In the previous blog, we discussed at length how to earn money through mining cryptocurrencies. Today, I intend to help you choose a cryptocurrency for day trading. If you happen to have enough experience, it is not that difficult to make money and earn profits from trading almost any coin on the cryptocurrency market. However, if you are a beginner, things are different.
The first thing to do is to determine your purpose for day trading. Ask yourself whether you want to have a secure, long-term investment with modest profits, or you would instead take the risk and make more money on short-term investments. Once you figure out what you want, the next step is to decide on an exchange from where to launch your day trading career. You can choose from multiple trading platforms, including cryptocurrency exchanges, day trading markets, etc.
In addition to a suitable trading platform, Day traders need to look for trading volume, trading fees, and liquidity aspects of the various exchanges. Once they make their decision, the next step is to choose a cryptocurrency.
As a day trader, you need to consider both the trading volume as well as the price of the coin you are interested in. Generally, if you find the cost of a specific currency to be quite low, it is quite likely that it could be risky and vice versa. From another point of view, the low price could mean there are more profits involved.
What is day trading? And why cryptocurrencies are perfect for it?
Day trading offers investors an opportunity to earn profits from price movements without having to own the underlying asset. Trading apps have become favorite tools for short-term speculative trading as day traders rarely hold them for longer than a day. The trick is to focus on more liquid markets by placing several trades in a trading session.
Most investors trade cryptocurrencies on cryptocurrency exchanges. However, margin trading offers an alternative option – involving price movement speculations – to trade cryptocurrencies.
Cryptocurrencies are perfect instruments for day trading because the spreads are usually lower. Cryptocurrency exchanges, on the other hand, do not have swaps, which makes them ideal for long-term investments but not suitable for short-term day trading and swaps. In day trading, you can make more money with small price movements.
How to choose the best currency for day trading?
One of the most critical steps, when you decide to start trading, is picking the right currency combined with the right trading strategy. Choosing the right currency will spell the difference between earning and losing money, so you need to be extra careful.
So now that you have made up your mind to start trading, you need to know that day trading is not everyone’s cup of tea. You have to understand and be confident of your motives and goals, and also be comfortable with the market. This will require continuous practice and learn on a daily basis throughout your journey as a day trader. You need to undertake a careful technical analysis of the market before you jump start because if anything, the cryptocurrency market is exceptionally volatile.
That being said, let us now look at some of the best currencies for cryptocurrency day trading. The first rule of thumb is that the more liquid a currency is, the better it is for day trading. The volatility of the coin is one of the main attractions for short-term day traders as it gives them a chance to make money on swaps quickly and with the freedom to get in and out of the market. You can trade using any currency – Bitcoin, Ripple, Ether – as long as it gives you the needed volatility and flexibility to liquidate on short notice.
Generally speaking, the top cryptocurrencies are Bitcoin, Bitcoin Cash, Ether, and Ripple, as all of them enjoy a market capitalization over $20billion. What is more, they all offer ample liquidity, which makes them excellent choices for day trading. All you need to do is to keep an eye on the total number of a particular coin in circulation and whether more coins can be printed.
What is the difference between bitcoin and other altcoins?
If you plan to trade in cryptocurrencies on a regular basis, then you must understand the similarities and differences between different trading systems, financial products and the coins traded on them. Since day trading is at best a zero-sum game, not all traders make gains from trading. For everyone who benefits, someone else loses. There are more than 4,000 different types of altcoins in existence. These are supposed to be Bitcoin clones, seeking to improve on the ideas Bitcoin represents.
Most altcoins are traded according to the value of the Bitcoin. Bitcoin value has an inverse relationship with the value of most altcoins. You should keep in mind that Bitcoin is a volatile asset, so conditions for trading for both Bitcoin and altcoin are uncertain and at best speculative when it comes to day trading. The wisest course of action on a rough day is to have close, short-term trading targets, or to withhold trading when the value of Bitcoin moves sharply.
If you do not prefer to trade Bitcoin against fiat currency markets, then you can choose to buy altcoins instead. However, the altcoin market is dominated by large sharks who are just waiting for beginners to make mistakes.
Remember that the best strategy is to start slowly, with small amounts of money invested in trading cryptocurrency.
If you want to profit from the bitcoin and other altcoins price volatility, trading is your best option. However, it’s very difficult to predict how the crypto prices will change. That’s why it’s best to use a demo account for a start or a live account with little money on it. To do it you’d need a trading platform with no minimum deposits. If you want to try crypto trading check out SimpleFX WebTrader.
You can test it with a fully functional demo or a live account with some funds for start.
