In the stock market world, there are those who can make a great deal of money by day trading. In order to do so, however, it takes the ability and the discipline to follow a proven system. Otherwise, you could be out a lot of money very quickly.
Although many of the more conservative buy-and-hold investors tend to shy away from rapid up and down price movements, the volatility in the price of assets is exactly what attracts most day traders as it is typically viewed as a potential for high profits.
Today, as Wall Street starts to get more involved in the day trading of Bitcoin, it is becoming more necessary for traders to have a proven system to run on in order to make money in this area of trading.
Tips for Successfully Day Trading Bitcoin
When starting out in trading Bitcoin, it helps to have a Bitcoin day trading guide. This way, you will be able to ideally follow through some examples and even a day trading tutorial for various situations that may come up.
Prior to even getting started, however, there are several tips that it is essential to keep in mind when day trading Bitcoin. These include:
- Understand the basics of technical analysis. When trading in Bitcoin – or in any type of asset – it is vitally important that you have a thorough understanding of technical analysis. This includes learning how to read all types of charts for the prediction of up and down trends. This will help you with the identification of buying and selling points. There are many free resources online – including downloadable trading manual PDF options – where you can obtain information regarding technical analysis. Likewise, you can also obtain a number of very good trading books that will go into a great deal of depth about this topic.
- Know the asset that you are trading. Just as with trading shares of stock, it is essential to understand Bitcoin before you begin to day trade with them. Unfortunately, there are scam artists out there in the Bitcoin world running similar ploys to the “pump and dump” penny stock schemes, so beware before diving in.
- Always have an exit plan. Before entering into a trade, you should always have an exit plan. This is the case whether you are exchanging Bitcoin or simply buying at a particular time. When doing so, you should also take into account the amounts that are charged in transaction fees by the exchanges, as this will have an effect on your overall profit.
- Track all trades for tax purposes. All investment gains and losses should be tracked for tax purposes – and day trading should be no different. The IRS (Internal Revenue Service) will want to know if you made or lost any money throughout the year. If you had profits, you will need to pay your share of tax on them. If, however, you had a loss, you may be able to write it off. In any case, be sure that you have records of all transactions and exchanges, including any amounts and dates.
- Never trade with funds that you cannot afford to lose. Although this is listed as that last in the list of tips, this rule of thumb should always be first in your mind regarding any type of day trading activity – never, ever day trade with funds that you can’t afford to lose. While there is certainly profit potential in this type of venture, there is also a great deal of risk that is involved – especially in the beginning when you are still learning the ropes. Therefore, you must be sure that you are not gambling with money that should otherwise be used to pay your rent or other important household expenses.
Where to Day Trade Bitcoin?
Currently, there are several online Bitcoin exchanges that are available where investors and day traders can go to either purchase or trade Bitcoin and other types of virtual crypto-currencies. These currently include:
Some of these exchanges are better than others in terms of the speed of the transactions, as well as the variety of other crypto-currencies that are available for sale to traders who are using the site.
Learning to Trade Bitcoin the Right Way
If you want to learn how to do anything right, the best way possible is to follow in the path of someone who has successfully done it before you. Simply jumping in cold to Bitcoin day trading is not recommended.
Rather, learning how the process works, getting an understanding of ways to predict the market, and even grasping what methods are available for trading are essential for traders to learn prior to starting day trading in any market – and especially in an area as new as this one.