The life of a day-trader is not all it’s cracked up to be. It’s equally exhilarating as it is terrifying. Cryptocurrency trading is a 24/7 market, which is a blessing and a curse. The cryptocurrency market gives you the freedom to trade when you want and across so many different coins—and that’s part of the problem.
You can trade.
Whenever you want.
Whatever you want.
The opportunity is present all the time to enter and exit the market—weekends, public holidays, the birth of your child on Christmas day—the cryptocurrency market is always there. The daily life of a cryptocurrency day trader in this sort of environment can be perilous—how’s one to gain some structure when the market is always moving, always shifting, always edging you on? So, what non-technical advice does it take to become a cryptocurrency day-trader?
The freedom to create a structure
How many times have you sat at your desk from 8 AM to 5 PM, watching charts aimlessly, not really sure or convinced in a direction some of your coins will go? Since you’ve not made a trade yet, you push through the night, and then finally at around 2:30 AM, some Binance coin listing news hits and you immediately buy that coin on Bittrex because “mewn”. Except, you’ve now bought the bag of some insider waiting to you sell you their accumulated coins. Price predictably stalls and now you’re stuck, a newly minted bag holder of some coin whose whitepaper would be better explained on a napkin. You might think that the reason you’ve become a bagholder is that you just fomo’d into a coin, and you’d be half correct. The other half is that you traded when you should not have been trading.
As a cryptocurrency day-trader, the first change I made to help stop taking awful trades was to structure my day around trading and non-trading. That didn’t mean I religiously stuck to this schedule, but it helped setting up my psyche for when I could focus on trading and then not focus on trading. You’d be surprised how well your mind approaches trading when you’ve made a habit of not trading all the time. Picking a schedule that works for your personality and lifestyle (night owl/morning person/afternoon cracker) will make day-trading a more enjoyable, and importantly, lead you to maybe become profitable. I say maybe because you can bring a horse to water, but making it 100X long the bottom perfectly every time takes more than just showing up. For that, you need to develop discipline, and obviously forget longing the bottom or selling the top.
By far, the most important basic skill to develop in day-trading is to become disciplined. Now that sounds like an easy ask—but do you know what it really means and what it entails? For some, discipline might mean only trading under certain market conditions, while for others, it may mean executing the trade, setting the take profit and stop loss and walking away. For those new to cryptocurrency trading, it may simply mean not listening to a crypto twitter personality calling out trades. The discipline you need to develop varies based on what you’ve identified through trial and error over many trades. That’s the bittersweet reality with trading: you are both the test subject and the researcher. You’re throwing yourself at the markets, getting beat up, humbled, and emotionally wrecked. Once it’s over, you have to then step back and analyze your performance, ask the right questions and then try to improve through feedback, analysis and reflection. This can only be done through discipline in trading a plan or strategy, but also discipline in analyzing how you’re trading.
The curse of winning and benefits of losing.
I’m sure you’ve had that one trading session where everything just works out and you’re so tuned into the market that it’s just practically giving you all the gains.
The problem with winning, though, is winning.
Often when you’re on a hot streak, you don’t want to psyche yourself out and double-guess everything you’re doing. The thing though, giving into the euphoria of a winning trade means you’ll likely give in to the negative emotions of a losing a trade—revenge trading or compounding losses by not cutting a bad trade. The way you reconcile these related, but divergent, emotions is by focusing on the objective processes and errors made in both winning trades and losing trades—a profitable trade with a bad process (bad risk, fomo, boredom trading) should be seen as a “bad” trade even if the outcome was good. Shifting to a process-based trading mindset( for example, plan a trade), over a rewards-based mindset will mean less emotional trading problems. A losing trade that is stopped out doesn’t become a bad trade. It’s just another trade that you can record and use to better your trading process overall.
Protecting capital and capitalizing on market cycles
The market can stay irrational longer than you can stay solvent—although in cryptocurrency trading, it seems that the trader can stay irrational longer than the market can support them. For the entirety of 2018, it seemed that every bounce was the start of a new bull run, and many traders troubled to shift to the new market cycle—no more 1000% gains to be made. So, like a junky weaned off of cryptocurrency gains, the market cycle has gone cold turkey—speculative bubbles leave people hurting. If you came out of 2017 relatively intact and realized more than just paper gains, day-trading in the post-parabolic all-time-highs should be in the mind-set of capital preservation. As the market continues to unwind, casting an eye towards the longer-term cycles and their triggers should help to put the gains made in 2017 to work for the new cycle.
Inception: Don’t think about Bitcoin
Ideas have a funny way of messing with your head. I’m not talking about ideas in the traditional sense, like how an idea changes your perception of the world—I’m talking about the confusion an idea creates. In trading, an idea can bring down the best plans, simply because it offers something untested. The worst thing a trader can do is jump between different trading “ideas” when trying to trade the market. The reason ideas are so dangerous is because an idea only exists in the mind, whereas a strategy is simply an idea about the market that’s been tested and works. The problem is that traders often move from idea to idea without fully testing their viability—jumping from trading system to trading system creates a Penrose paradox that gives the illusion of development. Develop an idea about the market or system you’re using to trade it and test it meticulously.
There’s more to-day trading than drawing lines on charts. Often the biggest barrier to trading successfully is ourselves and the things we take for granted—the lack of structure, disciple, capital considerations and our tendency to discard trading strategies based on a small sample size of trades. If trading sounds visceral and uncomfortable, that’s because it is: it’s a place where you’re confronted by your most basic impulses. Not only are you trying to navigate a path to riches, but along the way, you also find out so much about yourself that you are able to control yourself in the market–and that, often, makes all the difference between a profitable and unprofitable trader.