As any day trader will tell you, whether you’re trading stocks or cryptocurrencies, there is risk involved. Meticulous management of this risk is how day traders are able to profit on a consistent basis, and while all traders have their own preferred strategies for trading and managing risks, there are a few basics that should always be kept in mind.
1. The first and most important thing to remember is that in order for someone to win, someone else has to lose, and for this reason one should never invest more than they can afford to lose. Day trading is similar to traditional forms of gambling in that it is essentially people competing against each other for profit/wins. It is quite a bit less luck dependent and requires research and knowledge about the investments, however it still requires one to put their money on the line, with the hopes of winning someone else’s. The competition in day trading is tremendous, in both numbers and skill. I’m quite sure it’s safe to assume that the majority of day traders are very wealthy investors and have more than enough time and money to learn how the markets work and how to profit from the fluctuations. Another tough competitor you’ll be facing as a day trader is the computer automated traders, or bots. Bots cause the prices to move extremely rapidly and erratically because they can trade 24/7 on their programmer’s behalf. On top of that, there is a built-in disadvantage in the form of a fee when trading on an exchange, making trades much less profitable.
2. The next thing to consider is the practicality of one’s investment. While gold can be used for a multitude of things, including electronics and jewelry, many investors still would be surprised to hear that Bitcoin may be similarly useful. The blockchain technology is set up very well to lead a technological revolution as far as the global economy is concerned. It makes room for far more than just an average financial transaction between consumer and business, it will allow any transaction of any type, between any two parties. All of this being said, there is a rather large number of alternative cryptocurrencies that could help or hurt the market in several ways. Sadly, there are many cryptocurrency developers that have developed either poorly made, or completely scammy coins, which have claimed a decent amount of trust and money from the community. This has, unfortunately, been a “not so friendly way” to remind the average investor to be wary of who is considered trusted. It is one thing to invest in a company listed on any stock exchange, as they are regulated quite strictly (and it could still be pretty risky), however, investing in a digital currency that has not yet made it mainstream or even seen reasonable regulation, leaves plenty of room for foul play.
3. Cryptocurrency, like Bitcoin, has finally proven that digital, near-instantaneous financial transactions are possible without a company being required/paid to log all of your personal data (VISA, MasterCard, etc), and, personally, this is one of the main reasons I look forward to using Bitcoin and other cryptocurrencies in the future. This gives cryptocurrency the value it currently has, and certainly leaves room for growth.
My last piece of advice for trading cryptocurrencies lies in knowing what you’re getting into. I’ve already explained that it is a risky market and that it might not suite the average investor. However, if you already know the difficulties that lie ahead in the world of cryptocurrency, then you are likely not afraid. The most important thing now is faith. The concept will either succeed due to it’s incredibly well-written code, or fail due to a better written version of a similar concept. Either way, I would expect to see digitally transferred currency as a growing part of our future, and I doubt we’ll see anything capable of replacing Bitcoin within our lifetime.
Source: blog.cex.io
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