A Simple Guide To Day Trading Cryptocurrency
Looking for a way to make money that doesn't require you to sit in a cubicle for 8 hours? And then getting paid the minimum wage? Do you have an interest in trades and cryptocurrency? If your answer is yes for all three, then you are in the right place, like mins do attract.
Cryptocurrency trading has become a huge part of day trading since Bitcoin blew up in late 2017, peaking at a value of $20,000 per BTC after being worth a few dollars in its first few years of launching, back in 2009. After the meteoric rise of Bitcoin, several other cryptocurrencies like Paycoin, Spacebit, and Dogecoin have surfaced and been hyped to be the 'next Bitcoin'. A lot of people jumped on the 'new coin trend' bandwagon, the coins all flopped and millions of investors' dollars were lost.
In this guide, we will walk through the step by step process involved in day trading and find out how to make money the legit way, and avoid falling for the 'hype'.
What is Day Trading?
Trading in the traditional sense is defined as buying and selling of assets to make a profit. In the trading world, assets that can be traded could be stocks like Apple, Samsung to currencies like dollars, yen, pounds, and natural resources like gold, palm fruit, oil, etc. The big plan here is to buy at a lower rate and sell at a higher rate. Simple and sweet!
Trading is split into two types according to the trader's goals; short term trading and long term trading. Day trading is classified under the short term trading category because the aim here is to buy an asset, hold on to it for between a few seconds and several hours. Short term trades involve the sale of your asset before the end of the day, to try and make a small, quick profit.
How do Traders Make Money?
For example, Kate has spare $25 from her last trade, she observes the charts and the price of Ripple XRP appears to be trending upwards. She buys 500 XRP at $0.50. Because other people have seen the upward trend also, they buy into it and its value is going up. After 6 minutes have passed, the price has gone up from 0.50 to 0.55. Kate decides to sell for a quick profit. She makes a profit of 10% amounting to $2.5. Decent for 6 minutes' work.
Now that you know what day trading is and how it works, let's get into the details of starting a day trading career.
A step-by-step guide to Day Trading Cryptocurrency
Educate yourself on blockchain
Most people don't like to study, this is understandable given how it was forced on us all through our schooling years. But surely there must be an exception to studying to make money. Understanding at least the fundamentals of blockchain gives you an advantage over a lot of other traders. This is important because blockchain is the bedrock on which cryptocurrencies sprout from, so ensure to do your due diligence.
Learn what currencies you should trade
When it comes to coins available for trading in the cryptomarket, you will surely be spoilt for choice. There are over 1000 coins in the market and this can be confounding. When you're just learning the ropes of trading, it is always advisable to trade the most valuable coins like Bitcoin, Etherium, as they are less prone to abrupt changes in value. Less valuable coins are much more volatile and should be avoided by beginners.
Sign up for an exchange platform
If you don't own any of Bitcoin, Etherium, or Tether currencies, you will need to purchase some on an exchange. As a day trader, it is much smarter to leave your currencies on an exchange rather than your wallet because of rapid chart movements that could be missed. Coinbase, Shapeshift and CEX is all reputable crypto exchanges.
Acquaint yourself with the basics of trading
Cryptocurrencies just like forex are traded in currency pairs. This means your viewed valuation of currency is in relation to another currency i.e BTC or ETH. It has been stated that currencies tend to fluctuate a lot, just like in the example provided previously. You can make trades like that all day.
Learn to use your orders effectively
When it comes to gains and losses, we humans tend to get emotional. That is why stop and limit orders are vital for your trades. Market orders are used to buy and sell assets immediately, stop orders are used to limit your loss, and limit orders are utilized for setting a specific amount you intend to sell for or buy an asset.
Study Advanced Trading analysis(ATA)
There are four(4) major analysis methods that you should get accustomed to namely
• Sentiment analysis - Is the study and observation of how the market is feeling emotionally and psychologically.
• Fundamental analysis - this method utilizes external events to predict the future movement of a currency.
• Momentum analysis - Most beginner traders use this method because it focuses on jumping on the bandwagon on already upward- assets.
• Technical analysis - This is the most technical as it focuses on the statistical approach, observing, and analysis of supply and demand.
Follow the cryptocurrency news
To become and stay a successful crypto trader, you need to form the habit of staying updated on the happenings of the cryptocurrency world. Stay abreast of everything happening in the crypto atmosphere and with the time you will learn to discern the fake news from legit news.
Only invest with spare funds
You would think it goes without saying, but it is worth mentioning. NEVER USE MONEY YOU CANNOT AFFORD TO LOSE FOR TO TRADE! Avoid becoming a lesson to other traders.
Have a way out
Always remember to set target gains and losses as this could potentially be what stands between you and making a profit. This will entirely negate emotion and help you properly assess prospective trades.
What are the risks of trading?
• Loss of capital
• Psychological addiction
• High stress
• Deep commitment
What are alternatives to cryptocurrency day trading?
• The swing trade
Trading is much like gambling in the sense that it is a high risk-high reward system. It is important to always stay calm and collected when making trading decisions, never make emotionally driven trades. Ensure to manage your risks, educate yourself, and remember that practice makes perfect. Good luck!
BitForex is an exchange service platform that can be classified as one of the Top 10 cryptocurrency exchange services. It is focused on providing millions of users with a digital currency trading and investment tool that is not only safe but also professional and convenient. BitForex has a high customer-oriented culture and state-of-the-art financial technology.
BitForex is programmed in a way that it can quickly adapt to the changes of the Crypto market while introducing new features like margin trading, enhanced trading charts, derivatives, and a host of others. The headquarter of BitForex is located in Hong Kong, while there are branch offices in countries like the United States, South Korea, and Singapore.