Day trading is the short-term trading of cryptocurrencies where you buy and sell within hours or even seconds to make small profits quickly.
Day trading is not based on speculation but rather a strategy formed after following how the price of a cryptocurrency moves and trying to determine its next move.
Cryptocurrencies are volatile; they can rise and fall by any percentage at any time. Volatility refers to how quickly the price of a currency rises and falls. New traders should practise before risking real money ontrading. There are a few sites that offer demo accounts for you to do this.
You can write your potential trades down and watch the markets to see how your trading fares compared to real life. Start day trading with small amounts that you can afford to lose. Once you’re happy that you know how the markets work, it’s time to set yourself targets for each day.
You also need to have realistic expectations as to how much you want to make per day. Take the time to develop the necessary skills and knowledge by following cryptocurrency charts from reliable sources. Experienced traders usually only risk about 1% of their total bankroll per trade.
Trading small amounts means less risk. Trades tally up to more significant profits when done correctly. This allows for steady income building with the lowest risks. Along with setting your daily profit targets, should be stop losses.
If you don’t have a loss target set, then you are ultimately just gambling. Some exchanges allow you to stop losses through automated systems to protect you from losing everything if you cannot watch the market. Finding a reputable trading exchange is vital.
The type of cryptocurrency you wish to trade in must also be considered when choosing your exchange. An exchange’s liquidity is also significant as if you cannot match with a buyer or seller; then you can’t close your trade when it starts losing value. Be sure the exchange you choose to work from accepts the currency you need to deposit or withdraw in.
Common day trading mistakes
Don’t trade directly after the news. Markets rush after news announcements. This doesn’t mean it is the right time to trade. People panic after news announcements and follow their emotions, either buying or selling large amounts at once. Instead, wait for the volatility to lower.
Many day traders abandon set strategies to chase trades. This is very risky. You may end up losing more if the market doesn’t turn around. Set your limits and stick to them. Don’t get caught up in the emotions of a loss.
Often, day traders will impulsively change their strategy when it seems to be failing without considering the external factors that are causing the failure. If your plan fails due to external factors, impulse trading could result in losses for the same reasons.
Follow the financial news. Yes, above we told you not to follow the news, but that’s the local or international news. Financial news is not the same as it’s based on analyst’s reports. You’ll still need to compare what cryptocurrency news predicts against your knowledge and strategies before trading on it.
It’s not an easy task to get started day trading crypto but if you learn the basics and strive to improve every day you are on a good track. You need to find a decent platform to operate on with low fees to support your coming errors.
Start out small or even on a demo account to test your strategies before going live with real money. I also recommend reading some books on the subject as you are learning as this will help you with finding ideas and staying calm in tough moments.
The markets are relentless but if you keep at it you will see results along the way.