The cryptocurrency market has become the new playground among day traders. The first thing cryptocurrency traders need to do is choose the best help available for providing technical analysis for their trading plan to help avoid making costly mistakes in their crypto investments.
Trading, not Gambling
Both trading and gambling involve an element of risk, you make a bet and wait for an outcome. However, what separates trading cryptocurrencies from gambling is risk management. Buying digital currencies without assessing the risk is equivalent to gambling and is a common mistake of inexperienced traders.
Cryptocurrencies are volatile. It is essential for crypto traders to have an effective risk management strategy. A sensible approach would be to use a stop-loss order and risk an amount you’re comfortable with losing.
Choosing a Trading Platform
US-based traders must use only domestic regulated crypto-trading platforms, which is a significant factor to consider when researching which crypto platform to use.
When choosing the right trading platform, traders also consider exchange liquidity, financial asset liquidity, and fees. Crypto market volatility causes the value of market price to fluctuate wildly. To maximize profits in this market quickly, traders need to make moves fast. For a novice trader, the options among the many crypto exchanges can seem overwhelming without trading skills.
When looking at different trading platforms, here are the main things to consider:
- Years active: A long history of providing quality services is a sign of reliability and credibility.
- Exchange Support: Knowing what cryptocurrencies are supported by an exchange can be useful when weighing which platform to use. Traders may find more utility in a smaller exchange with support for their preferred cryptocurrencies and trading pairs than in larger exchanges.
- Fees: Transaction fees are what an exchange charges when buyers or sellers execute trades. Exchanges charge users fees to monetize their business. The fee structure varies depending on the exchange’s approach, like charging no trading fee on trades over $10,000 to encourage large-scale trades.
- Deposits: Like a brokerage, users must finance their exchange accounts with capital. Some exchanges allow for bank transfers and wires, but few allow for credit card funding, PayPal transfers, and gift card transfers.
- User reviews: Visiting different popular cryptocurrency communities and reading user feedback can be one of the best ways for you to evaluate which exchange to use.
- Liquidity: Liquidity is the speed at which an exchange converts one asset into another without changing its price. The best cryptocurrency exchanges are highly liquid, which means they can buy or sell cryptocurrencies almost instantly and with a minimum difference in price.
- Another thing prospective traders need to consider is that they should weigh whether they want to trade on an exchange where it’s easy to send their crypto assets to another crypto wallet of their choice. Your exchange should make it easy for you to transfer funds or assets from your account to an off-platform digital wallet.
Cryptocurrency day trading involves frequent purchases and sales of cryptocurrencies in the pursuit of short-term profits. If you’re planning on day trading crypto, you should know where you plan to trade, have a detailed day-trading strategy, and stick to your entry and exit points.