The moment an altcoin’s price rises is a beautiful sight to witness. We’re talking 20-50% gains in 24 hours or less. Watching major news move coins by this amount and even 100-200% in weeks or less is inspiring for investors.
The price rise itself is a tad scientific…
We’ll try to explain how you can analyze these low risk to reward day trade cryptocurrency opportunities with our 7 fast tips found below. We also suggest that you read into Fibonacci retracement and Elliot Wave theory. These two trading methods will give you a better understanding on how support/resistance levels form so you can accurately identify trading ranges and play them accordingly.
Price Spikes Create Scalping Opportunities
There’s a reason for when & why price spikes happen
The problem is the price doesn’t move up linearly unless big news comes out. The price remains subdued until the market has enough technical strength to test a higher range. Impulsive price increases come from the good news but only truly amazing press will push coins near new highs. When it happens, buy the news if the trade meets this condition: no significant price rise in the past 1-3 weeks.
You now know any buying pressure is only going to send the price up. If the market maker realizes everyone is buying suddenly, the sell orders get pulled. Suddenly the price keeps bubbling upward at an unpredictable rate.
Catch Price Swings, Make Profits!
Hold on and watch how high the pump goes. In most cases, the first resistance will be broken and the price will overshoot from there. That level will become a support on the leg up during the third Elliot Wave. If you buy in before the breakthrough, your position can have an incredible risk-to-reward if you utilize a tight stop.
Use Scalping Profits to Make Further Gains
Assuming you know how to chart resistances, treat these as sell-off points. If the news is amazing, be a little greedy because you know the market will try to find support at a higher price than recent days. However, if the price literally skyrockets in minutes and you know in the next few days it’ll still be higher, sell and buy a pull-back to add 10-20% to your stash.
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Roll your investment – it’s a winning strategy
Rolling your investment is a great tactic. You profit on the way up and buy in lower. If the price keeps dropping you first lose your profit from the initial trade. You can therefore withstand a greater push down and the likelihood of the price falling much lower is low because it already dropped from recent highs. You can wait it out… If the price recovers to the new high, it can easily rocket beyond and give you even greater returns.
Don’t be quick to close when running behind
If you do lose some, it comes from your profits before eating into your initial investment. Look at it as a way of rolling your money when you know the trend will make for an aggressive upward price hike. Sell near the high end of the channel and buy at the low end until a confirmation forms of the price falling down; if you get a confirmed push up, watch out for the juicy gains!
Understand how news impacts trade action
Remember, the market moves irrationally when unexpected news releases. Be on the ball if you want to day trade crypto actively. These moves are easy 5-10% boosts to your bankroll. The key is to sell out early if the pump fails to grow legs. Don’t buy in after the price is up 10% in minutes unless the news is literally insane (such as, if Verge’s PornHub announcement was a surprise).
Factor market cap when predicting spike potential
One last thing to watch is the market cap of the coin that’s rising in price. If it’s a low market cap coin with great news, the volatility and upside potential will be much greater. If it’s a high market cap, even great news can provide minimal price support. In fact, some large coin holders treat these moments as a time to sell off holdings to mid-sized whales which can prevent/suppress a price rise.
Buy the News, Before the Spike
You don’t have to believe that a news story will push a price higher for good. The moment news breaks a coin typically has some immediate buying pressure. It’s a matter of whether the whales support the price with some buying volume and real, large buy orders.
Even when the big players plan to push the price down… The market tends to trend upward at first to see how many people buy the hype. If you are focused and day trading crypto many hours a day, you’ll catch these stories a few times a week. Buy right away if it seems good enough, especially if you trade at Binance or another low-fee crypto exchange. Even if the news won’t hold the pump, if you get in early it’s a quick 3-4% profit.
For these scalps it’s almost always safer to trade coins with a sustained $75 to $150 million market cap or higher. A coin with a lower market cap will be pumped faster with any real volume and will not always have real buy support which creates a worse risk to reward.
Arbitrage News-Based Price Spikes
Let’s say you have funds on Bittrex and monitor the action at Binance all throughout the day. The moment a coin is pumping on Binance you can check its price on Bittrex. Imagine, and this does happen quite often, you discover the coin is 10-20% cheaper at one exchange as the other leads the pump. You get to buy in lower and hold through a dip if it happens or ride a strong wave up as the price pumps more and the exchange prices start to synchronize.
You can play these by feel but keep your stops in so you don’t suffer any real loss. Either scalp for 5-10% gains or ride it to 30% or higher. Going for a scalp of less than 5% doesn’t seem worthwhile due to the high expected reward and relative risk behind the trade.
Track Price Spikes in Live Time
You can use the “Price Radar” tool at Coinzaa to track recent price moves. Look out for any double-digit price changes in the past hour. Especially when you catch it in the first 10-20 minutes, these specific arbitrage moments are very profitable.
Here’s a look at the tool we’re talking about …
Coinzaa also provides an Arbitrage tool, which tracks prices between multiple exchanges to spot large spreads to trade. This tool isn’t very functionally efficient; we recommend you look for hot coins and then check CoinMarketCap.com (select the ‘Markets’ section) to see the price difference between exchanges.
Only factor the high volume crypto trading platforms like Binance and Bitfinex when deciding the “current price”. But, if you are on a smaller exchange, buy for cheaper if you can when the price blasts off on the main exchanges.
Lurk In Telegram Channels & Other Social Areas
The Telegram app is where many speculators, altcoin project team members and market makers hang out. Plenty pump-and-dump folks are also present in certain altcoin Telegram groups. You will find a chat group for most altcoins.
Why should you care about altcoin Telegram groups?
There’s a bunch of this, don’t fall for these calls…
Join a Telegram channel for a specific altcoin when you research the trade opportunity…
Look for any signs of momentum building behind the community or special announcements from team members. Remove the channel if there’s nothing good, but keep an eye out for new messages in your Telegram app if there’s a potential news release that could cause the price to break-out.
The secret value for many day traders is that team members sometimes give spoilers to chatters. Announcements are often made ahead of time in a group’s Telegram chat. When an announcement goes live, moderators are also usually quick at pinning the announcement so it’s easy to spot. For instance, some news was announced on Telegram first when Verge was going through the whole hype-up to their PornHub partnership announcement.
You should be tracking wherever a coin is socially active, whether it’s Reddit, Slack, Twitter, Discord, Telegram, etc. Reddit is an especially strong indicator; if there aren’t hundreds or thousands of subscribers online at once, the project likely doesn’t have any real interest.
Want more tips on how to day trade crypto? Read our cryptocurrency day trading guide to pick up on more pointers & understand how Bitcoin’s market sentiment and movement can impact altcoin price direction.