|
In currency trading, the methodology adopted by a trader will determine whether he is classified as a Day Trader or a Swing Trader.
Day trading is a full-time job. It requires that you trade or analyze the market of your selected financial product/s practically every day. You’ll be hard press to even take a bathroom break when things are not in your way. You are required to make quick decisions on trading on the 1-minute, 3-minute, 5-minute or 15-minute charts.
Swing trading may have less trade decisions to make, but you are expected to develop a thorough trading plan with entry and exit points. The open trades could stretch from days to a week or two. You still have to watch your portfolio to ensure key levels are not breached. A minority of swing traders could do swing trade on a part-time basis and still turn a profit.
Both trade methodologies seek to make short-term profits based on price fluctuations in the market.
Understanding the above, the majority of “cryptocurrency” traders who have full-time jobs, will fall under the category of Swing Traders, naturally.
Commodities and currencies are known to be very volatile. The cryptocurrency space is simply much much more volatile than any other market we known today.
Take a Bitcoin 1-Hour Chart (29-Oct-17), for example.
It took only about 3.5 days to have one Bitcoin price, falling from the top $6,200 (21-10-17) to $5,400 (25-10-17), a drop of USD 750 (or 12% in value).
Percentage wise, it is equivalent to a typical bull run correction that takes about a year to happen in a stock market.
So, whether you consider yourself a “Day” or “Swing” cryptocurrency trader, the naming is meaningless. All trading in volatile cryptocurrency such as Bitcoin are speculative in nature (or a nicer word, “guessing”).
All are not loss on the above. The following 5 Tips of Trading on volatile cryptocurrency if practice diligently will improve your chance of making a profit in the long run.
1. Start small – don’t over-trade
The fact that cryptocurrency market is extremely volatile, with large gains and losses happening in a matter of minutes, it is important to keep the amount in the trade small (preferably 5% and no more than than 10% of your total investable assets). This should allow you enough money to play around with, but not so much that you will have years to playing the catchup, after a bad trading loss. Remember not to trade with borrow money (on leverage in your trading account). The chance of you losing your capital, due to margin call is extremely high!
2. All trading carries risk. Only risk capital you’re prepared to lose it all. Before you start any trade, have a thorough trading plan with entry and exit points in place.
3. Market can go south without any forewarning. If your cryptocurrency price reaches your stop-loss price, execute the cut loss plan without exception. Most people without a plan, will react slowly in “fear and hope” mentality, resulting in a even greater loss or a total loss of capital.
4. “Buy on news, sell on fact”
Take Bitcoin for example.
Buy on news Miners announced Bitcoin plan to underwent a fork some time in summer this year (Jun to July-17 period), there was a surge in interest in buying Bitcoin prior to that period. Reason: Existing Bitcoin holders were to receive a 1 to 1 bonus issue of Bitcoin cash.
Sell on Fact There was a drop in Bitcoin price after the the forking date was confirmed on 01-Aug-17.
There is a repeat of “Buy on news, sell on fact” in Bitcoin latest forking, to create Bitcoin gold. The new coins were created on 25th October and would be open to exchanges from 1st November this year.
5. All coins are not created equal, so don’t treat them the same way.
The world of cryptocurrency is diverse and growing rapidly, with new coins being created frequently.
To know more about current Top 5 Cryptocurrencies & Its Uses, please read my recent post, using this link.
Remember Warren Buffect’s top tip of investing.
“Rule No. 1: Never Lose Money”;
“Rule No.2: Never Forget Rule No. 1”
Buffett personally lost about $23 billion in the financial crisis of 2008, and his company, Berkshire Hathaway, lost its revered AAA ratings. So how can he tell us to never lose money?
He’s referring to the mindset of a sensible investor. Don’t be frivolous. Don’t gamble. Don’t go into an investment with a cavalier attitude that it’s OK to lose. Be informed. Do your homework. Buffett invests only in companies he thoroughly researches and understands. He doesn’t go into an investment prepared to lose, and neither should you.
The last point implies that you should actively manage your cryptocurrency portfolio. That is the most fundamental way to manage your holdings in traditional investing and also this one.
Flash News (31-Oct-17): CME Group Inc. is planning to have Bitcoin Future Contracts listed in its exchange before end of this year – The implication is volatility of Bitcoin currency can be hedged! It addresses a major concern of Bitcoin’s usefulness as a stable stored currency.
CME Group Inc. (Chicago Mercantile Exchange & Chicago Board of Trade) is an American financial market company operating the world’s largest options and futures exchange.
For cryptocurrency starter, you may like to consider opening an account with Coinbase, a secure online platform for buying, selling, transferring, and storing digital currency.
Note:- If you buys or sells US$100 of digital currency or more through Coinbase using this link, you and your referral will both get US$10 worth of free bitcoin.
Disclaimer: This article should not be taken as, and is not intended to provide, investment advice. Please conduct your own thorough research before investing in any cryptocurrency.
If you’ve any comment, please drop me a line.
Thanks for dropping by.
Reuben Ong
[wpforms id=”410″]