3 Short-Term Cryptocurrency Investing Time Frames

3 Short-Term Cryptocurrency Investing Time Frames

Although it may be intimidating, it is a time-proven fact in investing: to earn more returns, you must risk more. When you aim to make money in the short term, you should be prepared to lose your investment (and maybe more!) in that time frame as well, especially in a volatile market like cryptocurrencies.
Another term for short-term trading is aggressive trading. why? Because you are risking more in the hope of making more profits. Investing of any kind requires a constant balance and trade-off between risk and return.
Short-term trading can be divided into different categories within itself based on how quickly you can generate profits – hours, days or weeks. In general, the shorter the trading time frame, the higher the risk involved in this trade.

Investing in Cryptocurrency: Profit in a matter of hours
If you’ve ever wondered what a day trader does, this is it! Day trading is one form of strong short-term trading. Aim to buy and sell cryptocurrencies within a day and take profits before going to bed. In traditional markets such as the stock market, the trading day often ends at 4:30 pm. local time. But the cryptocurrency market is 24/7 so you can set your daily trading hours to fit your schedule. Pretty neat, isn’t it? With this great power comes great responsibility. You don’t want to lose your shirt and get your spouse or partner angry at you.
Here are some questions you should ask yourself to determine if day trading is really the right crypto path for you:
>> Do you have time to devote to day trading? If you have a full time job and can’t stay on your screen all day, day trading is probably not for you. Make sure you don’t take advantage of your company’s time to trade! Not only can you get fired, but you also won’t be able to put in the time and energy needed to trade either. Double the problem.
>> Do you have enough risk tolerance for day trading?
>> Even if you can afford the potential financial loss in day trading, are you willing to do it? Do you have the nerve to see your portfolio go up and down on a daily basis? If not, day trading is probably not for you.
If you’ve made up your mind that day trading is the way to go for cryptocurrency, the following sections share some tips to keep in mind before you get started.

Determine cryptocurrency trading sessions
Since cryptocurrencies are traded internationally without borders, one way you can determine a trading day is to go through the trading sessions of the world’s financial capitals such as New York, Tokyo, the Eurozone (made up of European countries whose official currency is the Euro), and Australia. This method follows similar trading sessions as in the foreign exchange market (Forex).
Some sessions may provide better trading opportunities if the cryptocurrency you plan to trade has higher volume or volatility in that time frame. For example, a cryptocurrency based in China, such as NEO, may see higher trading volumes during the Asian session.

Know that day trading cryptocurrency is different from trading other assets daily
When day trading traditional financial assets such as stocks or forex, you can keep track of the fundamental factors influencing the market such as a company’s upcoming earnings report or a country’s interest rate decision. The cryptocurrency market, for the most part, does not have a developed risk event calendar. This is why doing fundamental analysis to develop a day trading strategy is challenging for cryptocurrencies.

make time
Depending on your personal schedule, you may want to consider setting a specific time of day to focus on your trades. The idea of ​​being able to trade around the clock is a pretty cool idea in theory. You can just get your trading app during a sleepless night and start trading. But this flexibility can backfire when you start losing sleep on it.
Remaining alert during day trading or night trading is very important because you need to develop strategies, identify trading opportunities and manage your risk multiple times during the trading session. For many people, having a tangible system pays off.

start small
Day trading involves a lot of risks. So until you get the hang of it, start with a small amount and gradually increase your capital as you gain experience. Some brokers even allow you to start trading with a minimum of $50.
If you start trading on a small scale, make sure that you are not using margin or leverage to increase your trading power. Leverage is a very risky instrument that is expected to be an opportunity. It allows you to manage a larger account with a small initial investment by borrowing the rest from your broker. If you are trying to test the situation by starting small, using leverage will eliminate that purpose.

Don’t risk too much
According to Investopedia, most successful day traders don’t share much of their account – 2 percent of it max – with every trade. If you have a $10,000 trading account and are willing to risk 1 percent of your capital on each trade, your maximum loss per trade is $100 (0.01 x $10,000). Therefore, you must make sure that you have that money set aside for potential losses, and that you are not risking more than you can afford.

Secure your crypto wallet
One of the main issues with daily cryptocurrency trading is securing your crypto wallet. The least secure cryptocurrency wallets are online wallets. Since you will need your capital on hand throughout the trading day, you may have no choice but to leave your assets in an online exchange wallet, which could put you at risk of hacking.
One way to enhance your security is to not actually buy and sell cryptocurrencies, but rather to speculate on the price movement and movements of the cryptocurrency market by using brokers who facilitate such services.

Stay away from speculation
Scalping is a short term trading strategy that some individual traders choose. It basically means entering and exiting trades frequently, sometimes within seconds. If you pay commission fees per trade, you are not only exposing yourself to a lot of market risk when speculating, but you can also run out of fees before you make any profit. Individual traders rarely make any profit scalping. Now, if you are part of an organization that has access to low commission fees and huge trading accounts, the story might be different.
Of course, in real life, the bands are not as elegant and beautiful as you see in the example. To determine the range, you must be proficient in technical analysis. A number of chart patterns and technical indicators can help you determine the range.
If you choose swing trading instead of day trading, one of the downsides is that you may not be able to get an improved tax rate created for day traders in some countries. In fact, swing trading is in the tax gray area because if you hold your positions for more than a year, you will also get an improved tax rate.
If you are trading the cryptocurrency market movements without actually buying them, make sure that you are not paying a lot of commission fees to hold your positions overnight. Consult your broker before developing your swing trading strategy.
Investing in Cryptocurrencies: Take Profits Within Weeks
This time frame falls under the category of position trading in traditional markets. This type of short-term trading is still shorter than a long-term investment strategy but longer than day trading, and can be considered the least risky form of short-term trading. But ‘least risk’ does not mean ‘no risk’.
For this type of trade, you can determine the direction of the market and ride it up or down until the price hits resistance or support. The resistance level is a psychological barrier to the market that prevents the price from rising. The support level is the opposite: the price at which the market has difficulty “breaking below”.
To hold your positions for weeks, you need to keep your crypto assets in an online exchange wallet, which may expose you to additional security risks. It may be better for you to use a broker that offers speculation for this type of trading strategy so that you do not have to own cryptocurrencies.
A popular position trading strategy involves the following steps, as you can also see in the figure:

  • Determine the trend (using technical analysis).
  • Wait for withdrawal.
  • Buy when pulling back inside an uptrend.
  • Take profit (sell) at resistance.