Skip to main content

Discipline is Key for Crypto Day Traders, Analyst Says

Cryptocurrency day traders should stick to their goals and don’t let the market bully them, an industry analyst says.

When day trading in the volatile in the cryptocurrency market, discipline is key, a market analyst said.

Searches for "how to invest in crypto" increasing by 1,350% in the last 12 months and DailyFX said it has designed a guide to help day traders navigate the cryptocurrency market with control and confidence.

Nicholas Cawley, a strategist at DailyFx, said "it is extremely important to know why you are trading cryptocurrencies and what you are looking to get out of it."

The volatility of cryptocurrency is one of the main draws for short-term or day traders as it gives them the opportunity to get in and out of the market. 

"Stick to your goals and don’t let the market bully you into trading when you do not want to," Cawley said. 

There have been many examples of cryptocurrency exchanges. 

Some of fared worse than others: The cryptocurrency Squid suddenly closed down, with clients losing some or all of their money. But others, including bitcoin and ethereum, contain to capture investor imagination.

Cawley said that's where opportunity may lie.

TheStreet Recommends

"One of the main ways that traders lose money is by losing discipline and chasing losing trades or by ‘doubling down' on positions that are going against them," he said

"This is the market controlling you and taking your money right in front of your eyes."

Traders should choose their marketplace carefully and make sure liquidity, reliability, and if possible market regulation is at the top of their list before entering any trade.

When entering a trade, traders are advised to identify their entry price, stop loss level, and target price.

Do not enter a trade without a stop-loss, without fail, DailyFx said. Even better if your provider can offer you a guaranteed stop-loss — normally for a small premium — you should consider it carefully.

Market volatility can force prices straight through a stop-loss — slippage — which can leave traders at the mercy of their provider for their eventual fill.

Margin trading, if offered, ramps up volatility, and unless traders are absolutely clear that they are able to use it correctly, leave it.

Traders should also consider Contracts for Difference (CFDs) very carefully before using them. The market has enough volatility of its own and will continue to offer opportunities to trade profitably.