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February 24, 2018, 03:36:41 PM |
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Disclaimer – I am not a financial advisor. Invest and trade at your own risk. The following is my opinion.
Day trading is described as buying and selling a coin with 24 hours. Swing trading can be defined as buying and selling coins over the course 2 – 6 days up to a couple weeks. A few of my trades are executed within minutes. Here are the 3 things I would suggest that will give you an edge in day trading altcoins. Altcoins are any coin that is “alternative to bitcoin” as bitcoin was the first cryptocurrency. Most if not all altcoins are affected by the rise and fall of bitcoin. I want to talk about 3 ways to holistically look at crypto day trading. This will be the beginning of a series on day trading altcoins. Here we go:
1. Research Coins
When researching altcoins it helps to first learn about the coins in general. While you can look at a chart and technically analyze it to make a decision to buy/sell it helps to get more information to maximize your profit. Go to one of the exchanges such as Binance.com or Bittrex.com. These are the exchanges where users can trade altcoins for bitcoin, Ethereum or USDT (which is no to be confused with USD). Go down the list of coins and further read about each one. Here are the most common places to do research on altcoins. Of course, each coin should have a website with a whitepaper that will tell you more about the use of the coin, and the technology backing it as well as the development roadmap the coin is following. Pay attention to this roadmap as it will usually call out specific dates the coin will hit major milestones. These milestones can vary from ‘creating a wallet’, ‘launching product on blockchain mainnet’, etc. The reason to pay attention to these is because it usually affects the price negatively or positively depending on how the community behind the coin interprets the achievement.
When you see a major rise or fall of a coin it means there was some sort of news behind it. Now the trick is to try and get in on the information as early as possibly to be part of the rise or avoid the fall. I know this sounds obvious but a lot of day traders just look at a coin chart and think they can determine where its going based on technical analysis alone.
2. Have a Strategy
When looking at an altcoin to trade determine a couple of things beforehand.
– First, determine the best entry or buy price based on your research and try to get in at the lowest point possible for the day. You can do this by looking at a day chart and by comparing the previous day open and close coin cost. While this is not 100% bulletproof you can get a feel for how high or low a coin will fall based on past data. Don’t buy when a coin is at its all-time high unless you are convinced this coin will just continue to skyrocket.
– Don’t get too greedy – In traditional trading day traders would be incredibly happy with 1% – 2% gains in a day or even a week. In altcoins the volatility is so high that it is not uncommon for you to make 30% gains in a week. (This is not saying you will but it is possible). If you see a coin rising a falling between 5% and 15% most days, set a sell to get out around 7 – 10% and don’t try and catch it at the top every time. If you try and catch a coin at the top too often, you will find yourself stuck in a trade that will make you wait longer to sell or never recover.
– Determine your level of risk – In other words, analyze the coin and try and determine its day range on average and try and pick a reasonable sell position if it falls below a certain point. It is just as important to determine and set stop losses as it is to set a sell at the gain you are trying to achieve.
3. Analyze the Charts
If you are going to day trade or swing trade then you have to at least know the basics of chart analysis. You can also use some of the really helpful chart indicators that help you determine the direction of a coin such as MACD (Moving Average Convergence Divergence), EMA (Exponential Moving Average) and a few others. Of course, no one can predict for sure which way a coin will move but based on technical chart analysis you can make a better-informed decision based on the statistical probability that a coin will move based on the analysis. This along with all the other research will give you a better chance of making a smart decision.
Goodluck.
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