking varies by traders and sometimes by market conditions or circumstances. If your portfolio has swelled 10x, you might naturally feel a bit more emboldened to increase trading limits.

Every crypto trader’s trading plan is uniquely personalized to their approach and strategies. Use our step-by-step guide to walk yourself through creating your own crypto trading plan. 

To help formulate a trading plan like the example below, try to ask yourself these questions:

Here’s an example of what a real trading plan could look like after following our guidance. 

— Gain enough experience with swing trading and reading technical indicators to grow my portfolio by 15% during a maximum time frame of six months and reassess risk. 

 — Gain enough experience in momentum trading to grow my portfolio by 40% and begin trading cryptocurrency futures.

 — Once successfully trading futures, increase the risk to 3% of portfolio capital per trade, and reach a further 20% growth from the mid-term goal. 

Traders are often attracted to cryptocurrency trading because of the large swings in the market and the potential for a quick profit, even short-term trading. Getting involved in cryptocurrency trading is also relatively easy, with powerful exchanges available to trade.

Take advantage of a cryptocurrency trading plan to assess the viability of potential trades. As you learn more patterns and indicators and find ways to improve your strategies, track them in your trading journal to see if they will work in your plan. A plan helps you focus and avoid getting distracted by all the shiny trading objects in the cryptocurrency space.

The key to using a crypto trading plan successfully is to stick to the trading framework you’ve created. You can adjust or expand it when your plan no longer serves you. Your plan can be somewhat fluid, as long as you are intentional and logical about the changes. 

Former U.S. President Dwight Eisenhower said, “Plans are nothing; planning is everything.” While a plan is essential, planning your strategy also ensures that you take a thoughtful approach to trading. When large sums of money are on the line, you don’t want to leave anything to impulse and chance.

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