You've probably seen pictures of cryptocurrency traders flaunting their posh lifestyles on social media. You might be surprised to learn that the reality of day trading cryptocurrency is far different from what these websites want you to believe. There are some unavoidable harsh facts that you must be aware of if you want to day trade cryptocurrencies.
1. Crypto Day Trading Does Not Assure a Monthly Income
Even the most successful traders cannot guarantee a profit. The best you can do given the volatile nature of the market is to use a technique that has been backtested or tested on a paper market.
Profits and losses from a normal day trade are added up to provide a final outcome, which may or may not be greater or lower than the starting margin.
When you have a job, you nearly always receive your money at a set time. But with day trading, you never know when your profit will materialise. Keep in mind that there will be periods when you receive no pay.
2. You Can Lose Your Whole Profit or Account With a Little Mistake
Due to the high level of market volatility, a little error like a math error might result in a loss.
Errors include using a position size that is bigger than you anticipated, incorrectly arranging stop-losses and take-profits, choosing the wrong way to execute trades, and many more can cause you to lose months or all of your trading capital.
3. A Substantial Amount of Money Is Necessary to Generate Significant Income
To consistently make money day trading, a sizable commitment is needed. Your chances of generating sizable returns rise when you have a sizable beginning margin that allows you to invest more.
With a $100 account, you would find it difficult to support yourself through trading. To become a full-time trader or earn a career through cryptocurrency trading, you need thousands of dollars.
While it is feasible to begin cryptocurrency trading with a modest bit of money, traders who wish to continuously make high sums of money must either deposit the large sum into their exchanges or develop their trading balance into a large amount.
4. You Will Lose Money No Matter How Good You Are
Losses are inevitable in any game. No matter how skilled or experienced you are, you will still lose money. If you don't come to terms with this truth right away, you can start to believe that your approach is flawed or feel awful every time you lose a deal..
Short-term price volatility in the cryptocurrency market make it challenging to forecast the market's course. Even if you properly estimate the path of the trade, you might still lose because of other factors, such as a sudden price rise exceeding your stop loss before the deal proceeds in the way you anticipated.
Even the most seasoned traders lose transactions; some even lose more frequently than they win, but this does not always imply that they are not lucrative. Their overall profit is also influenced by a few other variables, including their risk-to-reward ratio and risk management strategies.
5. Trading Is Different From Many Other Ways of Making Money
When you day trade, you might not be actively working like you would at a regular job. You could spend the majority of your day doing analysis and then anxiously waiting for your setup to come together. You are not need to do anything else while waiting for a setup.
Waiting for your setup to materialise does not always entitle you to a whole day of freedom. To prevent missing your trading edge when it arises, you must regularly monitor cryptocurrency charts. You must remain glued to your screen or check it at certain times, such as right after each 15-minute candlestick closes.
Day trading is unique in that you are always trying to limit your losses. Regrettably, losses are a necessary component of trading, and traders must accept them. Naturally, typical businesses do not want to lose money, but this is not their primary goal.
6. Most Day Traders Give Up in the First Year
The majority of day traders give up after their first year because day trading is difficult. They have inflated expectations since they think they can benefit quickly and easily, which is one of the main causes. As a result, when these expectations are not satisfied, people give up, and many even lose their money.
Another factor contributing to traders quitting during the first year is the prevalence of inexperienced traders. Significant expertise and understanding are necessary for successful day trading, which you must develop via practise. However, many ambitious traders neglect their education in favour of making quick money.
Inadequate funds and poor emotion management are additional factors that frequently cause traders to give up early.
Don't Rush Into Day Trading
In order to properly day trade, you must comprehend and embrace certain unpleasant facts. While it is feasible to turn a profit day trading cryptocurrencies, you must approach the task with a realistic outlook and keep learning from your failures.
It is not a simple method to earn money, but day trading can be extremely rewarding as well as your worst nightmare if you are not familiar with how it operates before getting started. Spend some time learning how it functions and what influences market price movement.