Rookie Mistakes To Avoid When Day Trading In Crypto

Trading in cryptocurrency is a trend that is catching up fast with trading in other instruments like stocks, currency pairs, commodities, and derivatives. The volatility in this sector is high. It helps in making good gains through day trading. Low volatility instruments don’t provide so much profit as these high volatility instruments provide.

The potential profit-making opportunities can be very lucrative. However, there are many pitfalls that the trader should be aware of. There are many places to learn about what a trader should be careful of when day-trading in crypto. The best place to learn cryptocurrency trading is definitely in the market itself.

Here are a few pointers that help avoid rookie mistakes when day-trading crypto.

• Keep emotions out of the trade: The worst enemy of a trader is emotions because there can be a lot of news in the market that can trigger feelings of FOMO (Fear of missing out) or FUD (Fear, Uncertainty, and Doubt). These can cloud the decision-making capability of the trader and prompt into trades that otherwise the trader would have avoided. The key is to trust the process and rely on analysis over anything else for making and exiting trades. Proper analysis and a proper trading strategy are the keys to making the most out of crypto trades. News, blogs, opinion of others, etc., can make a base on which a trader can develop their trading plan, but the final call for any trade must come through the trader’s own analysis and trading strategy.

• Choose the trading tools carefully: One size fits all is the worst strategy that any trader can have. There are many products in the market that a trader can choose. These cryptocurrency products have been made keeping different uses and purposes in mind, and not all products are meant to help in day trading. The results can differ massively. Some of these products can help in improving the profits of the trader. Whereas some of the products can result in reducing the gain. The perfect example is hardware wallets meant to hold your cryptocurrencies for a long time. Transferring crypto assets from these wallets to an exchange for trading can take a lot of time, resulting in reduced profits. The right strategy would be to hold the assets in a hardware wallet that you want to keep for the long term but keep your day-trading portfolio in an exchange.

• Avoid locked-in positions by making the right choices: Given the right situation and compliance with the trading strategy, it is easy to get into a trade. However, exiting at the right time is critical to maximizing the possible profits. There can be multiple reasons why a trader can fail in squaring off on time. The exchange may not have enough volume, or the cryptocurrency may not have enough volume. To avoid these situations, the trader should choose the proper trading exchange with enough volume, and the cryptocurrency should also have sufficient volume to execute the trades when required.

• Rely on technical analysis but don’t overdo it: One should rely on technical analysis and not fall prey to emotions. However, when a person goes overboard with indicators and technical analysis, there is a chance that traders will stop looking beyond these. The chart may give signals of buying or selling a particular instrument. However, the trader should also look into the total crypto market to see the overall trend.

• Spread is vital to get the best prices: The general tendency of traders is to check the top of the order book and trade based on the prices given on the top of the order book. This is a mistake that can affect the profit negatively. The prices shown on the top of the order book are the most extreme buying and selling bids. There is a lot more to look for getting the complete spread. If a trader checks the depths of the order book, the trader can get much better deals.

Profitability in cryptocurrency trading can be increased by avoiding these pitfalls as a day trader. The market of cryptocurrency is indeed ready for more traders. As the cryptocurrency day trading scene evolves, day traders should be prepared to make the most of the opportunities. 

Editorial Note: This is a sponsored article. Opinions expressed are solely those of the sponsor and readers should conduct their own due diligence before taking any action based on information presented in this article.