The cryptocurrency market does not have time restrictions, unlike some other trading markets. This provides plenty of trading opportunities for short-term traders.
With cryptocurrencies, such as Bitcoin, there are a lot of exciting market movements that short-term traders may seek to benefit from.
There are different types of short-term trading depending on how quickly you realize your profits. They are separated into hours, days, and weeks categories. In general, the shorter the time frame of trade, the greater the risk involved.
For a short-term trade to succeed, it is crucial to understand several essential concepts and develop a risk management strategy. Since the crypto market is relatively new, it is vital to understand these concepts.
However, to successfully navigate the world of trading, there are some tips that cannot be overlooked. Here are a few;
Know Your Trading Time Frame
Before you start to trade, you should identify the trading strategy you are going for and its clear purpose. For example, as highlighted in an article by a trading platform, IG, a trader may want to day trade, swing or scalp the market. These trading strategies are dependent on time constraint and risk appetite.
Scalpers profit from small price swings by opening short-term positions that last between seconds and minutes – but usually not any longer. This trading style is the shortest.
A day trader buys and sells assets within a single trading day, so they don’t have to pay
overnight costs. They exploit small market movements by trading frequently throughout the day.
Swing traders seek to take advantage of a significant movement that could last several days or weeks. In addition to taking advantage of short-term movements, they also take advantage of medium-term movements.
By defining your time frame, you can determine the level of risk to take, how much money to invest, and how much time to spend trading. Maintaining alertness is very important since you will need to develop strategies, identify opportunities, and manage your risk at various points during the trading session.
Trading is a risky endeavour, no matter how long the time frame you choose. New traders are highly advised to start with a small amount of money. As time goes on, you can gradually increase your capital as you gain experience. To learn more, click here for more resources.
Carry Out Technical Analysis
The basis of technical analysis is reading and analyzing charts. It is market forecasting that evaluates and analyses the market by comparing the past with the present. According to Kriptomat, it is looking out for market correlations by comparing price charts for different coins.
You might consider checking the correlation between the coin you wish to trade and Bitcoin. Find out whether it moves in the same direction as Bitcoin’s price in different periods.
By technical analysis, you can identify trending patterns in price fluctuations of other cryptocurrencies. As opposed to looking at a coin’s long-term strengths, it’s more important to recognize these trends when trading and use them as a guide. This is an essential tool when dealing with short-term trading and to determine how to gain profits while others are uncertain.
Don’t Trade Emotionally
Taking the time to learn technical and fundamental analysis is undoubtedly a challenge, but it isn’t the most difficult. Instead, trading is most challenging when traders have to manage their emotions and stay disciplined enough to follow the strategy instead of following emotion-based impulses.
Fear of missing out (FOMO) is one of the top reasons why traders run into losses. The most successful traders know they have to overcome their natural emotions of hope, greed, panic, guilt, and excitement. Traders are not meant to be gamblers; they are intended to be rational, strategic planners.
Have a Profit Target
Short-term trading involves a considerable amount of risk, so it is essential to minimize risk and maximize return. You need to know when to exit any trade, regardless of whether you have made a profit or not. Set a stop-loss order to limit your losses. By placing this order, you’d minimize loss as much as possible.
The same holds for profit levels. If your goal is to exit the market when you have reached a certain profit amount, stick to it. Stay disciplined!
Trade Only with Familiar Coins
Because there are thousands of coins on the market, it would be best to start trading with coins you understand, have analyzed, and know. As a rule of thumb, never trade in an asset you don’t understand. Conducting thorough research before investing your money is essential. Trading is not gambling.
The bottom line is that short-term trading is a very profitable way for traders to seize on small price movements that might otherwise go unnoticed when looking at the more significant trend.
Short-term trading is not without additional risks and costs. All of these should be considered before making a trade. As rightly mentioned by Investopedia, the ultimate goal of all trading strategies is to reduce losses to a minimum and maximize profits.
