How to find the best cryptocurrencies to day trade : Price Analyses

How to find the best cryptocurrencies to day trade

There’s no shortage of opportunities out there to make fast profits from trading cryptocurrencies. Thanks to their volatile and unpredictable natures, money can be made from when the coins go up and down. But whether you’re new to the market or an experienced trader, simply finding the right trading opportunities will consume the bulk of your time.

Fortunately, there’s an easy way of finding the best coins to trade without flipping through hundreds of charts in the process.

In this guide, I’ll show you how to day trade on Binance, the world’s largest cryptocurrency exchange.

1. Choose coins which are in a positive upswing

First of all, we want to choose coins which are in a strong uptrend. So we’ll go to cryptocompare and look for the coins that have the highest positive change.

All of these coins look good from a momentum point of view. All their price graphs are pointing upwards, so we will assume that their price trends will continue in the same direction.

So now that we have the top six coins it’s time to narrow down our selection further.

2. Select coins which have high volume

You may have noticed that the coins vary wildly in their volume amounts from $240,533 to $271,750,072, which is important for two reasons.

First, a high volume helps to reinforce the underlying trend to the upside. When volume and price converge like this it gives credibility to the strong price move. On the other hand, weak volumes often foreshadow a reversal to the downside.

The second reason for why volume is important comes down to volatility. The amount of money moving in and out of the coin will determine how quickly the price changes. Since we’re day trading we want to buy coins which are volatile enough to hit our price targets before the day ends.

So to narrow down the field further, let’s take a closer look at these coins: Kyber Network, Enjin Coin, and Bancor. All of these coins have made strong moves to the upside with the highest volumes.

3. Determine short-term momentum

The next step in our day trading process is to affirm that the momentum will continue to trend upwards.

We can check the momentum of certain coins by looking at the Relative Strength Index (RSI) as well as Moving Average Convergence Divergence (MACD) indicators.

The RSI works as a standalone momentum indicator but is primarily used for highlighting overbought and oversold levels. The MACD, on the other hand, is arguably better suited for identifying possible reversals and divergences between price and momentum.

Let’s start by looking at KNC on the daily chart.

We can see a big green candlestick that was accompanied strong volume. The RSI for KNC is in the overbought territory but MACD is still pointing up.

Overall, this coin is in a good spot for a buy order as it’s just in the overbought territory with strong volume for the last two candles.

Enjin is another story. The coin went parabolic over the last couple of days.

We can also see that the RSI and MACD are almost off the charts. However, not all signs are positive for ENJ. One weakness is that volume is not leading price. Also, in very sharp price moves like this a retracement below 50% or 62% is common as its slope is unsustainable.

If I were to enter this trade for ENJ I’d set a comfortable stop loss 2% to 4% than my entry price. I’d be tempted to take more risk if the price continued to make higher highs.

In the graph below, we can see that Bancor’s momentum is starting to turn south.

Although Bancor’s overall change is positive, we can already see sellers taking over.

The coin had a small retracement move that came with heavier volume than the previous green candle. This validates the bearish nature of the currency as it heads downwards. Also, the RSI has turned down which could signal exhaustion among buyers.

4. Examine support and resistance zones and enter positions

Thanks to our cursory glance at the charts, we can rule Bancor out as possible buy. We are then left to split our positions among Enjin and KNC.

Now is the time to look at the support and resistance levels for Enjin and KNC to set our price targets and to anticipate future reversal zones.

First up is ENJ, which has surpassed its first, second, and third resistances over the last periods of trading. Price also looks set to close higher than R4 on the daily chart.

As resistances are known to form support zones once exceeded, we could wait until price hits R4 and set a stop loss slightly below it. We’d then wait to see if price reaches R5 as the ultimate objective.

We could also set a trail of sell orders leading up to R5 to diversify our risk profile. Taking small gains in 2%, 3% and 4% orders could make you a nice profit while also hedging against the currency’s risk.

KNC also exceeded its first and second resistances with the later now acting as the currency’s support.

The coin’s high flirted with the third resistance at R3 but didn’t quite manage to reach it. For this trade of KNC, I’d set a buy order at the current price and sell slightly below R4 to make a tidy profit.

Summary

By searching for the biggest gainers in 24 hours we were able to scout out some initial coins for trading. Then once we overlaid the RSI and MACD indicators we discovered which coins kept a strong momentum to the upside.

Once we affirmed the coin’s momentum and price action, we then had a look at the volume to ensure a valid trend was in place. Finally, we used some pivot points to highlight the possible support and resistance areas as well as stop-loss zones.

Although I used cryptocurrencies in these examples, the same strategy can be applied to stocks, forex, commodities or any other equity.

I’m interested to hear your feedback on the above strategy, so please your questions or comments below.

Matthew North

I have a passion for trading, behavioral finance, technology, travel, and writing. Contact: matthew@priceanalyses.com.