Traders who are interested in dipping their toes into the world of cryptocurrency should learn a few things about how the industry operates to understand their day trading opportunities better. The ups and downs of any cryptocurrency will provide the rush that day traders seek, but the volatility can lead to unexpected results. The best tip we can give is to educate yourself on how the cryptocurrency market works, but you should keep these extra tips in mind when trading.
Learn How Blockchain Technology Works
The underlying technology behind cryptocurrency is called the blockchain. It is a record that cannot be edited, that keeps track of every single transaction that takes place on the network, so you can be sure that funds are where they say they are. Think of this as the difference between passing a document back and forth in an email chain and using an online editor like Google Docs. When you pass documents back and forth without a cloud copy, you have to wait to receive the edits before you can make more edits of your own. With cloud documents, the most recent and up-to-date version of the document is available at all times. All changes are recorded in the revision history, and this is precisely how the blockchain works with its cryptocurrency transactions.
Learn the Ins and Outs of Popular Coins
It can be tempting to get into day trading altcoins that are only worth a few bucks, but you should set your eye on more established cryptocurrencies like Bitcoin and Ethereum to start. These cryptocurrencies have the highest volume and the most opportunities for riding a bull wave to make a profit on a given day.
Become an Avid Consumer of Cryptocurrency News
If you’ve been day trading stocks and securities for a while, you know how important it is to keep an eye on the news related to your chosen sector. That remains true of cryptocurrency news with one caveat. Because BTC acts as the gold standard in the cryptocurrency universe, you should always keep your eye on how it is performing whether you are trading it or not. Some resources that are great for daily cryptocurrency news include CoinDesk, Bitcoin Magazine, Coin Telegraph. There are also a handful of subreddits dedicated to discussing cryptocurrency, but these are not as helpful considering the lack of moderation.
Cryptocurrency Trading is Inherently High-Risk
Most day traders feel as though with an innate understanding of their trading sector, they can consistently make money on the marketplace. Day trading is always riskier than buy-and-hold strategies, but day trading cryptocurrency ratchets that up to another level. Those massive 139% gains you see on social media can seem like you should go all-in on cryptocurrency, but nobody ever advertises their -100% losses. Keep this in mind when you’re trading and realize that any negative news about a specific cryptocurrency can send all of them spiraling.
Professional Exchanges with High Volume are Preferred
With the cryptocurrency boom, new exchanges are opening left and right. However, only a handful are equipped to offer the kinds of market monitoring tools that day traders need to succeed. Consider exchanges like <Kraken and Coinbase Pro for your needs. If you want to trade on a high-volume network, Bitfinex is your best option.