Cryptocurrency trading completely changed my social life. It is a transition from stock trading, but some of the skills and setups do apply for both. Before you get started trading cryptocurrencies, you need to understand exactly what you are getting into, and have realistic expectations. I had to learn many tough lessons about cryptocurrency the hard way, so I thought I would make an article that would give newbie traders a heads up of what to expect from starting cryptocurrency trading.
24/7 Markets Are Draining
You do not know when a crypto is going to have a big breakout or breakdown (we short cryptos also). Due to the 24/7 markets, cryptos can make their move at any time. Trading them can become exhausting because you could be waiting all night for that move. I will often stay up late stalking for the move, but I cannot tell you how many times I have missed a big move that happened before I woke up.
It is useful to trade on cryptocurrency exchanges that have mobile apps and functioning stop orders to combat this. These will allow you to sleep at night without having to worry about the market crashing while you are asleep. My favorite exchanges to trade on are Kraken and Binance.
Cryptocurrencies’ Peak Volatility Hours Are Often At Night
Cryptocurrencies will often be the most volatile in the early morning hours. I have found that there is often peak volatility between 4am-7am EST. This means if you are on EST and are looking to day trade these, you may have to wake up early to catch quick moves. As day traders, volatility is your friend, as it allows you to capture big moves in short periods of time. The early morning volatility works out well if you have a full-time job during the day, as you can trade before you go to work.
Coins Take Longer To Consolidate
In stocks, you only have to wait 20 minutes to an hour to consolidate and make their move. In cryptocurrencies, everything takes much longer to make their move, because of the 24/7 markets. This means you have to be extra patient to wait for your entries and your exits.
Coins may consolidate for hours and sometimes days before they make their move. If you miss the initial breakout, it is not the end of the world. Cryptos will often retrace and retest old breakout spots before continuing. There is almost always an opportunity to get in on a pullback after a breakout or breakdown.
Appropriate Sizing Is A Must
Sizing your positions is important in any type of trading, but it is especially important when trading cryptocurrencies. Sizing too big will add a ton of unnecessary stress to your life. When you are oversized, it is hard to peel away from the screens because you are worried about it taking a big drop when you look away. Because of the 24/7 markets, it will be hard for you to get focused on other things besides your positions. If you size smaller, you won’t feel as stressed about moving your attention away from your positions. Unless you are a swing trader or longer-term investor, I’d try to avoid leaving a big position overnight.
Cryptocurrency Trading is NOT Easy
In 2017 all you had to do was buy cryptocurrencies on any technical breakout and you would see immediate follow through. It was considered a disappointment if you didn’t double your money within a week. However, in 2018 and 2019 reality has set in the cryptocurrency markets. Bitcoin and almost every other major altcoin have seen a huge retracement from their 2017 highs. Many wannabe crypto traders are under the impression that cryptocurrency trading is easy.
Unfortunately, it is no easier than trading stocks, forex, or any other financial instrument. In order to trade cryptocurrencies successfully, you need to develop a strategy with an edge, learn risk management, master technical analysis, and get a complete education on cryptocurrencies. In order to prepare traders to become successful cryptocurrency traders, we created a cryptocurrency mastery course that takes you from A-Z on everything you need to know about cryptocurrencies and how to trade them profitably.
Focus on Higher Time Frames
One of the biggest mistakes you can make as a cryptocurrency trader is to focus on the 5-minute chart. As we mentioned above, the 24/7 market makes everything take longer to make their move. This means you need to be focusing on the bigger time frames in order to accurately understand the crypto’s trend.
We recommend using the 15 minute chart as the smallest time frame to focus on, mainly used if you are day trading. Just like with trading stocks, you want to align your setups and patterns on multiple time frames to increase their probability of playing out. This means you want to align patterns on the daily chart with whatever intraday time frame you are on.
Get Started Trading Cryptos
Wondering how to get started trading cryptos? Check out our Cryptostreet trading community for daily trade ideas and market analysis.