One of the most popular trading strategies every trader should know, whether they’re dealing with cryptocurrencies or fiat money, is day trading. Although day trading cryptocurrency seems like an attractive option, many crypto traders fail because they’re not fully familiar with it.
That’s why we’ve created this crypto day trading guide to help you learn all the intricacies and decide if this is the right solution for you. As a bonus, you’ll learn how to day trade crypto and what you should pay attention to.
What Is Day Trading Crypto?
Day trading is a strategy used in stocks but also the cryptocurrency eco-system. Such a system involves buying and selling various kinds of assets, including fiat money, stocks, and metals.
Of course, the ultimate aim is making a profit. Whatever asset you buy, you should sell it for more money. This brings us to the question crypto users often wonder – what exactly does day trading cryptocurrency entail?
Well, the idea is the same as with fiat money day trading. Buy cryptocurrency and sell it for more money. However, most crypto traders don’t know the basics for cryptocurrency trading. In the main, they aren’t aware that day trading cryptocurrency is a type of short-term trading.
Basically, you don’t have assets for more than a few hours. The whole purpose is to sell cryptocurrencies by the end of a day and quickly gain a small profit.
What Should You Know About Day Trading Cryptocurrency?
Although crypto trading fundamentals might seem like a fantastic opportunity to grow income, there are some things traders should know. In the following section, you’ll learn trading cryptocurrency for dummies and the mental aspect of this strategy.
Educate Yourself About Cryptocurrencies
Practice makes perfect, and crypto trading is no exception. If you want to be a successful crypto trader, you can’t simply start purchasing and selling crypto assets. It’s essential to educate yourself about cryptocurrencies and blockchains first.
Once you’re sure you fully understand everything, learn which currencies you can trade. After all, if you want to learn to trade crypto, you must be familiar with different crypto values. Although Bitcoin is the safest crypto asset, it isn’t the only one. For example, Ripple and Ethereum are also worth considering. Moreover, there are altcoins which might seem profitable at first, but long-term, they’re a riskier investment.
Learn About Day Trading
Crypto trading is based on day trading marketing strategies traders use for fiat money. Therefore, reading about day trading, in general, can be beneficial. When you’re equipped with day trading skills, crypto trading will go much more smoothly.
Furthermore, it might be a good idea to learn which methods can be used to analyze crypto currencies. Doing so will enable you to make better predictions, thus reducing the chance of losing money.
Don’t Invest More Than You Can Afford
Like with real-world money trading, investing more than you can afford is a terrible idea. Don’t spend your whole paycheck. Instead, think about a maximum limit and use it for the trading business. Always stay within this limit to avoid suffering significant loses.
With such a mindset, we’re sure crypto trading won’t be a stressful activity.
Be Ahead of the Game
If you’re in the loop about cryptocurrencies and follow the news, you’ll have more skills to trade successfully. For example, did you know that coins change value when companies announce big crypto collaborations? That’s why reading and discovering news before competitors can turn out to be a valuable asset.
Learn About Volatility
One of the basics for cryptocurrency is being aware of how volatile the crypto prices are compared to real-world assets. Volatility is the degree of the price change either of crypto assets or fiat assets. While the prices of real-world assets can also go up and down, the differences aren’t significant. But that’s not the case with cryptocurrencies.
For example, there’s a high chance of coin prices changing drastically from the beginning to the end of the day. Sometimes the prices can go up even by 50%.
The way to deal with this is to invest in cryptocurrency with high volatility and high liquidity. Although high volatility may not always be desirable, it ensures stability and less risks compared with high liquidity. For example, the most liquid crypto value is Bitcoin.
Accept Capital Losses
You can learn all crypto trading fundamentals, but the fact remains that crypto trading isn’t always stable. In 2018, the value of E-coin increased by 4,000% in 24 hours, after which it dropped to its original price. Imagine those people who bought this cryptocurrency when it was at the highest price. After the value dropped, they lost significant amounts of money.
That’s why an important aspect of learning how to day trade crypto is also accepting capital losses. As harsh as it seems, losses are a natural part of every trading business. And even the most skilled crypto traders have suffered at least once.
So while educating yourself about crypto trading is essential to reduce such risks, you should accept that you might lose assets at some point.
Be Aware of Potential Addiction
Any kind of trading is exciting, risky, and adventurous. And when you earn money for the first time, you’re hooked even more. However, it’s also a trap. The very thought of earning a couple of hundred dollars in the comfort of your home can be highly addictive. Unless you’ve got strong willpower, resisting the urge to invest even more when you’re losing can be challenging.
If you’ve got an addictive personality, you might want to stay away from crypto trading.
We hope you now understand how to trade crypto and what factors are essential to make this activity as successful as possible. Learning step-by-step cryptocurrency trading and the risks involved will help you determine if crypto trading is something you’d like to try.
There are lots of things to consider and undertake before crypto trading starts earning you money. And if you experience losses, it’s essential to pinpoint what exactly went wrong. That way, you can ensure such things don’t happen in the future.
Finally, we can’t stress enough how important it’s to educate yourself against investing more than you can afford.