6 Important Things You Must Know Before Day Trading Bitcoin
The stock market, where transactions can only take place during working hours, is where the term “day trader” comes from. This suggests that day traders close their positions after each trading day to take advantage of any intraday price fluctuations.
Can You Trade Bitcoin During The Day?
Absolutely. It is more a matter of whether you can day trade cryptocurrency as it is how you can do it successfully.
The main goal of day trading Bitcoin is to capitalize on fluctuating prices. The short-term price swings that day traders seek are more easily achieved in the volatile cryptocurrency market. For example, it is unusual for the value of blue chip stocks or other traded commodities to increase by 10% in a single day.
Such cost increases are typical in the cryptocurrency market. To generate profitable trading ideas, day traders must use effective day trading tactics and familiarize themselves with fundamental and technical analysis. Bitcoin day traders can use indicators such as chart patterns, Bitcoin price action, volume and other price data to help them choose when to enter and exit trades and where to allocate capital.
Volume, support and resistance are the three primary concepts in day trading. You can copy-trade cryptocurrency by renting intraday trading robots or trading on your own.
When and how do you day trade with Bitcoin?
We know the viability and potential success of Bitcoin day trading. How does crypto day trading work then?
To maximize profits, day traders in cryptocurrencies such as Bitcoin often try to predict when the market will be the most volatile or liquid. Since most Bitcoin investors are corporations and other large entities, it is best to avoid trading on weekends when the market is closed (volume will be lower).
And given that we are discussing quantities here, an overview of auction market theory might be instructive. The asset’s stated price, the duration that determines the pricing opportunity and the volume – help determine the success of any auction or market. Volume matters most.
Skilled day traders will generally focus on value first, as this is the guiding concept of auction market theory. Inefficient markets, like today’s bear market, seek equilibrium or efficiency by correcting the imbalance that caused them. When market participants have different opinions about the correct value of an asset, the market trends either higher or lower until it reaches a new equilibrium point. When this happens, market volatility decreases and equilibrium is restored.
Successful day traders often use auction market theory, market and overflow dynamics, and volume profiles.
Avoid the FOMO trap when shopping
Traders who rush into the market without carefully considering their entry points are more likely to run into problems, which can lead to losses. Trading out of fear of missing out is usually a bad idea that leads to bad deals that can be prevented with discipline and excellent trading tactics.
Be careful of excessive trading
Rapid changes of mind and excessive trading can lead to costly mistakes. Bitcoin day traders can prevent overtrading by keeping their rational trading separate from their emotional trading. Successful risk management, an effective trading strategy and clear analysis will help them achieve this.
Do NOT risk more than you can afford to lose in the market
Limiting your exposure as a Bitcoin day trader will help you prevent catastrophic losses. Success requires measured risks, but only risk what you can afford. Traders should not risk more than 1% daily to avoid losing too much.
Caution is the name of the game
Bitcoin day traders should avoid trying to time the market manually at all costs. Trading Bitcoin manually will always be faster, more efficient and more accurate than using a crypto trading bot. One study found that algorithmic trading can complete a transaction in less than 10ms. Even though the time it takes to blink is only 300 milliseconds, we use the phrase “in an instant” to describe something that happens very quickly. Therefore, there are more viable options than engaging in manual day trading.
Conclusion
A common strategy for making money with Bitcoin is day trading. However, it requires extensive study and careful monitoring of your trading strategy and portfolio. It can be risky, but if you follow this guide, you’ll know what to think about going forward.
The McClatchy newsroom and editorial staff were not involved in the creation of this content.
