- An In-Depth Guide To Day Trading Bitcoin
- What Does Day Trading Mean?
- What Can Be Traded With Day Trading?
- Become Comfortable With This Market
- The Cryptocurrency Market Is Highly Volatile
- Choose Your Provider And Marketplace With Care
- Understanding All The Inherent Risks
- Discipline Is The Key To Successful Day Trading
- Enjoy The Journey
An In-Depth Guide To Day Trading Bitcoin
Before you start trading Bitcoin, you will need to find a reliable broker that will execute your trades on the market. The broker you choose is a crucial investment decision. Here are a few points to consider before you select a broker:
How Fast Is The Execution
Due to the trades that you may make in one day, the “speed of execution” becomes important, along with getting the price that you need as soon as you want it.
The commission rates and fees that are lower are the most viable when it comes to day trading. The active trader’s trade often, so minimizing the costs involved to trade is a vital component.
You need to ensure that the broker you choose is regulated. This means that they are obliged legally to protect their interests on a financial level.
Leverage, Margin, and Spreads
When it comes to day trading, you should be looking for competitive spreads, and you also want to make sure the margins and leverage levels are low.
Make sure you do a bit of research first by reading up on broker reviews. This information should assist you in determining whether the potential brokers you are interested in, match up to your style associated with short-term trading.
What Does Day Trading Mean?
The definition associated with “day trading” means to sell and buy security over a single day of trading. When you day-trade online, it means you close out a position before the close of the markets for that day to secure profits. You can also exit and enter several trades over a single trading session.
The brokers, on some occasions, use different definitions for the day or “active” traders. This opinion is, in most cases related to the number of trades the client closes or opens in a month or a year. Certain brands will even refer to the “hyperactive traders,” which is a step up from the “active trader.”
Day trading is typically conducted using different trading strategies to capitalize on price movements that are small in currencies such as Bitcoin or high-liquidity stocks.
What Can Be Traded With Day Trading?
The more popular and lucrative Day Trading markets include:
The market of foreign exchange currencies is the most liquid and accessible across the globe. The volume involved in forex trading is what makes it highly attractive for the day traders. There are various short-term opportunities in the trending currency pairs, along with an unrivaled liquidity level, to ensure that the opening and the closing of trades is fast and convenient. Forex also does not have a central market. What this means is that traders can make trades 24 hours daily, six days in a week. This offers an excellent starting point when it comes to aspiring or entry level traders that have full-time jobs.
The physical stocks belonging to individual companies, the regular along with leveraged ETFs (Exchange Traded Funds, which hold a range of commodities or stocks and are traded like single stocks), stock options, and futures.
Day trading with stocks presents different opportunities when compared to more traditional buy-and-hold strategies. Speculating on the stock process through spread betting or CFDs, for instance, means that the traders are also able to profit from the falling prices. Leverage or margin also lowers the capital that is needed to open positions. This offers the opportunity to take positions from the latest product announcements, news releases, or financial reports.
Ethereum and Bitcoin at this stage are the two most popular and largest cryptocurrencies. Outstanding growth is linked with the cryptos which have attracted a new group of investors. The brokers have also ensured that direct access into these markets is far less complicated. The barriers for entry are virtually nil, which means that whether you happen to be a bear or a bull, now is the time.
The most predictable and most straightforward method, because the return and timing on successful trades are made known beforehand. All that you need to decide on is whether the asset will increase or decrease in value. With the drawback of the limitations in the size of these trades, and that the potential payouts are revealed in advance, understanding the binaries is not that difficult. They provide a different trading method and often play an essential part in many of the day traders portfolios.
The future prices of a security or commodity.
These include foodstuff, minerals, metals, natural gas, and oils.
If you choose the S&P 500 day trading, you will be selling and buying shares from companies such as Adobe and Coca-Cola. In the forex markets for day trading, you will trade currencies like GBP, the U.S. dollar, and the Euro. In the market of futures, which is mainly based on indexes and commodities, you can trade anything from cocoa to precious metals.
Digital currency is one of the areas of increasing interest in the world of day trading. Day trading with currencies such as Ethereum, Litecoin, and Bitcoin is a fast-growing business. With potential outstanding returns, a lot of volatility, and an unpredictable future, day trading with cryptocurrency has become an exciting path to pursue for traders of all experience levels.
Now that you know a bit more about what day trading is, here are a few tips on how to get started with Bitcoin day trading.
Before you begin as a trader, it is essential to know what your primary objectives are before entering this extremely volatile marketplace. This could include short-term trading, part-time trader, long-term investing, or maybe you are interested in using this cryptocurrency space to become accustomed to the volatility before you move on to the next asset class.
Become Comfortable With This Market
In order to become confident and comfortable with these markets, you have to learn and practice, and keep repeating these steps throughout your own journey. Gary Player, one of the greatest golfers in the world, was once heard saying that the harder he practiced, the luckier he got. This is also true when it comes to day trading cryptocurrencies as the practice is what breeds confidence, which will not only show what you happen to be doing right but also help you to ingrain this into all your daily trading activities. Just as important, it will also show you where you are going wrong. There are several Online Trading Academies which offer highly valuable information, which you may want to use through every stage of your personal trading journey.
If you are a new trader, it is highly advisable first to open a Demo Account before you commit any of your real money to a market. With a Demo Account, you can apply various technical trading methods in addition to extensive fundamental-market analysis along with execution set-ups.
When you start learning lessons, record how you have gotten there by keeping a record of both your losing and winning trades. Also, record why you decided to enter that trade, why you used specified loss and profit limits, why you chose to use a specific amount and what you felt once the deal closes. It is crucial that you answer these questions honestly as these are the experiences that can assist you with future trades in the way of offering real-life examples when it comes to why and how trades go wrong or right. It is crucial to avoid short-cuts when it comes to your trading analysis.
Before you set your day up to enter the market, you need to feel positive and in a good mood and ready to face the exciting challenges ahead of you. If you are rushed, feel ill, or in a bad mood, do not rush a trade. It is important never to force a trade, avoid trading when you feel angry, tired or ill, as this could cause your discipline to falter which could mean that you end up losing your trades for that day.
The Cryptocurrency Market Is Highly Volatile
Perhaps the main attraction associated with day trading currencies such as Ripple, Ether, and Bitcoin, or any other type of liquid coin has to do with volatility. The prices that rapidly fluctuate in wide ranges are known to be “highly volatile.” It is this volatility which attracts the day and short-term traders, because it offers these traders with an easy opportunity to enter and exit the markets, hopefully with gains.
Liquidity is also significant when it comes to Day Trading and is typically one of the main influences on not just the cryptocurrencies that you trade with but even marketplaces where you decide to trade. At this stage, the 4 top cryptocurrencies by size include Bitcoin Cash, Ripple, Ether, and Bitcoin. All of these currencies currently hold market capitalizations that exceed $20 billion, which offers a source that is more than ample when it comes to liquidity. It is also essential to monitor the market size and your coins, to ensure that the liquidity remains constant.
Other important factors to consider is to check on the total amount of coins that are in circulation and whether more of these coins will be printed or whether the original owner or partner for a specific currency has a substantial holding.
Choose Your Provider And Marketplace With Care
It is not only capitalization of these coins which make them liquid, but the marketplace or exchange where you will be trading the currencies is also just as important. There have been many exchange examples, due to the fact that they are primarily unregulated, which have stopped trading over periods of “extreme” volatility, or when they are hacked, or they are unable to handle the trade volumes.
There are also many examples relating to cryptocurrency exchanges which have closed down suddenly, with many of their clients losing all or some of their funds. For this reason, choose your marketplaces with care and ensure reliability, liquidity, and when possible market regulations are the first things you think about before you enter any trade. The investment firms such as IG fund clients in the way of using a segregated account at a regulated bank. They are also regulated and authorized by the Financial Conduct Authority.
Trading is also about becoming comfortable, along with the abilities to go short or long in any coin that you have decided to trade with. If you are not able to short coins, which means selling coins you do not own, then you chances associated with making regular profits will be severely curtailed. You should also make sure that the marketplaces you are interested in using provide you with maximum reliability and flexibility.
Understanding All The Inherent Risks
Bitcoin happens to be even more volatile when compared to any other asset type, which includes the stock market or gold. Cryptocurrency is still regarded as a technology that is still young, which is faced with many challenges. While many experts agree that the trend overall for Bitcoin is still upwards, trading with these currencies is associated with significant risks. The prices for Bitcoin are impacted profoundly by the public sentiment associated with the currency. This currency will carry on fluctuating as financial institutions and companies decide on how to either incorporate it or not into their workflow and businesses. In addition, at this stage, it is also highly sensitive when it comes to regulatory changes.
For example, in the early part of June in 2017, Bitcoin was at this stage trading at $2,983, before it lost 30% of its overall value one month later, where in July it crashed to $1,992. In September in the same year, it climbed to $4,764, which posted a highly impressive 139% gain.
There are also risks that are inherent to the actual exchange. Similar to money that you carry around in a wallet, safety linked to these types of currencies is dependent on your diligence. While it may be impossible for Bitcoins to disappear, any transaction is permanent, which means that only the recipient can refund you. What this ultimately means is that you need to be doing business with reputable, well-known, and trustworthy organizations or people.
It is also important to know that all Bitcoin transactions are publicly stored as well as permanently on the network. This means that any person can view the transactions and balance of any of the Bitcoin addresses. However, only the actual Bitcoin exchanges or any party involved in the trades can attach these addresses to the real person. This means that your transactions mainly remain anonymous.
Discipline Is The Key To Successful Day Trading
As mentioned before it is crucial that you know precisely why you have decided to trade with cryptocurrencies as well as what you hope to gain from these experiences. This means sticking to your goals and do not be tempted to purchase when you do not feel comfortable with it.
Before you enter a trade, make sure you have decided on your entry price, the stop-loss level, and what you would like the target price to be. Never enter any trade without implementing a stop-loss. Market volatility can often force the prices directly through the stop-loss, which results in slippage, which might leave you exposed to the provider when it comes to your “eventual” fill.
Margin trading, when it is offered by the provider that you are using will ramp up the volatility. The traders also need to consider the CFD, which stands for Contracts For Difference, very cautiously before deciding to use them. The markets already contain ample volatility, which will continue offering opportunities in order to trade profitably.
A few of the common reasons as to why traders will lose money is when they lose their discipline by chasing a losing trade or when “doubling-down” on the positions that go against them. This is when the market starts to control you, and this could mean that you end up losing a lot of your money.
Enjoy The Journey
In every career path, it becomes essential that you enjoy your profession. Day trading, along with any of the other similar markets, is no different. If you would like to become a full-time day trader, you need to dedicate many hours each day into studying your markets, looking over past trades, looking into potential trade set-ups that are new, while at the same time consistently updating and researching an extensive range of technical and fundamental trading techniques. This is a real full-time job, and you should be treating this opportunity with similar respect and dedication as you would any other type of profession.