Cryptocurrency Day Trading: The 6 Minute Guide | Blockchain Central


What’s is up guys?
It’s Blu here and you are watching Blockchain Central.
In today’s episode we’ll dive into the
fascinating territory of day-trading crypto
and analyze the potential benefits and risks
associated with this aspect of the crypto market.
As always, please note that this content neither
represents financial, legal, or tax advice,
nor is it supposed to be understood or interpreted as
solicitation to buy or sell any securities, coins or tokens.
So what is Day Trading?
It is the act of buying and selling a financial
instrument within the same day, taking advantage
of small price moves… and it’s actually
much older than most people expect.
Day Trading was first made possible with the
invention of a telegraph which resulted in
the creation of the first digital communication
medium: a ticker tape that allowed for almost
real-time recording of stock prices.
Believe it or not: this happened in 1867!
Over the years, Day Trading has been evolving
and the compound value of the Day Trading
networks has been growing consistently.
Later, with the advent of the Internet, it
became a way for smaller, non-institutional
investors to start participating in the market.
However, one thing has been consistent throughout
the history of Day Trading: it has always
been considered to be a risky endeavor and
even today many people speak out against it.
The Crypotcurrency market has also seen a
fair share of Day Trading and some people
consider it a good way for an innovative investor
to probe the crypto market, as most trading
strategies known from the regular market also
apply to crypto.
The main difference lies in the fact that
the huge volatility of the crypto market magnifies
both the potential profits and the possible risks.
Also, because currency trading always relies
on currency pairs, with the asset value usually
viewed against Bitcoin or Ethereum, the inherent volatility
of these networks adds to the aggregate risk of involvement.
Also, these days due to growing mainstream
popularity of blockchain technology, an aspiring
crypto day trader, has to do extra due diligence
in order to avoid being manipulated by bad
players or hype trains running within the
community.
When it comes to the strategy of day-trading
crypto, you need to understand the basics
of analytical trading and research techniques.
Generally, most day traders in crypto rely
on swing trading techniques and trade against
breakouts and breakdowns in relation to support
and resistance lines of each asset.
If you’re unfamiliar with these terms, a
support line is a price level below which
an assets has had difficulty falling.
When looking at the history of asset price
fluctuations, we can use a support line to
assess at what point the asset depreciation
will stop and the asset will “bounce back”
to an appreciation trend.
Similarly, a resistance line will inform us when to sell
based on historical values for
prices the asset is not likely to exceed.
These lines can also be understood as lines
that connect the candlesticks, namely prices
at which the asset opened and closed on a
given day.
Careful analysis of such trends can bring
a diligent day trader closer to the Holy Grail
being able to capitalize on the entire move
of an asset.
Another important aspect of Day Trading is
understanding the concepts of volume and float,
and it’s really very simple: volume is the
number of assets made available to the entire
market during a given period of time and float
is the number of shares that are still free
to trade in the open market.
The rule of thumb for any day trader is trading
in assets that are high in volume and low
in float.
The reason for that is that high float usually
results in lower volatility, which can results
in lower day-to-day price differences on a
given asset.
Once you understand the fundamentals, it’s
important to understand the risks, and these are aplenty.
It is said that 80%-90% percent of day traders
record a loss in their first year of activity,
as one really needs to gain significant experience
in order to start making significant profit.
That being said, many successful day traders
claim that failure rate is so high due to
people simply quitting too early before they
can learn the ins and outs of the business.
Another contributing risk factor can be the
emotional aspect of trading; whenever making
or losing money is involved, we tend to get
emotional and might not make rational decisions.
One thing that not many people realize is
that, in order to day-trade successfully,
one needs to devote a significant amount of
time to the process; it truly is a full time job,
as the market needs to be monitored almost
continuously in order not to miss out on trends.
Also, when it comes to crypto–because the
market is so young–it is susceptible to manipulation
and reliable information might be hard to
come by; the impact of the community and the
culture of hype can play a big part in influencing such a developing market.
One last risk not to be ignored,
is the fact that it is possible to develop
a psychological addiction to the highs and
lows of Day Trading, and one can actually
become dependent on process of trading itself
and lose track of why they started in the first place.
In this context, the gambling parallels
drawn by the opponents of Day Trading
might actually hold some merit!
So, is there any way to mitigate the aforementioned risks?
Of course there is!
First of all, you can start by paper trading,
which is the process of buying or selling
virtual assets without involving any actual
money.
The easiest way to do that is to follow the
market, make predictions, and write down your
potential trades to see how they would do.
Also, some trading platforms and apps offer
a demo product where you can experiment without
risking any real money.
Another safeguard can come from following
several key principles of trading such as
never risking the money you can’t afford
to lose and never staking more than 2% of
your trading account on a single trade.
Also, taking advantage of specific market
tools such as Limit Orders and Stop Orders
can mitigate the risk you’re taking as a
crypto investor.
When it comes to blockchain-specific techniques,
it might be considered a no-brainer, but getting
a solid understanding of blockchain technology
can really help immensely and give you an
edge over other traders in the market.
Knowing more about blockchain will allow you
do be a more fundamentally-sound investor
by doing reliable research and clearly identifying
added value that technology
behind an asset is providing.
Last but not least, due to an ever-present
risk of hacking, it is advisable to select
a reliable trustworthy exchange with an impeccable
track record of security.
So that’s about it for this episode of Blockchain
Central, let me know in the comments what’s
your experience Day Trading crypto and what’s
the biggest gain
you managed to accumulate in one day.
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