Cryptocurrency investment is safer when compared to stock market investments. But, you can take the investment to the next level by short term trading. The context is very simple, high risk and high reward.
Short term trading, as the name suggests is trading cryptocurrencies for a very short interval of time. Short term trading can be used to make small profits in a small amount of time.
In long term investments, we buy cryptocurrency and store it in a wallet for years and sell it once we need our money back. Long term investments are not always targeted at profit. They are used as an alternative saving option for the future. Short term investments, on the other hand, are highly targeted towards profits. We invest some money, wait for the right moment and sell it for profit. Here, I’ve written my story on How I made 19% profit in 5 hours by short term trading
Beginner’s guide to short term cryptocurrency trading
There are a lot of factors that contribute to short term profits. You need good prediction, observation and cryptocurrency knowledge for gaining good profits. In this guide, you will get enough knowledge to kick start your short term cryptocurrency trading career.
Start with lower amounts
As a human, I understand, Everyone likes to make a good profit. But, without having enough experience, it is not suggested to invest huge amounts on cryptocurrency. You should have good knowledge of volumes, market caps, trading etc. Even though you have all the required knowledge for crypto trading, it is not a good deal to start with a big amount.
Mistakes teach us the best lessons
The mistake should be a smaller one. If you lose $50, you can recover without any problem and it will teach you experience. If you lose $1000, not only recovery is hard, it also introduces the fear of cryptocurrency investments. Hence, always start with lower figures.
Understand market cap
Here is a simple formula to calculate the market cap of a coin.
Market cap = Total Circulating Supply * Price of each coin
The total circulating supply refers to “How many coins are available in the market”. Many people often get confused between volume and circulating supply. Volume refers to the number of coins or USD traded in the last 24 hours. Volume can be used to determine the popularity of a coin in public.
Well, What does market cap has to do with the short term cryptocurrency trading?
Market cap helps us in knowing the volatility of a coin. To be more specific, we can understand how rapidly a coin’s value is changed ( may be higher or lower ) by looking at the market cap.
Higher market cap coins are not highly volatile, they tend to grow linearly. While the price of low market cap coins fluctuates so much at any interval of time. Here is an article from blockgeeks to learn more about Market Cap in cryptocurrencies.
From our understanding, it is a better choice to invest in coins which have a low market cap. Their price goes high and low multiple times in a day. We buy the coin at a lower price and sell it for profit.
Know the right coin to invest
When there are more than 5,000 cryptocurrencies in the market, there definitely would be some confusion about selecting the right coin. Choosing a coin is a pretty straight forward process. Here are some questions you need to ask yourself:
- Does the coin belong to low market cap coins?
- How many coins can I afford with my investment?
- What was the price of the coin before “x” days?
- Is the price going up or down?
After you selected a group of coins based on the market cap, it is the time to make the ultimate decision by selecting one.
First of all, check out the price of the coin before “X” days. In my case, I like to check out the price before 7 days. Then, look out for the price going up or down. Here is how I decide which coin to buy:
If the price is going too down, I won’t buy it. If the price is going too high, I won’t buy the coin either. I focus on those coins whose value dropped 1-5% to their value 7 days ago.
Here is a great tip for making profits:
You can either buy a single high priced coin or multiple low priced coins. For a low amount of investment, I consider low priced coins. Let’s say, a coin having price $0.001 reached $0.0014. If you buy 100 coins, the outcome would be $0.14 compared to the original purchase of $0.1.
Set a reasonable target
For short term cryptocurrency trading, you have to set a target on “How much you profit you want to earn”. Set lower targets and gradually increase them linearly. If the first trade gave $0.1 profit in 5 hours, focus on second trade to make $0.2 in 5 hours and so on.
Greed ultimately destroy your investments
Never focus too high on short term profits. It doesn’t work that way. Short term cryptocurrency trading is not mean to be a get rich quick scheme. You need patience for making good profits.
Who needs to trade for short term profits?
The simple answer would be “Anyone”.
But, you need time, effort and patience for profits. If one of them is not available to you, trust me, it is hard to make a good profit in cryptocurrency. A short term trader needs to monitor the price of coins every minute for selling them for a profit.
If you don’t have time, consider investing for long term profits. Investing in high market coins would be great in this scenario.
Short term cryptocurrency trading is not meant for everyone. You can experiment for making a good profit or minor loss. But, money can never be made without effort. You should give your 100% in trading.
If you are someone who does a job, try making short term profits on weekends. Why not?
If you loved this guide, a share would be amazing. Which type of trading you love and why?. Let me know in the comments 🙂