Those familiar with foreign exchange (forex) trading will know the term “scalping.” Also called “scalp trading,” the practice has been adopted by cryptocurrency traders. Proponents of scalp trading say it can turn a profit quickly, but how exactly does it work when trading digital currencies like Bitcoin?
We’ll define scalping in more detail for those who aren’t familiar with the trading method, then go into some ways crypto traders can use it to their advantage when working with cryptocurrencies.
Scalp trading is a lower-risk, short-term form of trading that makes smaller profits with less risk. Scalp traders make this happen by initiating a group of small trades very quickly. Over the course of a trading day, the profits from these trades can add up to pretty substantial numbers.
Speed and focus are needed to pull this off consistently, however, this is why experienced traders utilize cryptocurrency trading software designed to identify patterns and execute specific trades when using scalp trading bots.
Scalp traders will monitor the price of an asset, say Bitcoin or Ethereum, and take advantage of price fluctuation to make a small profit from the trade. When the price goes up, they take advantage of the higher trading volume for that asset to turn over a bunch of trades at once, never actually holding the digital asset. Then, they get out when the asset peaks and stop trading.
One very important thing to keep in mind for executing this strategy are the trading and exchange fees. Since they’ll be making many trades back-to-back and most exchanges charge at least a small fee per trade, it is essential that a trader has the risk capital to cover the trading fees they’ll incur using a scalping strategy.
Exchanges that promote liquidity typically offer incentives to reduce trading fees for those traders. Those incentives are often associated with an exchange specific token that can be used to further reduce fees, like the trading fee, often times more than 25%.
Relative to other cryptocurrencies, Bitcoin tends to be less volatile. That means less profit per trade, but also more reliability for your crypto scalping trading strategy, as predicted with technical analysis that Bitcoin will hold its value over the course of the trading session. This makes Bitcoin scalping a pretty popular form of scalp trading in the crypto market.
Altcoins, on the other hand, can have enormous differences in price, especially if they’re smaller coins not backed by a reputable company. Something could go wrong, or the coin could be delisted, along with any profit you’ll have made on those trades. If the coin isn’t worth much, the price you pay in trading fees could be more than you make from trading.
Whichever cryptocurrency you decide to try scalp trading with, patience and focus are key. Don’t get frustrated and give up right away if you don’t turn a profit in the first few minutes. It takes time to familiarize yourself with trade automation software and even manually executing scalp trading.
If you know what to look out for, with time and practice you can see whether or not the market favors a scalp trading strategy.
Three market factors that experienced traders watch are:
Relative Strength Index (RSI): This is a momentum indicator calculated by looking at recent price changes. The RSI evaluates whether an asset like Litecoin is overbought or oversold, and is displayed as a line graph. It can have a value between 0 and 100. An RSI of 70 and above usually indicates an asset is being overbought or overvalued, thus it’s a good time to sell. An RSI of 30 or below indicates the opposite: it’s undervalued, primed for a price increase, and therefore its a good time to buy.
Support and Resistance Levels: An asset’s support and resistance levels will change as it increases or decreases in price. That change can cause an asset to experience a concentration in demand and trend downward (support), or an increase in demand as price drops (resistance).
The Moving Average: Traders use this to get an idea of where the price of an asset is headed, using past data to extrapolate what it will sell for in the future.
Some traders use charts to track these indicators manually, but using trade automation software can help you analyze and act on the same data much more quickly.
Scalp trading allows for the opportunity for lots of small profits taken from batches of small trades that build up quickly. However, those profits can be wiped out if trading fees exceed the value generated from those trades. One large loss can also negate the profits from a scalp trading session. As such, it’s very important that the trader has a stop-loss strategy in place to minimize or mitigate their profit losses if the market conditions are changing in a way that negatively impacts the active trading strategy.
Trading with bots lets you make trades based on signals from exchange and market data. The trader’s emotions are taken out of the picture, as they aren’t watching the value of their assets rise and fall, or seeing huge changes in the market while trying to evaluate their trade.
However, you can suffer losses if you set a trade bot to trade and market conditions change, rendering your initial strategy useless. If you’re not around to course-correct, you could wind up with more losses than you otherwise would have. Oftentimes, the first strategy a trader comes up with ends up being wrong. If you’re using trading bots, make sure you check-in on them every so often to make sure your strategy is still performing soundly.
As with anything else, becoming a skillful investor takes time and practice, especially in a market as relatively new as cryptocurrency trading. However, there are a few tips traders can follow to help themselves do better right out of the gate when scalp trading:
Avoid altcoins with low volume; you may not be able to trade enough of them to turn a profit
Know your plan beforehand and stick to it, leaving room for adaptation
Have a good exit strategy
Don’t put all your assets into a single trade, a good rule of thumb is no more than 2%
Remember to account for fees and make sure you can cover them. Use HaasBot safeties and insurances to automate
Follow the proper technical indicators (discussed above)
Also, if you decide to use crypto trading bots, remember to check-in on them regularly as they execute trades to account for changes in the market.
HaasOnline’s crypto trading bots give user’s privacy, don’t charge trade fees, and have no trade volume restrictions. They also allow traders backtest or simulate their trading strategies with historical and real-time exchange data, giving you a better picture of the market and allowing for a more informed decision.
It is an exciting time of growth in the cryptocurrency industry, as day by day Bitcoin, Ethereum, and other cryptocurrencies prove to be more than just a passing fad and major financial institutions like JP Morgan recognize the importance of blockchain technology. However, the most activity in the crypto sphere continues to be on the ground, where early adopters and shrewd investors have made fortunes in the years since Bitcoin first entered the scene. Naturally, some interested in getting into the action have wondered: can you day trade Bitcoin and other cryptocurrencies? Well, the answer is yes, and it is easier than ever before, despite requiring some basic knowledge and continual research.
It’s no secret that cryptocurrencies have experienced volatile price swings over the past several years, with Bitcoin alone surging from $2,900 on September 12, 2017 to a high of $19,783 on December 17, 2017 before falling gradually to somewhere in the single-digit thousands for much of the time since. This price volatility makes day trading cryptocurrencies a potentially lucrative endeavor. However, with upside also comes risk, so it’s important to know at least the basics about the platforms and day trading strategies that are widely practiced before jumping in.
As the name suggests, day trading involves buying and selling financial assets throughout the day in pursuit of profit opportunities. This may involve trading the same security multiple times within a single day and requires a different array of strategies than more traditional long-term buy-and-hold investing.
Day trading gained prominence and largely became possible for most people with the advent of internet brokers, as otherwise only those working for large financial institutions were able to execute trades. As highly liquid digital assets, cryptocurrencies are particularly well suited for day trading.
It’s quite simple to start day trading cryptocurrency, too, as long as you know how to get started. To that end, we hope this guide will equip even complete beginners with the knowledge of platforms and strategies that are commonly used to conduct day trading in the cryptocurrency space.
Before providing an overview of some of the major types of day traders, it is helpful to first discuss the difference between technical analysis and fundamental analysis.
Technical analysis refers to trading assets based upon price forecasts generated from analyzing historical market data. There are a wide array of strategies pursued under the banner of technical analysis based upon different signals that are put in place to direct a trader to buy or sell a given asset, a number of which will be detailed throughout this guide.
Fundamental analysis, meanwhile, involves close review of financial statements in order to construct price ratios and determine the appropriate valuation of a business. Traders employing fundamental analysis will usually look at some combination of dividends paid, cash flow, earnings, and current share price.
Day traders naturally favor technical analysis, as it is far more amenable to forming narratives used to predict and act upon intraday price swings. As a result, much of the discussion in this guide will largely fall under the general banner of technical analysis. However, it is common for day traders to employ both technical and fundamental analysis as deemed appropriate. For example, investing in a particular cryptocurrency based on the team behind it would fall under fundamental analysis. On the other hand, selecting a cryptocurrency to day trade on the basis of past price movements is an example of technical analysis.
With that brief overview of technical and fundamental analysis out of the way, let’s now turn to some of the most common types of day traders in the cryptocurrency market today.
While it is possible to trade shares of publicly listed crypto companies, fundamental analysis does not lend itself towards day trading individual cryptocurrencies. Instead, day trading based on technical indicators is ubiquitous in the cryptocurrency market. Technical traders use the aforementioned technical analysis to quickly enter and exit positions in select cryptocurrencies.
The range of technical indicators to follow is virtually limitless, bound only by the data available and a trader’s imagination. Nearly all day traders engage in technical analysis of some kind, as the motivation to buy or sell a given asset requires some kind of signal to help decide whether to buy or sell.
Contrary to their negative reputation in the popular press, day traders who primarily engage in what can be considered speculation fulfill an important function in the market. Alert to news that may signal whether a particular cryptocurrency will be more or less desired in the market, speculators try to get ahead of the crowd and capitalize on expected price movements. In the case of a correct prediction, the speculator is rewarded with profits for moving the price of the coin closer to its correct market value. On the other hand, an incorrect forecast will result in losses, providing a valuable signal to other traders.
Speculators are distinguished from technical traders by the fact that, at least in their capacity as pure speculators, they are only focused on how unanticipated news will immediately affect a cryptocurrency’s price. Only the next price move from the present baseline matters to a pure speculator, not historical data or complicated charting patterns. Of course, many technical traders can also engage in speculation, and vice versa, but speculation is usually regarded as a different game than technical or fundamental analysis.
With well over one thousand cryptocurrencies in existence, it’s important to narrow down which cryptocurrencies you want to trade. CoinMarketCap is a good resource to find up-to-date information about the cryptocurrencies with the highest price, market capitalization, 24 hour volume, and daily price change.
Next, budding crypto day traders will need to identify which exchange is best suited to transaction their cryptocurrencies of choice. Cryptocurrency exchanges vary in terms of cryptocurrency offerings and fee structures and so it pays to take the time to research carefully early in this process. It should also be noted that it is not necessary to stay limited to a single exchange, as one can use an automated trading bot like setting up our crypto arbitrage bot to trade cryptocurrency across multiple exchanges.
This step is where the most successful day traders separate themselves from the pack. There are too many strategies for day trading crypto to make an exhaustive list, but later in this article we provide an overview of some of the best strategies for beginners to try when just starting out. Nevertheless, finding a good strategy that brings in consistent profits requires a lot of dedicated research time. But hey, if it was too easy, everyone would be doing it, right?
Since day trading involves buying and selling the same asset in short succession, cryptocurrency arbitrage is naturally appealing to cryptocurrency day traders. Arbitrage generally involves identifying price discrepancies in the market and buying and selling in quick succession to take advantage of these differences. However, arbitrage trading is limited to available opportunities and often yields very small profits per trade, making it just one of many potential day trading strategies to pursue.
Despite the many complicated techniques and strategies possible when day trading, buying low, selling high, and pocketing (or reinvesting) the difference is the name of the game. The best strategies will pay out profits, but no strategy is immune from the possibility of loss. What each individual day trader chooses to do with their gains is up to them, whether it may be reinvesting into more trading opportunities or taking some money out of the market for consumption of tangible items.
With that broad overview of crypto day trading out of the way, let’s now turn to some specific strategies crypto day traders employ.
Scalping refers to the frequent buying and selling of an asset to profit off of minuscule price changes. While any given transaction will generate only a small profit, the sum of all transactions in a day will ideally be significant. The emergence of supercomputers in past decades has made high-frequency trading a common example of scaling in traditional securities markets.
When dealing with cryptocurrency trading, scalpers attempt to profit by buying at a certain price and selling as soon as possible at some higher price, even if just barely so. Since scalping relies on collecting many small profits throughout the day, it is very important to avoid big losses, as a single loss could easily wipe out hours or even days of profits. A safe way to engage in scalping is to use an automated bot like our Scalper Bot, which can be programmed to quickly transact small amounts of crypto and book profits as the opportunities appear.
Also known as switch trading or inversion, pattern trading utilizes technical indicators to produce buy or sell signals. Of course, these signals do not guarantee that buying or selling the cryptocurrency under consideration is a good idea, merely that the conditions specified in the trading strategy have been reached.
As a time-honored part of technical analysis, price patterns come in many different shapes and sizes. At a basic level, “uptrends” indicate that prices have been moving higher over a certain period of time, while “downtrends” indicate the opposite. A “sideways” market occurs when the price of an asset oscillates back and forth between two parallel trend lines. Other patterns appear in a price chart in the shape of “triangles,” “pennants,” “flags,” “wedges,” and so on. There have been far too many different technical indicators and price patterns identified and developed over the years to list, so those interested should do some research into different patterns and find one to try. The HaasOnline trading platform features native integration with a number of technical indicators that can be used for cryptocurrency day trading.
Often regarded as one of the most important pieces of advice to any day trader, using stop loss orders make sure that a trade is exited once the price of an asset reaches a certain level. This can prevent catastrophic losses in the case of huge price declines. For example, if you buy $5,000 in BTC, it is possible to set a stop loss at $4,000, meaning that the BTC will be sold if its value falls below $4,000.
A limit sell order can be combined with a stop loss, but is intended to activate once an asset reaches a certain price higher than the purchase price. Then, the limit sell order kicks in, selling the asset and booking the profits. In the reverse of the same example as before, imagine once again purchasing $4,000 worth of BTC but placing a limit sell order at $5,000. If the value of the purchased BTC reaches $5,000, the limi sell order will kick into gear and sell the BTC for $1,000 in profits.
Stop loss and limit sell orders are often available on major exchanges, such as Coinbase and Binance. Furthermore, the HaasOnline trading platform features proprietary safeties that activate whenever predefined market movements occur, among which stop loss and limit sell orders can easily be constructed.
After deciding which cryptocurrencies to transact and which trading strategies to follow, all that’s left to do is to hit the market and put those strategies to work. Manually watching market signals and executing trade orders is cumbersome, however, and will likely prove too unwieldy even for relatively simple day trading strategies. That’s where automated trading bots come in.
Algorithmic cryptocurrency trading uses computers to execute trades according to a program defined in advance. In that way, these “trading bots” can run with trading strategies without needing continual human intervention. The HaasOnline trading platform features a number of such trading bots, all of which allow cryptocurrency day traders to stack technical indicators, safeties, and insurances to create an individualized automated trading strategy. While algorithmic trading with automated trading bots is useful for anyone interested in buying and selling cryptocurrencies, they are especially useful for day traders.
Let’s look at a few examples. First, the Trend Lines Bot allows traders to set buy and sell lines which the bot will use to execute trades whenever those lines have been breached. Beginner day traders may especially benefit from using the Standard Trade Bot, which provides an intuitive interface through which to compile a strategy using various indicators and safeties. Finally, the Market Making Bot can create two limit orders for a given cryptocurrency at certain percentages away from the current price.
Algorithmic trading bots are a powerful tool in the hands of a cryptocurrency day trader. However, it is important to keep in mind that the bots will simply do what they are programmed to do. It takes careful research and programming to set up a strategy for the bots to follow that avoids major losses and takes advantage of profit opportunities as they come along.
While day trading can seem like an alluring way to earn consistent income, its risks must be acknowledged. Just as one can profit from price movements, one can also suffer losses when prices move in unanticipated ways. While risk can never be eliminated, certain strategies can limit downside potential.
Cryptocurrency day traders operating on margin are especially susceptible to price swings, as trading on margin involves borrowing funds from a broker or exchange to amplify the total amount of a given position. While trading on margin can create the possibility for outsized gains relative to some fixed level of capital, it also increases the chance for loss if the market moves in the other direction.
Knowing how to pay taxes on cryptocurrency can seem daunting to a beginner day trader, as the tax treatment of cryptocurrency is often unclear and varies by jurisdiction.
In the case of the United States, bitcoin and other cryptocurrencies are treated as property, like stocks and real estate. Therefore, cryptocurrencies are subject to capital gains taxation like any other investment vehicle. What you have to pay will depend upon how long you held the taxable asset, as long-term investments of over one year are subject to different capital gains taxation rates than short-term investments.
Long-term capital gains tax rates are usually lower than those applied to short-term transactions, but the exact difference will depend upon each individual’s situation. Thus, day traders usually, though not always, face higher tax rates than long-term buy-and-hold investors.
We highly recommend that cryptocurrency day traders keep detailed records and consult a tax professional when filing taxes. This makes it possible for another trusted set of eyes to check if everything is documented properly and goes far in preventing any major issues with the IRS in the future. Cryptocurrency day traders using HaasOnline’s cryptocurrency trading software will be able to find records of gains and losses on every trade, which can prove invaluable around tax season.
Below are some tips to keep in mind when getting started day trading cryptocurrencies.
Limit losses and practice, practice, practice
There are no sure bets in day trading, but it is possible to limit losses with the right strategies, such as the aforementioned stop loss orders. Once you have a basic strategy running, there is no substitute for thoughtful tinkering and continued practice.
Focus on the fundamentals
It is usually better to narrow in on a small selection of cryptocurrencies, exchanges and strategies at first. Then, with a working strategy in place, branching out incrementally is easier than jumping in head-first from the beginning.
Stay aware of psychology
Ever heard of FOMO? Fear of missing out on a big price rally can cause panic and deviation from a tried-and-true trading strategy. Keeping emotions in check in a turbulent market environment is a hallmark characteristic of a veteran trader.
A cryptocurrency can be particularly suited for day trading for a variety of reasons.
First, liquidity, proxied by market size and volume, is important to a day trader, so naturally the most popular cryptocurrencies like Bitcoin Core (BTC) and Ethereum (ETH) are attractive targets, along with Ripple (XRP), Bitcoin Cash (BCH), and Litecoin (LTC). Next, fees are also important to a day trader who plans to enter and exit a position in a certain cryptocurrency multiple times within a certain day. As mentioned before, fees vary by exchange, necessitating some preliminary research before deciding which exchange to use to day trade cryptocurrency.
Finally, cryptocurrency day traders should be aware of the history of a cryptocurrency and some of the actors pulling the strings of a coin’s development. Each cryptocurrency has its own unique origin story and learning who’s working behind the scenes and what their motivations are may help a day trader determine which coins may experience particular price volatility at a certain time.
What is the best strategy for beginners?
While there is no single best strategy for any kind of day trading, good strategies for beginners will be simple to construct and execute, with minimal on-the-spot decisions required. It takes time to become familiar with trading software and hone one’s trading instincts, so it can be more comforting to put into place an automated strategy with minimal downside potential.
Are there any differences between day trading Bitcoin, Ethereum, and altcoins?
The major differences between day trading Bitcoin versus Ethereum or other altcoins come in the form of different market structures. While major cryptocurrencies like Bitcoin and Ethereum sport substantial daily trading volume, small altcoins may seem appealing due to the possibility of enormous price volatility, but actually be difficult to sell in the case of a thin market. Day trading altcoins can certainly be profitable, but the relative lack of liquidity and the possibility of “pump and dump” schemes adds extra risk within an already volatile market.
Trading strategies tend to work in certain market environments at certain times. With that said, using an automated trading bot to scour cryptocurrency exchanges for arbitrage opportunities can be a low-risk high-reward strategy in specific scenarios. Also, an automated scalping strategy put into place with the HaasOnline Scalping Bot can be an easy entry into the world of cryptocurrency day trading. Otherwise, there are a variety of pattern trading strategies based upon technical indicators that may be simple for beginner day traders to put in place with a standard trading bot.
In this guide, we have tried to provide a basic yet detailed overview of what beginners should know before jumping into the world of cryptocurrency day trading.
Those looking for a streamlined way to pursue cryptocurrency day trading may find the HaasOnline cryptocurrency trading platform appealing. There are a number of key features such as automated trading bots, integration with major exchanges, native support of many technical indicators, and proprietary safeties which make day trading easier both for complete beginners and veterans in the space. HaasOnline has three different plans according to how many features you will need, with even the beginner plan providing unlimited trades across all supported exchanges, with no fees on trade activity charged through the platform.
We hope this guide has been useful and hope we can assist you in achieving your goals in day trading cryptocurrency.
If you’re at all familiar with the stock market, then you more than likely have heard of the arbitrage trading strategy. You might even know that it can be a lucrative part of savvy crypto investor’s strategies, or may have even used it yourself in the past.
Financial markets are fast-paced, global, and constantly pushing creative traders to find any advantage they can when it comes to turning a profit on their investments. One way to do that is by applying the concept of arbitrage to the world of cryptocurrency trading.
In this primer, we’ll go over what exactly arbitrage is, why it can be a successful strategy in the cryptocurrency market, and how you can utilize it yourself with a HaasBot.
As we covered in a previous crypto arbitraging post, cryptocurrency arbitraging is the strategic practice of using price discrepancies in the market to one’s advantage by simultaneously buying and selling an asset in two different exchange locations. If a trader buys stock in a widget company going for $45.48 USD on the New York Stock Exchange (NYSE), and sees the same stock being sold on the Japan stock exchange for the equivalent of $46.00 USD, they can sell off those assets and make a profit of .52 per stock.
The same thing can be done with cryptocurrencies.
The cryptocurrency markets are much more volatile and abundant than the fiat markets, meaning there are more possibilities for wide discrepancies in value between cryptocurrency exchanges and thus creating opportunities to generate profitable trades.
A particular crypto coin might have a value of .45 Bitcoin (BTC) on Bittrex and .5 BTC on Binance; whoever bought and sold that coin could make a profit and keep making it until the market equalized or they ran out of their holdings of that particular coin.
The global nature of cryptocurrency trading, the current lack of regulation in the market, and the volatility in the value of certain coins make cryptocurrency trading a perfect opportunity for traders looking for cryptocurrency arbitrage opportunities.
There are five basic steps to determining an arbitrage path opportunity in the market:
Collect order book data on each exchange for certain assets you would like to evaluate for arbitrage.
Examine the buy and ask prices on each exchange for the asset or assets in question to see if you can find an overlap.
Sell that asset or assets on the exchange where the price is higher and buy where the price is lower, as close to simultaneously as possible.
Continue to buy where the asset is low and sell where it’s high until you consume the order book.
Once the entire opportunity has been used up, stop buying and selling that asset.
There are 20 major fiat stock exchanges around the world. As of this writing, there are over 200 cryptocurrency exchanges and HaasOnline supports 25 of the biggest exchanges. Different countries have different regulatory environments and restrictions, which can affect price enormously, leaving them wide open to arbitrage strategies, including inter-exchange arbitrage.
What we just described above is known as simple arbitrage: you buy one asset for lower and sell it for higher on a different exchange. But there’s another, more complicated kind of arbitrage called triangular arbitrage. This type of arbitrage is commonly used in foreign exchange (forex) trading in fiat currency markets, and in some cases can be applied to cryptocurrency.
Triangular arbitrage can happen either on a single exchange or across multiple exchanges when a price discrepancy between three different cryptocurrencies creates an opportunity for arbitrage. Moving through those three assets in a cycle can turn a profit when done correctly.
Say for example that the ETH to BTC exchange rate is favorable, and a trader has BTC to sell. They could trade their BTC for an intermediary cryptocurrency like Litecoin (LTC), then trade the LTC for ETH, then trade the ETH back to BTC for a net profit.
There are four steps to a triangular arbitrage strategy:
Start with a single asset you want to increase in value. This will be the one you return to at the end of the cycle. We’ll use BTC as an example here.
Trade that asset for one connected to both your original asset (BTC) and the next asset in the cycle, say BTC for Litecoin (LTC).
Next, trade that asset for a third asset with connections to the first (BTC) and the one you’re currently trading (LTC). We’ll trade our LTC for ETH in this example.
Convert the third currency (ETH) back to the original asset (BTC) at a favorable exchange rate.
We used LTC here because BTC could be traded for it, and it could be traded in turn for ETH. Once we traded the LTC for ETH, the ETH could be traded again for our original asset, BTC. All three trading pairs existed on that exchange, so we could take advantage of those trades. Because of the differences in buy/ask prices between those assets, we end up making a net profit and increasing BTC holdings.
Because the trader ultimately ends up increasing their original asset holdings, this is considered a low-risk strategy. In the forex world, these opportunities don’t last very long, but in the cryptocurrency market, exchange rates can vary widely and aren’t always updated as quickly as they are on fiat exchanges. That means more opportunities that can also last longer. However, it should also be noted that settlement and trade execution times vary widely from exchange to exchange so you need to do due diligence in order to prevent opening yourself up to unforeseen risk.
With hundreds of exchanges operating worldwide, constantly monitoring the cryptocurrency market for arbitrage opportunities can be taxing. You could end up spending most of your time just looking for arbitrage path opportunities and end up missing out on short-lived opportunities instead of turning a profit. That’s why some people choose to use our crypto arbitrage trading bots.
Trading bots are faster at scanning the market for discrepancies and executing your predefined arbitrage strategy on the identified arbitrage path than is humanly possible, and speed is key when it comes to arbitrage. Our automated trading server never needs to rest or take breaks the way we all do, so your trading bots can be scanning the market, executing trades, and generating profitable trades while you sleep or manage other daily chores.
Crypto arbitraging is a useful strategy for experienced traders that could be executed on a single exchange or across multiple exchanges, in a wide-array of market conditions. It’s a relatively low-risk strategy for the experienced trader, but not entirely riskless; if you’re trading manually and don’t sell your assets quickly enough, you could be stuck holding bags with undervalued or toxic assets you didn’t want to long.
A couple ways to improve your crypto arbitraging results are to make sure you have the best connection to your desired exchange(s) on a high-performance machine with a stable broadband connection (or better). Make sure to calculate the average settlement time between exchanges to ensure you know how long it will take to manually settle your balances.
If you do it right, especially with the use of our trade automation through either our legacy custom trade bots or developing a highly advanced arbitraging HaasScript, you do stand to make profitable trades.
It’s been over ten years now since the emergence of the Bitcoin blockchain and the publication of Satoshi Nakamoto’s famous Bitcoin whitepaper. In that time, cryptocurrencies have matured rapidly as an asset class and have even started to gain a foothold in the traditional finance industry.
As a result of its ongoing maturation, the investment market for cryptocurrencies has naturally began to resemble that of more traditional investment vehicles. This includes the rollout of cryptocurrency index funds over the past few years. Now you can manage your crypto index strategy and compete with funds like Coinbase Index Fund (RIP), Bitwise10, or Bloomberg Galaxy Crypto Index.
While there can sometimes be substantial monetary barriers to entry to the tune of tens of thousand of dollars when it comes to investing in a professionally-managed cryptocurrency index fund, it is easier than ever to enjoy the benefits of crypto index funds without having to overcome such hurdles.
In general, index funds are portfolios of securities that seek to track market indexes in terms of both composition and financial performance. Major stock indices include the S&P 500, the Dow Jones Industrial Average, and the Nasdaq Composite. Index funds are regarded as an effective way to minimize trading fees and gain broad exposure to the market, thereby achieving diversification at a low cost.
Index funds have been gradually gaining in use and popularity in the past decades, as they have proven to outperform most active managed funds and are very accessible to the average investor. Following the explosion in popularity over the past couple of years, it was only a matter of time until cryptocurrency index funds emerged as alternatives to traditional index funds.
Investing in cryptocurrency index funds has some notable advantages over picking and choosing specific coins. In particular, cryptocurrency index funds:
Give broad exposure to the crypto market easily and at low cost
Allow focus on particular segments of the market (based on size or category)
Distributes the risk of any particular cryptocurrency failing
Can be set up and managed yourself
The first three benefits are largely the same as traditional index funds, but the fourth is unique to crypto index funds. This is because traditional index funds must be purchased from a brokerage firm or directly from a mutual fund company. In that way, your investment options are constrained by the index funds available at a given time. With crypto index funds, it is quite easy to replicate the portfolio holdings of a professional crypto index fund like the Bloomberg Galaxy Crypto Index from the comforts of your own computer, without needing to purchase the index directly from a broker or open any special accounts.
With HaasOnline Trade Server, it is easy to replicate the crypto index fund of your choice. You only need to identify your desired portfolio mix of cryptocurrencies and set up an automated trading bot according to those parameters. The HaasBot will do the rest.
If you don’t particularly like the portfolios that any of the professional crypto index funds offer on the market today, you can also simply create your own. As a result, it is possible to enjoy the benefits from crypto index funds in a way not feasible in the traditional financial sector, with customization options and individual management to boot.
The HaasOnline software is integrated with over twenty of the largest cryptocurrency exchanges on the market today, from BitMEX and Binance to Coinbase Pro. There are no exchange restrictions or trading fees on the HaasOnline platform, as we believe that what you earn is yours to keep.
Use HaasOnline trading bots to automate strategies across dozens of cryptocurrency exchanges in minutes.
As mentioned earlier, it is simple to set up trading bots that automate the work of maintaining a balanced portfolio. Furthermore, the HaasOnline index bots can be backtested, allowing you to see how your portfolio would have performed historically. For a visual demonstration of how to use the HaasBot to set up and manage your own cryptocurrency index fund, please watch this video.
Here are a few of the different bots one can set up in the HaasOnline Trade Server that are especially helpful in constructing or replicating crypto index funds:
The Crypto Index Bot allows users to design and maintain their own cryptocurrency portfolios within the HaasOnline trading platform. Choose the exchange of your choice, the crypto coins you wish to hold in your portfolio, whatever percentage of each you wish to hold, and buy/sell thresholds in the event of price movements that necessitate portfolio rebalancing. The Crypto Index Bot will automatically rebalance your assets once they have breached the customized value thresholds set for each currency.
The Advanced Index Bot offers more granular configuration of index settings than the standard Crypto Index Bot. Like the Crypto Index Bot, the Advanced Index bot will automatically re-balance your assets when the value of one of the currencies has changed or breached a pre-set threshold. You can manualy set which digital assets to hold or choose preconfigured templates like market cap and market volume with weighted or equal distribution.
In addition to such automated trading bots, HaasOnline offers a range of insurances, safeties, and technical indicators that can be combined for unique and innovative strategies. These insure that you have the tools at your disposal to set up your automated crypto index fund in the way that best suits your goals.
Use the HaasOnline platform to trade on over twenty of the largest crypto exchanges on the market today.
HaasOnline offers three different license tiers in the Beginner, Simple, and Advanced plans. The original Crypto Trading Bot, a number of insurances, safeties, and indicators, and all exchanges are available at the Beginner tier, with the more advanced bots like the Advanced Index Bot and the Inter-Exchange Bot available at the Advanced tier. All plans come with unlimited trades, no fees, and friendly chat & ticket support.
Please let us know if you should have any questions about the HaasBot or how to construct your own cryptocurrency index fund. We look forward to helping you take control of your automated crypto trading strategies and construct the right crypto index fund for you.
A crypto arbitrage bot is a tool a trader will use that will execute a series of predefined instructions based on user-defined settings. These trading bots can vary widely in performance and complexity, but the basic premise is the same — they will try to take advantage of price spread discrepancies between crypto pairs on select exchanges.
Technical trading can be somewhat daunting for newer cryptocurrency investors. And, to be honest, there is a bit of a learning curve. Yet there are also some widely-used indicators that are both highly useful and extremely simple to understand.
And perhaps no indicator better fits this description than the simple moving average.
For newer cryptocurrency traders, learning how to successfully time market entries and exits is a fundamental challenge. It’s also often a difficult one, given the considerable volatility of the market.
Technical trading tools help level the playing field, giving traders access to indicators that can help identify developing market trends and opportunities. One of the most popular and useful of these indicators are “Bollinger Bands.”
To help you learn more about technical trading strategy, let’s take a closer look at the ideas behind Bollinger Bands, and how the bands are used in cryptocurrency trading. This article is merely meant to serve as a helpful resource, not advice.
All traders — whether in equities or cryptocurrencies — want any edge they can get in their quest for profits. Skillful use of arbitrage is a more advanced skill, but is one of the most tried and true techniques for making money in bull, bear and sideways markets.
To help you better understand how it works, let’s take a closer look at the concept of arbitrage, and some possible strategies to pursue when applying it.