You’ve seen crypto traders flaunt their expensive lifestyles on social media, right? It might surprise you to know that the truth about day trading crypto is far from the notion such sights give you. If you want to be a crypto day trader, then there are some hard truths you must be aware of.
1. Crypto Day Trading Does Not Assure a Monthly Income
Even the best traders are not assured of a profit. The market is unpredictable, and the best you can do is make sure you are using a strategy that you have backtested or paper traded to be sure it works.
A typical day trading result combines profits and losses, which are summed together to give the final result, which could be higher or lower than the initial margin.
You are almost certain to receive your pay at a predefined time when you have a job. However, when day trading, you’re always unsure when your profit will come. Remember that there will be weeks when you won’t earn anything.
2. You Can Lose Your Whole Profit or Account With a Little Mistake
Due to the high market volatility, a minor mistake like a miscalculation can wipe out your profit.
Errors like entering a larger position size than you intended to use, not placing stop-losses and take-profits correctly, making a mistake as to the direction you want to execute trades, and many more can set you back by many months or even wipe out your trading balance.
Consistently earning profits through day trading requires considerable investment. Having a large sum of money as your initial margin enables you to invest more, which increases your chances of making substantial profits.
You will struggle to make a living trading with a $100 account. You need thousands of dollars to be a full-time trader or make a living through crypto trading.
While it is possible to start crypto trading with a small amount of money, traders who want to make huge amounts consistently must build their trading balance into a large amount or deposit the large sum into their exchanges.
4. You Will Lose Money No Matter How Good You Are
Losses are a part of the game. No matter how experienced or well you master a strategy, you will lose money. Not accepting this fact early enough can make you feel like you have a bad strategy or feel bad whenever you lose a trade.
The crypto market experiences short-term price swings, which makes it difficult to predict the market’s direction. Even when you correctly predict the direction, you may still lose for different reasons, like a quick price spike reaching your stop loss before the trade continues in the direction you predicted or for other reasons.
Even the most experienced traders lose trades; some even lose more times than they win, which does not necessarily mean they are not profitable. Some other factors, like their risk management techniques and risk-to-reward ratio, also determine their overall profit.
5. Trading Is Different From Many Other Ways of Making Money
When you are day trading, you are not necessarily actively working like you would in a normal workplace. Your typical day may require you to conduct analysis, then wait patiently for your setup to form. You may wait for a setup the whole day without doing anything else.
Waiting for your setup to form does not necessarily mean you get to be free the whole day. You must closely monitor crypto charts to avoid missing your trading edge when it forms. Doing this requires you to stick to your screen or watch it at specific intervals, say after the close of every 15-minute candlestick.
Another way day trading is different is that you are constantly attempting to avoid losses. Unfortunately, losses are part of the trading process, and traders need to accept these losses. Of course, regular businesses don’t want to lose money, but it doesn’t become the sole focus of the enterprise.
6. Most Day Traders Give Up in the First Year
Day trading is challenging, and most day traders give up in their first year. One of the major reasons for this is that they have unrealistic expectations because they believe they will make quick and easy profits. Thus, when such expectations are not met, they give up, and many even lose their money in the process.
Another reason traders give up in the first year is that many people approach trading without adequate knowledge. Successful day trading requires significant experience and knowledge you must acquire through practice. However, many aspiring traders don’t pay attention to learning, aiming to earn quick profits.
Factors like not managing emotions and trading psychology well and insufficient capital are also common reasons traders give up early.
Don’t Rush Into Day Trading
We have described some harsh realities you must understand and accept to day trade successfully. While making a profit through crypto day trading is possible, you must approach the endeavor with a realistic mindset and continue learning from your mistakes.
Day trading can be highly profitable, but it can also be your worst nightmare if you do not understand how it works before getting involved—it isn’t an easy way to make money. Take time to learn how it works and the factors affecting the market’s price movement.
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