Much of the activity that comes from the crypto-space originates from the crypto-trading community. Buying and selling bitcoin is probably one of the first things that you will do once you go down the crypto rabbit hole.
As the crypto-community expands we are seeing an increasing number of people go down that rabbit hole to learn more about the trading aspect of crypto. The purpose of this guide is to serve as a starting point for those that are considering or have already started trading cryptocurrency on a day-to-day basis.
Day trading cryptocurrency is hard.
The first step to acquiring the skills necessary to become a successful day trader is to manage expectations. Going into trading cryptocurrency requires a mindset in which you are always striving to learn and develop your craft. The loss of your capital will be a fait accompli if day trading is approached in an overconfident manner.
A Quick Introduction to Day Trading
The idea of day trading is not hard to understand and is self-explanatory. Day trading is one trading strategy (out of many) that can be used in navigating the cryptocurrency market. With day trading, you are going to be buying and selling crypto 1+ times per day. Day traders will often use leverage to capitalize on the intraday price movements of the cryptocurrency market and will take either long or short positions when trading.
The worst thing to do when it comes to beginning your day trading journey is to focus on the amount of money that you can make. Instead, you should be focusing on developing solid principles that will hone your skills, and that’s what we are going to focus on the most in this guide.
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Avoiding Common Mistakes
There are countless individuals that have years of experience day trading crypto. From this, we are able to identify mistakes that they have made so that we can avoid them.
Making mistakes when day trading crypto can be very expensive, so reducing the number of avoidable mistakes when day trading is vital. Here are a number of common mistakes that you can avoid when you start trading:
- Not using a trading simulator: This is by far the most important mistake you can make. To be a beginner trader and not use a trading simulator before trading real capital is overconfident. Simulators give you the opportunity to get a feel for how to place trades and how the crypto-market moves. The major exchanges all have testnets that you can use before jumping into the real thing.
- Not formulating a strategy: Probably the most important question that you can ask yourself when you are at an early stage in your trading career is: how exactly am I going to make money day trading crypto? This is a powerful question because it forces you to formulate a trading strategy. Your strategies can be simple or complex and will vary from person to person. Just have a strategy in place.
- Not sticking to your strategy: When you’ve researched and thoroughly planned out your trading strategy, stick to it. If your trading strategy isn’t working, change it. It is very common for traders to stop learning. If you do this, then your trading strategy will not be as refined and effective as it should be. Never stop learning.
Here are a few more important but self-explanatory mistakes that are common:
- trading more capital than they can afford to lose; and
- not being disciplined.
Tools and Resources
This guide would not be complete without actionable instructions that you can follow to hone your craft in trading. It can be daunting to decide on the tools and resources required to be successful in trading, so here are some foundational resources and tools that are core in getting you started on the right track.
Tools
Firstly, you will need charting software that will allow you to monitor the price of crypto and draw your lines (e.g. support and resistance lines). The first charting software that you were likely first introduced to is Coinmarketcap. However, the functionality offered by Coinmarketcap is not enough for the serious trader. For example, you are not able to draw lines on Coinmarketcap. The most used charting software for traders is TradingView. Using TradingView, you will be able to monitor the price of crypto, change time frames, and draw your lines.
Secondly, you will need a place to trade. Now, there are countless exchanges to choose from, of which some of the biggest include the likes of Binance, BitMEX, Coinbase etc. Selecting the right exchange will require you to identify what your needs are and then to choose the crypto-exchange that best meets those needs.
Thirdly, when it comes to placing a trade you can either do it manually or automatically. Manual trade execution can be tricky because it is susceptible to human error. Some traders do use bots to aid them in their trading. But, as a beginner, you should first get comfortable with placing trades manually and then advance to automated trading. Trade execution could be performed by third-party traders via signal groups (e.g. bitcoin signals). But, ultimately, you should be responsible for the trades that you place.
Resources
We have already mentioned the importance of continuous learning when it comes to trading crypto. So, the following resources are merely starting points from which to begin your educational trading journey.
Arguably, the best resources for trading and understanding market movements are those covering traditional asset classes such as stocks. The learnings of these resources can closely be applied to crypto.
- Investopedia
- Skillshare
- YouTube
There are a lot more resources out there, so keep looking.
Conclusion
The purpose of this guide was to give you a flavor of what it will take to be a successful crypto day trader. If day trading is approached from the correct mindset, then there really is no limit to how successful you can be in this space. Good luck.
