A Peek Into the Arsenal of Crypto Day Traders

Abhijoy and I have always been fascinated by the world of cryptocurrency trading, often wondering how our lives would shape out if we seriously considered trading as a vocation. 

- What are the tools or platforms we would use? 

- Would we require 3-4 screens for a more rewarding career?

- Would we need to say goodbye to social life in order to day trade? 

While not seriously considering a career move, we did decide to take a dive into the murky waters of crypto trading to gain more insight into it.

And what did we conclude?

The high intensity world of day trading might seem alluring at first glance, but it needs the right set of skills, mindset and tools at your disposal to be successful.

While you wouldn’t need to bid adieu to your friends and family or set up a high-tech workstation to day trade, you would definitely need a few basic tools to set up shop. The four types of platforms one would need are:

• A trading platform or exchange to execute trades 

Our Pick: FTX

• A charting platform to map out prices and technical
  analysis indicators

Our Pick: TradingView

• A portfolio tracker and trade analysis platform to evaluate and improve trading performance

Our Pick: Coin Market Manager

• A tax accounting platform to file for taxes on profits from trading

Our Pick: Token Tax

While you don't need multiple giant screens to day trade, you would definitely need a few tools at your disposal.

You might ask as to why one would need specialised software for the last three items mentioned above when we have the good old MS Excel and the calculator at our disposal. Well, you can try and find out yourself. 

It is near impossible for high frequency day traders to separately do any kind of manual analysis. Reconciling hundreds of trades in a day is a whole new job in itself and is prone to human errors. This is why there are dedicated platforms that do this for you, so that you can focus on the thing at hand – day trading.

We tried a few platforms ourselves in the pursuit of getting our hands dirty, getting a fair bit of experience in the process. So here are some key takeaways on the four platforms we used in our trading experiment.

Trading Platform or Crypto Exchange – FTX

FTX is a relatively new cryptocurrency exchange which has shot up the ranks in a relatively short amount of time thanks to their innovative product offering. Backed by major players like Binance and Alameda Research, FTX is today consistently placed among the top 10 crypto and derivatives marketplaces.

FTX offers conventional spot trading and futures contracts on major cryptocurrencies, as is available in most of the top cryptocurrency exchanges.

What sets FTX apart is the range of leverage tokens that FTX offers to users.

Leverage trading is a feature that most prominent exchanges offer. Here, users can enter a short or long position with exposure to a larger amount of capital than the actual funds they possess, depending on the ‘leverage’ chosen. Greater the leverage, greater the amount. This allows them to achieve a larger profit than what they would in simple spot trading.

FTX offers a range of leveraged tokens, which have captured the imagination of crypto traders

This is where FTX is unique – FTX provides a clean and simple way for users to get leverage, through different leverage tokens known as BULL, BEAR, HALF and HEDGE.

These tokens automatically rebalance themselves to maintain target leverage and prevent liquidations. Not only can users get access to leverage trades through simple spot trading, but they can also remain free from the risk of liquidation no matter which way the market moves.

FTX also supports fiat on-ramp, which is essential for crypto enthusiasts looking to make their first trade. Users can deposit major currencies such as USD, EUR, GBP and AUD through bank transfers. FTX additionally allows crypto purchases through credit cards, thus providing multiple fiat on-ramp experiences.

Charting platform – TradingView

TradingView has been a known and trusted name in the world of trading, providing advanced charting tools for traders to analyse market action, identify trends and maximize trading profits. 

What sets TradingView apart from other such tools available in the market is that TradingView has something in offer for both beginners and advanced traders.

The interface is easy and intuitive enough for beginners, while the tools available are powerful enough for advanced chartists to accurately model the market sentiments.

No installations or complex setups are required; TradingView provides the convenience of simple, browser-based charts. Their advanced cloud-based infrastructure and real-time data feeds enable users to do comprehensive research anytime, anywhere.

TradingView’s simple and intuitive interface has made it a popular name among traders

The platform comes with hundreds of pre-built studies, over 50 intelligent drawing tools, and over 10 types of charting tools for in-depth market analysis, allowing users to cover the most popular trading concepts.

Novice traders can utilize simple concepts like trendlines and support/resistance levels, while advanced techniques like Fibonacci Retracement, Gann, Elliott Waves, Renko and Kagi charts, and so on, help expert traders gain insights into market behaviour and determine long term trends.

TradingView provides users access to not only crypto markets, but other traditional markets as well. The platform is connected to hundreds of data feeds with access to stocks, futures, all major indices, precious metals, oil, forex, and CFDs.

Apart from the charting interface, TradingView also has a social platform for traders and investors to discuss trades, strategies and latest events through real-time public chats. This also provides inexperienced traders with the opportunity to learn from their more experienced peers. Each user builds up a reputation based on the quality of content created.

TradingView provides other features for an enhanced user experience, such as 25 indicators per chart and 8 charts per layout. Moreover, with individual watchlists, users can keep track of their favourite assets, stay updated with real-time price trends, and be the first to know about fast market moves.

Portfolio Tracker & Trade Analysis Platform – Coin Market Manager

Coin Market Manager (CMM) is a comprehensive crypto accounting tool solution for traders, specifically targeted towards active traders who are looking to make a career out of trading crypto. Through CMM’s performance analytics and journaling facilities, traders can analyse their trading habits and identify patterns to improve performance.

CMM’s journaling facilities allow traders to maintain a detailed record of their trading performance, providing CMM an edge over other portfolio tracking apps.

Users can analyse their performance over every historic interaction with each coin, and review how much profit has been made on each exchange. Trades from multiple crypto exchanges can be synced with CMM’s platform via read-only API keys by simply clicking the "Refresh Trades" button.

CMM also lets users track their overall Rolling Profit/Loss summary on all their positions together as well as the individual market value of each coin in their portfolio, in both Bitcoin and USD terms.

CMM’s USP is probably the support that they provide for a host of derivative crypto exchanges.

Traders on popular derivative platforms such as BitMEX, FTX, Binance, Deribit and Bybit can simply plug in their read-only API for a complete overview of their derivative position performance and net worth in real time. Not only does this help traders keep track of all their positions (both leverage and spot) over all exchanges in one place, but it also allows them to break down and analyse their trades over multiple time frames.

Coin Market Manager provides deep insights into trading activity, helping traders fine-tune performance and improve RoI

CMM also provides a complete breakdown of all investments made on each exchange into individual trades. This is helpful for both new entrants, who might feel lost keeping track of investments over multiple exchanges, as well as seasoned traders, as they can analyze past trades to see what went right and what went wrong.

Other features include using the “Fiat Summary” to track profit/loss against all the fiat that has been invested in the user’s native currency, converting non-BTC base pair trades to their BTC value (at the time of trade) for accurate portfolio accounting, and the ability to see the breakeven figure on live investments for a clear idea of how well their position is doing.

Tax Accounting Platform – TokenTax

TokenTax is a tax accounting software that reconciles records from multiple platforms and generates tax reports ready for filing. In addition to the customary reconciliation and tax reporting tool, TokenTax also includes a Tax Loss Harvesting feature to offset gains for lower tax liability (more on that later).

The platform covers one of the largest sets of exchanges to import trade transactions from (including FTX). Margin and derivatives trading related taxes are supported as well. 

Decentralised exchanges like Uniswap and 1inch are supported too, allowing users to file taxes for DeFi transactions as well. 

This was not possible till very recently since most DEXes either didn’t have suitable APIs or the tax accounting platforms didn’t sync with them. Even if there’s an obscure exchange which is not supported on TokenTax, users can simply download their trade history CSV file from the exchange and upload it to their TokenTax account.

The list of exchanges supported on TokenTax is quite comprehensive

Tax filing is rather simple. Once you have signed up on TokenTax and completed your user profile, you can either upload your trade history CSV file or connect directly to an exchange account. This automatically imports the transaction history to the platform.

Thereafter, the tax report can be generated in just two clicks - choose accounting method and download tax report. It’s that simple. Advanced users can also use TokenTax’s partner CPAs to file their full tax returns.

An interesting feature on the platform is Tax Loss Harvesting, which can help users reduce their pending tax amount.

More often than not, taxes on capital gains can be reduced by accounting for losses on other trades elsewhere. This is sometimes missed during tax calculation but is an effective way to offload heavy dues.

The Tax Loss Harvesting dashboard on TokenTax shows which assets are currently being held at a loss and how much losses can be claimed for selling them. These losses can then be deducted from capital gains to reduce tax liability.

To sum up, while day trading isn’t everyone’s cup of tea, if one does wish to practise it as a vocation, the right set of tools is necessary. It is crucial to constantly track and recalibrate strategies since the kind of volatility seen in crypto is rarely observed in most other markets. We found the above four platforms to be optimal for our experiments with day trading.

Let us know if you use some other solutions for the same. What you like and what you don’t like about them. As always, Abhijoy and I are one “Hi” away on Telegram.

Disclosure: The authors have no vested interest in any of the
projects mentioned in the article.

About the authors:

Rohit Chatterjee is an Analog Design Engineer working at Texas
Instruments. Abhijoy Sarkar is a banker-turned-entrepreneur. They are high school friends who lost contact years ago. They reunited over crypto in early 2018 and have been investing through mutual research and shared knowledge.