What is cryptocurrency? How do you trade it? What are the risks and rewards? How can you profit from cryptocurrency prices? These are just a few of the questions we will answer in this all-inclusive guide.
Cryptocurrency markets are notoriously volatile, although this has improved significantly in recent months. For those looking to day trade, this means opportunity. However, new traders should also have realistic expectations as they begin their journey.
It’s important to know what to expect when day trading cryptocurrency. These markets operate 24 hours a day, 7 days per week. It’s impossible to predict exactly what will happen at any given time, but we can look at the past for some guidance on the future.
Between January 1st and May 1st of 2018, bitcoin decreased by nearly 50%. Ethereum dropped over 40%. This was followed by an increase of 40% for Bitcoin and 20% for Ethereum during the remainder of May.
One of the biggest reasons people make mistakes when they’re day trading is because they expect to lose money. When you go into a trade with a negative mentality, you’re less likely to succeed, because you have an increased chance of making mistakes.
Whether you’re day trading stocks or you’re trading cryptocurrencies, most traders will lose money and give up within a year. While this is a normal part of business for many stock and options traders, too many cryptocurrency traders have no real plan for trading.
It’s important to make sure that you’re aware of the potential losses that can occur when trading cryptocurrencies. You need to be aware that even if the fundamentals look solid, cryptocurrency prices could still go lower before they head back up again.
Many people have seen the headlines about Bitcoin and other cryptocurrencies rising in value and have decided they want to get in on the action. They figure that they will buy some Bitcoin or Ethereum, hold onto it for a while, sell it at a profit, and repeat.
They join an exchange – perhaps Coinbase or Kraken – and then they set up a digital wallet to store their cryptocurrency. Once their account is funded, they use their exchange’s trading tools to purchase some Bitcoin or Ethereum. If the price of these cryptocurrencies goes up compared to their base currency, they sell them back to the market and pocket the profit.
Not as easy as it sounds, right? It may seem like anyone can day trade cryptocurrency for a profit and turn a nice sum of money doing so. But there are certain things you need to know before getting started.
The first thing you need to know about day trading cryptocurrency is that understanding markets is key. There are many different factors that affect whether or not a trade will be profitable. Your own personal finances play into this too; if you can’t afford to lose money on an investment, don’t put your money into it in the first place!
One of the most attractive aspects of cryptocurrency for many is its volatility. Most investors realize that a currency can be either a store of value, a medium of exchange, or both. However, when it comes to cryptocurrencies, most people forget to consider them as currencies and only focus on how volatile they can be in comparison to other currencies. Cryptocurrencies are not immune to market forces and their prices will fluctuate accordingly.
To give you an idea of just how volatile cryptocurrencies are, consider this: in December 2017, the average price for Bitcoin was around $12,000 while the average price of Ethereum was around $1,000. As I write this (mid-January 2018), the price of Bitcoin is over $17,500 while the price of Ethereum is nearly $1,200. In the span of about one month this past winter, the price for both cryptocurrencies increased by over 150%.
This should come as no surprise since it is common for financial assets to be volatile. Although there are cryptocurrencies out there that have been specifically designed to be less volatile than others (e.g., Tether), historically speaking cryptocurrencies have been among the most volatile financial instruments out there. This makes day trading cryptocurrency an appealing prospect for anyone who has some free time during the day
Cryptocurrency prices are especially volatile. Consider this recent example from the end of June:
Day 1: Ethereum falls from $319 to $288 (-9%)
Day 2: Ethereum falls from $288 to $260 (-10%)
Day 3: Ethereum rises from $260 to $287 (+10%)
Day 4: Ethereum falls from $287 to $245 (-15%)
Day 5: Ethereum rises from $245 to $268 (+9%)
“Whiplash” is a common term we use in the cryptocurrency world, as you can see why!
The cryptocurrency market is a relatively new market, and a lot of people are missing out on the long-term profits that are to be had. Cryptocurrency prices have been seeing huge highs and lows, but most people don’t know how to take advantage of it.
The reason that many people do not take advantage of the highs in the market is because they get scared when they see the market fall, so they sell and never buy back in. The other reason is that they think that buying in at a high will lead them to lose money when the market falls. This could not be farther from the truth.
The reason you want to buy when the market is high is because it gives you more room for profit when it rises again, as it always does. Yes, there will be times when the market does not rise again, but those times are few and far between. So if you want to make money with this type of investment, you need to learn how to recognize trends, and how to buy low and sell high.
Trading cryptocurrency is quite popular among younger investors. It’s not unusual for people under 40 to be interested in Bitcoin and other cryptocurrencies, and it can be a good way to earn extra income if you know how to trade properly.
But before you invest in any of these options, there are a few things that you should know about cryptocurrency trading.
The first thing that you should know is that the price of Bitcoin and other cryptocurrencies can go down as well as up. This means that when you buy into one of these currencies, you could lose money if the price goes down.
The second thing that you need to keep in mind is that when you trade cryptocurrency, the price can fluctuate wildly. This means that if you are holding onto a currency for the long term, then it might be better to hold onto it. If the price starts to fall, then you might want to sell it while the price is still high.
Thirdly, when you trade cryptocurrency, it’s important to remember that there are risks involved with buying and selling currencies as well as investing in them. You should always do your homework before making a purchase so that you don’t end up losing your money because of some unexpected event or security risk.