The cryptocurrency market is widening with each year that passes. In 2020, cryptocurrencies can now be used to execute more transactions. These digital currencies are being used as a form of payment for goods, for sending money to someone in any part of the world, and as an asset for trading and investment.
The market for cryptocurrency trading has also seen a rise in participants, as traders and investors are aware that they can earn a profit in this market due to its volatility and volume. Are you interested in trading cryptocurrency? Learn how to make money day trading cryptocurrency with this simple guide!
Since its inception in 2009, Bitcoin’s value has shot up the charts to around $10,000 in 2020! The value of digital currencies has continued to increase due to a rise in market caps, an increase in demand, and wider adoption by different businesses and platforms.
To be able to make money day trading, you will need to be familiar with how to read and analyze trading charts, and how to apply strategies based on these charts. Continue reading to find out more.
Understanding Technical Indicators
Technical indicators will help you in your quest to earn a profit through day trading. You cannot begin to trade if you do not understand the basics of the trading chart that you will be looking at. There are many technical indicators that you need to understand to gain an advantage as a day trader, and just a few of them are listed below.
Relative Strength Index (RSI)
The RSI of a cryptocurrency determines whether the coin’s value, as reflected by its market price, is moving farther from its true value. Understanding the use of RSI is very helpful to identify when to buy or sell.
Most trading exchanges can compute the RSI automatically for you with a few clicks of the button. The RSI will always be a number between 0 to 100. An RSI less than 30 means that a coin is being oversold, while an RSI that is over 70 means that it is overbought.
When a coin is oversold, it is being undervalued. This can possibly indicate a reversal in the coin’s trend. However, when a coin is being overvalued or overbought, it can suddenly experience a pullback or a downtrend in value.
Moving Average Convergence Divergence (MACD)
The MACD is one of the most used technical indicators in trading cryptocurrency. This indicator will show you two lines on the chart, a signal line and an MACD line. If the MACD line crosses the signal line in an upward direction, you can expect an upward trend. On the other hand, if the MACD line crosses the signal line in a downward movement, it may be a sign for you to start selling your coin.
In a volatile market like cryptocurrency, the MACD should be used along with other technical indicators. This is because the MACD line and the signal line can cross multiple times in one day, leading to false predictions and failed trades.
Bollinger bands help identify when a market is highly volatile or not. When using this on your chart, you will see a moving average line that is sandwich by the Bollinger bands. These bands will move farther or closer towards the center band depending on the price actions in the market.
If a band is moving farther away, market volatility is high, and when a band is moving closer to the center, volatility is relatively low. By using these Bollinger bands, it will be easier to formulate predictions about the price movement of a coin.
Tips to Earn from Day Trading
Understanding the chart indicators is the technical aspect of day trading cryptocurrency. It is also important that you know the other sides of trading and the market to get a more complete picture of how you will be able to earn from day trading.
Study the Market
The first thing you must do is study the market. Cryptocurrency can give you good returns, but it is not for everyone. Take the time to read up on cryptocurrency, the price movements, the history of the coin, and the most highly valued coins today.
Gaining all the knowledge that you can before beginning to trade is important to minimize risks and avoid losses. If the goal is to make money by trading coins, you must prepare yourself as much as you can.
Stick to your Strategy
Once you have studied all you can, and you have chosen the strategy that you feel will work for you, stick to it! A common mistake of day traders that are just starting out is that they get messed up by their emotions. This means that when a strategy doesn’t work out on the first trade, they will immediately switch to another strategy.
Stick to your strategy and follow your plan. A lot of day trading strategies involve some waiting time. Don’t get disheartened immediately if you see a negative sign on your supposed profits during the first few hours of the day. Remember, you have the whole 24 hours! Give your strategy some time to work.
Here is another common mistake of a day trading beginner: investing too much all at once. Trading comes with risk, and as a beginner, you should do your best to minimize these risks. How, you may ask? Start small. Start with a capital of around $500 to $1,000 and work your way up once you have your strategies figured out.
One of the most repeated rules in cryptocurrency trading is this: “Never invest more money than you can afford to lose.” Want more awesome tips on day trading cryptocurrency? Go here!
There you have it, a simple guide on how to make money day trading cryptocurrency. Day trading is not for everyone, that is why it is important that you first study about it and practice trading. But if you do find that day trading is for you and you are ready to do it fulltime, you can earn up to $100 in a single day.