Cryptocurrency markets such as Bitcoin are some of the most volatile trading markets in the world. These provide you with both potential for massive gains, as well as massive loss. It’s the ultimate high risk, high reward market.
Before even beginning Bitcoin trading, you should ensure that your setup is secure. Nothing is worse than getting hacked and losing all of your money. Enable 2 factor authentication with the exchange you plan to use, and use a unique, secure password that you will remember. Enable 2 factor authentication with your email as well. Additionally, be sure that the system you’re using for day trading is free of malware. If you’re trading large amounts of money, such as thousands, you may want to consider a new computer dedicated to trading for extra security from key loggers.
If you’re new, and afraid of losses, you can pretend to day trade by using imaginary money, and keeping track on paper. While this isn’t a perfect simulation, as your pretend day trades don’t affect the market like real trades do, it can give you a general idea if you succeeded or not. It’s important to consider how much you want to invest. If you’re new, you may want to start with a small amount. Day trading is quite complicated, and takes a long time to fully learn. Never invest more than you can afford to lose. If you’re young, you can afford to take quite a few risks, as long as you can afford to pay your bills if something goes horribly wrong. If you’re older with a family to support, you may need to be more careful with day trading as you have a lot more responsibility.
Types of Day Trading
Trading Bitcoins/Fiat Currency Directly
Trading Bitcoins for fiat back and forth can be quite difficult for those living in America. Coinbase has higher fees that make it harder to profit when daytrading, as well as not functioning as an exchange. While you may be able to daytrade at some foreign exchanges, you will have trouble withdrawing USD funds, so you’ll need to cash out to BTC, then send it somewhere else such as Coinbase where you can withdraw to USD.
Trading Alternative Coins And Bitcoins
There’s only one thing more volatile than the Bitcoin market-the altcoin market. Some smaller altcoins have seen pumps to over 50x their value within hours. Many others have lost enormous amounts of value over time. This is truly the riskiest market available.There are hundreds of alternative digital currencies all based on Bitcoin. Some have unique features that set them apart from the others, while some simply copy the code and just rename the coin and change a few numbers. The value of an altcoin is often tied to Bitcoin, meaning that if Bitcoin’s value drops, most altcoins lose value as well. If Bitcoin gain’s value, most altcoins gain value. They also have changes of value of their own. For altcoin trading, there are exchanges dedicated to it such as Cryptsy. You’ll generally cash out your earnings in BTC, and if you want, you can cash out to USD or your local currency.
Day trading can be complicated, however these tricks should help you stay in the green.
Rationalize changes in value
When a particular coin changes in value, try to consider why it did. If you see a very fast jump in value with no reason behind it, be cautious-it may be a temporary pump followed by a dump. If you see a rapid drop in value with seemingly no explanation, it could be someone selling a lot at once, which could result in a fast recovery. It could also be insider trading though, so it’s difficult to tell what unexplained changes truly mean. Respond at your own risk. If a coin quickly gains or loses value due to an event, consider it’s long term impact on the coin, and why people would be selling. If its something such as a new feature, consider if it would increase outside demand for the coin or not. If it only appeals to those already using the coin, a rise in value may not last. Also keep in mind that most selling occurs via bots that will sell almost immediately after news goes out, so you’re almost always late, meaning you likely missed the majority of the drop/gains. If you’re truly dedicated to daytrading, there are apps that will set off an alarm if the price of Bitcoin falls below or goes above a certain threshold, allowing you to respond quickly to rapid fluctuations in value.
Avoid Trading While Impaired.
If you’re under the effects of alcohol, or anything else that may reduce your ability to think clearly, avoid trading if possible. You may end up making decisions you regret. If you plan on drinking a lot, you should move all of your high-risk altcoins into Bitcoins to avoid forcing yourself to make a tough decision.
Don’t be Fooled by Market Manipulators
There are many tricks people use to manipulate the market. This includes:
- Creating multiple tiny buy or sell orders at different prices to confuse humans trying to analyze the market
- Creating huge buy/sell orders that they remove in an attempt to drive the price up or down.
- Spreading false information(you should always get your information from credible sources)
- Spreading fear or distrust in Bitcoin, or extreme optimism
Don’t Let Your Emotions Control You
When money is on the line, it’s easy to get emotional. Don’t let slight losses scare you into instantly selling. At the same time, don’t let denial stop you from taking a loss if you have to. If you can’t take a loss well, day trading may not be for you. If you’ve suffered from gambling problems in the past, you should avoid day trading, as losses may pressure you to take further risks. Hopefully these tips should help you get started with day trading.