Day Trading Bitcoin: Is It Profitable?
So you want to try your hand at day trading the Bitcoin; but, is this a lucrative option? This is a question that bothers most of us who are not really aware of the right method of trading when it comes to crypto trades. The truth is that day trading Bitcoins will only be profitable if you can manage risks better than average traders. The simplest way to make profits is to simply accumulate the crypto asset and wait for a bull cycle.
Day trading, on the other hand, can be quite hectic and stressful for the trader. It is simpler to stick to the swing trade strategies but this demands a lot of expertise and patience and you may have to wait for months on end for trades to become successful. When you day-trade, if there is a loss, there is some profit that the exchange and the counter parties are making; so, you will be losing money in any case.
Some individuals are more adept at day trading just like some people can play better poker. There are some techniques that are of use to day traders. So, when you have a good strategy, you can make one trade and boost your position right away, as happened in 2018 when the Bitcoin value hiked over 10% in one minute. But, if you are someone who shoots in the dark, you are trading without a strategy in place and you are liable to take a huge hit in that minute.
What are the common mistakes that do not make day-trading profitable?
Day trading implies making trades every couple of minutes, but it does not mean that every second you will detect a potential trade. Rather, you may be more successful if you were to take ample time and identify opportunities that assure you of returns and execute your trades from time to time.
- If you start day-trading on emotions instead of going by technical analysis, you are likely to end up losing a lot of money. News cycles will influence you so much that you start taking decisions based on emotions alone. Instead, if you could try and come up with your own strategy for day trading, and use your own indicators and rules, read the news without trusting it completely, and make decisions not based on hearsay, you may be successful.
- If you use the wrong tools you can lose money in day trading. Wallets like Ledger or Trezor have been created to ensure utmost security but they are not suited for day trading. This is because time taken to confirm transactions from such wallets can delay your trade where time is of utmost importance. So, to be successful, you must keep your crypto coins in an exchange in which you day-trade.
- It is often easier to make an entry into a position rather than to exit from it. Some exchanges have healthy liquidity while some are quite illiquid. When you get stuck with the latter, you may miss the chance to make profits because you are forced to stick to a position for a far longer time than you wanted.
- While technical analysis helps in day trading, it is also rather risky to focus excessively on such analysis. You may end up overlooking what is happening in the real market. Instead, you must be in touch with the latest news in the crypto world and analyze prices, not simply from charts. Besides, you must use stop-loss orders in order to ensure that losses are mitigated.