Most people will tell you that the best way to invest in cryptocurrencies is through buying and holding, or HODLing, as it has become known in crypto circles. The problem with long-term investments is that they take a lot of patience and time, something many people don’t have.
Day trading cryptocurrencies is the quickest way to earn profits in this incredibly volatile market (check here for more info).
Let’s look at how you can get started day trading today.
Get an exchange account
There are hundreds of cryptocurrency exchanges, even more, when considering all the regional exchanges. It is worth looking around for a good exchange because some exchanges charge excessive fees, don’t offer the features you want, or have an interface that is hard to navigate. The best place to find out which exchanges other traders use is Reddit and Bitcoin Talk (or Google it).
Set up a trading account
You can day trade cryptocurrencies in your standard exchange account, but 99% of exchanges don’t support certain advanced order types like stop-loss orders, which we will look at in more detail later.
Set up stop-loss orders
Never leave your coins on an exchange, especially not overnight or for extended periods. When you set up a stop-loss order, you will automatically sell your coins if their price begins to fall, so you don’t lose money by mistake. Many newcomers to day trading get caught out with stop losses and end up selling at a loss; they then panic sell because they think it’s all gone wrong and buy back in again (at a higher price than they sold).
Find an entry point
It is essential to think about when you would like to profit and set your sell orders accordingly. A rule of thumb is that it’s time to sell if you aren’t in profit within 24 hours. Don’t let greed convince you to hold on, though, because nothing lasts forever. You can use Fibonacci retracement levels and candlestick charts to help find good entry points for coins with large price swings; we will look at this later.
Use limit orders, not market orders
You might think this isn’t so important but making sure you place the proper market order could end up costing you a lot of money (you place a market buy order as opposed to a limit order). Take our previous example of a stop-loss order: if you place a market buy at a specific price and the coin doesn’t reach that price, your coins will never be sold because you have placed a market order.
The right way to do this is by placing limit orders, so you only buy coins at the specific price you want.
Follow telegram channels for coin alerts
There are hundreds of cryptocurrency news websites out there that find stories for you. Still, Reddit and Bitcoin Talk have been around forever and have some of the most experienced crypto users on the planet sharing their knowledge there every day. I’m not saying ignore these sources of information; far from it, they are great places to check out what’s going on in cryptocurrency markets and make sure none of the major stories are being missed.
However, you will find that experienced traders will post on Reddit and Bitcoin Talk before they hit the news mainstream.
Don’t try to day trade with little or no experience
Day trading cryptocurrency can be very profitable, but it is not for everyone. The main problem is that day trading requires a lot of your time, attention and skill, three things which inexperienced traders will find impossible to manage all at once (you could end up losing money through sheer ignorance).
As an alternative, why not try swing trading instead? Swing trading is the art of buying coins with solid fundamentals and selling them for a profit after they have reached their peak (and before they come crashing down).