The crypto world is definitely not for everyone, especially not for the faint of heart. Not only is the whole crypto sphere surrounded in a sort of techy allure (meaning that you have to be a tech-inclined person to fully comprehend the concepts and underlying technologies used), but it’s also arguably one of the most unpredictable ecosystems in the world.
That said, we’ve all heard stories of how various people “made it big” in crypto. We’re not talking about brilliant people such as Vitalik Buterin who invented Ethereum, and also happens to own a sizable amount of ETH (which he will not give away for free, mind you).
The Internet is filled with incredible stories of people who more or less randomly invested in new crypto projects, and became millionaires in a couple of months or years. As it turns out, long- term trading can be a very efficient way of making money. As stress-free as this method might be (it’s really not), it’s not for everyone.
Those who don’t believe in long-term trading are the ones who are often going for short-term trading and are called day traders. So, what is day trading? How can you get into day trading? Is it worth it? What are the risks? In this guide, we will look try to provide you with comprehensive answers to all these questions, and possibly others as well.
What exactly is day trading?
Trading means buying and selling things with the aim of making a profit. Real-world examples of trading can involve anything like stocks, shares, currencies, and even metals. In trading, the golden rule is the following: Buy an asset at a given price and then sell it for more than you paid for it! That’s how you make a profit.
In the crypto world, the trading goals fall into two categories mentioned above: short-term trading and long-term trading. Day trading is the “epitome” of short-term trading. To put it as simple as possible, it involves holding a crypto asset for anywhere from a couple of seconds, to
a maximum of a couple of hours. The concept is to buy an asset and sell it by the end of the day hoping to make a small, but very fast profit.
When it comes to day trading, one has to have in-depth knowledge of how the crypto and the financial world works. Not only that, you have to constantly be on the lookout for good opportunities that can wield a quick profit.
Methods used for day trading
Right from the bat, it’s worth noting that there no fool-proof method of day trading, as the method itself is a very risky one. However, the main two methods that people use today trade are by using chart analysis or by speculating.
Speculating involves a trade believing that the price will go up or down because of certain events. A good example of this is as follows: a trader sees a positive news story on a renowned website. As a cryptocurrency’s price can be affected by these types of news events, the trader decides to risk and speculates that the price will rise.
Alternatively, you can practice day trading cryptocurrency by using chart analysis. Of course, it’s a much more complex method, as it requires you to study the price movement of a particular crypto asset. The main goal is to try to guess which way the price will go based on a lot of historical price movements and other similar data.
How about the risks?
Cryptocurrency trading, in general, is a very risky business. Some call it “a high-risk, high-reward” type of situation, and they are not wrong. For starters, it’s important to understand that crypto trading is not like trading real-world assets. There is a lot of volatility in the market. The
prices of cryptocurrencies are extremely volatile. It’s not uncommon for the price of a coin to rise and fall by more than 50% in a single day.
Since day trading requires you to be on a constant alert, it might become harmful for your state of mind (or piece of mind, or even mental health) in the long run. You may get over-exhausted and frustrated. Since cryptocurrencies allow you to be your own bank, so to speak, you are the one responsible for the security of your funds. In the crypto world, a small mistake like misspelling a character for a wallet address could mean the total loss of your funds. Not only that, but you’ll have to work with cryptocurrency exchanges if you are to become a serious day trader. As we all know, the crypto sphere has seen a lot of hacks and attacks on crypto exchanges.
Basic tips for crypto day trading
The first thing you need to understand is that there’s a very very small chance you will be a successful crypto day trader right off the bat. Crypto day trading requires patience, time, and commitment.
There will be days when you will lose. Learn to accept these losses, and try to learn as much as possible from them. Even the most successful traders lose sometimes. It’s impossible to have a 100% prediction rate.
The difference between a seasoned trader a newbie one is his state of mind. Where a newbie would try to “chase” his losses, a seasoned trader will take a break, take a walk, read a book, and put everything on hold. Remember: if you experience a bad loss, the worst thing you can do is attempt to make it back by taking a big risk.
It takes a lot of time before you will understand how the market works. Hence, you can read as many books or tutorials online in order to get a better understanding. Using a demo simulator for crypto trading is a very good idea. This will eventually prepare you for real-world losses, but it
will also help you develop a strong mindset.
Goals are very important in life and just as important in day trading. Don’t forget that day trading is all about small and quick gains. If you get 1% of the trade, that’s very good. It’s a very good practice to never risk more than 1% of your total bankroll in day trading.
Most modern crypto exchanges have a lot of advanced features that can really help you in your day trading endeavors. You can learn to use something called a “limit sell order.” This allows for traders to be automatically processed when you coin hits a certain higher (or lower) price.
While we are on the subject, make sure that you find a reliable crypto exchange, one with very good liquidity, lots of trading pairs, and positive sentiment from the crypto community at large.
Coming back to our initial point, crypto day trading is definitely not for anyone. In fact, without the proper knowledge, it’s probably one of the riskiest methods of making money from crypto trading. Be that as it may, it can be a very exciting process, one that could “make or break” a trader.
And, while there is no perfect method of succeeding in crypto day trading, we will only remind you two very important rules that should also be YOUR rules: never invest more than you can afford to lose and never chase your losses.