6 Hard Truths About Crypto Day Trading

The lavish lifestyle some crypto traders portray on social media can be misleading. Most people show fake luxuries to attract people and possibly scam them. Even the successful ones took years to get where they are today. 

The truth about day trading crypto involves several hard truths aspiring traders must understand before diving into this volatile market. Let’s explore six essential realities about crypto trading that can help set realistic expectations and enhance the chances of success. But first, let’s discuss what day trading is. So let’s get into it. 

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What Is Day Trading?

Day trading, also known as intraday trading, has become increasingly accessible to individual investors due to the rise of automated trading systems. In the past, only brokerages, trading houses, and large financial institutions could frequently buy and sell assets within a single trading day. But today it is available to everyone due to decentralised and centralised exchanges. 

Successful day traders analyse the trading volume and identify levels of support, where prices tend to stop falling, and resistance, where prices tend to stop rising. It is done to make informed decisions and maximise their chances of achieving favourable outcomes. Now that we know what day trading is, let’s move onto the 6 things every trader should know.

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6 Hard Truths You Should Know About Crypto Day Trading

#1. Crypto Day Trading Does Not Guarantee a Monthly Income

Even the most skilled traders cannot guarantee consistent profits in the unpredictable crypto market. While developing and implementing a well-tested trading strategy is crucial, there will always be a mixture of profits and losses. The net sum of these gains and losses determines day trading results. 

It’s important to understand that day trading does not offer the same certainty as a regular job where a fixed paycheck is received at the end of each month. There will be periods where no profits are earned, and traders must be prepared for such fluctuations.

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#2. A Small Mistake Can Lead to Complete Loss

Due to the high volatility of the crypto market, even a minor mistake can have significant consequences. For example, entering a larger position than intended, incorrectly setting stop-loss and take-profit orders, or executing trades in the wrong direction can result in substantial losses. 

Traders must exercise caution, adhere to risk management strategies, and be vigilant in avoiding unnecessary risks. Precision and attention to detail are essential to protect trading balances and avoid devastating losses.

#3. Significant Capital Is Required for Substantial Income

While starting day trading with a small account is possible, achieving substantial income consistently necessitates a larger investment. Having a sizeable initial margin allows traders to take advantage of more significant opportunities and potentially generate higher profits. 

It is important to recognise that day trading with a minimal account balance, such as $100, is unlikely to yield sustainable living or substantial returns. To pursue day trading as a full-time profession and make a living, traders typically need thousands of dollars as their initial trading capital.

#4. Losses Are Inevitable, Regardless of Skill

Losses are inherent in day trading, regardless of a trader’s skill or experience level. The crypto market is known for its volatility and unpredictable price movements. Even when a trader correctly predicts the market direction, unexpected factors can lead to losses. For instance, a quick price spike hitting a stop-loss order before the trade resumes in the anticipated direction can result in losses. 

Traders need to accept and embrace the reality of losses as an integral part of the trading process. Successful traders focus on effective risk management techniques and maintaining a favourable risk-to-reward ratio to ensure long-term profitability.

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#5. Day Trading Differs From Traditional Employment

Day trading is fundamentally different from traditional employment. Instead of following a fixed work routine, day traders engage in extensive analysis, patiently waiting for suitable trade setups to form. A trader’s day may involve waiting for hours for the right opportunity without actively executing trades. 

However, this does not imply that day traders have an entire day free. They must diligently monitor crypto charts, identify potential trading opportunities, and act swiftly when their trading edge presents itself. This requires constant attention and adherence to a disciplined trading approach.

#6. Many Traders Give Up in the First Year

Day trading poses significant challenges, leading to a high percentage of traders quitting within their first year. Unrealistic expectations and insufficient knowledge are common culprits behind early failures. Many aspiring traders enter the market hoping to make quick profits without realising the dedication, experience, and practice required for success. 

It is crucial to approach day trading with a realistic mindset and commit to continuous learning and improvement. Managing emotions, understanding trading psychology, and having sufficient capital is vital for long-term success. Traders who persevere, adapt, and refine their strategies over time have a better chance of achieving profitability.

Key Statistics About Crypto Day Trading

According to Tradeciety, these key statistics have been found after extensive research:

• 80% of all-day traders quit within the first two years.
• Nearly 40% of day traders only do day trading for one month.
• Only 13% of day traders continue to day trade after three years, and that number drops to 7% after five years.
• On average, individual investors underperform market indices by 1.5% annually.
• Active traders tend to underperform by 6.5% annually.
• Even traders with a negative track record for up to ten years continue to trade, disregarding negative signals about their abilities.

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Frequently Asked Questions

Is It Possible to Consistently Generate a Monthly Income From Crypto Day Trading?

No, consistent monthly income from crypto day trading is not guaranteed. The market is highly unpredictable, and even the most skilled traders experience periods of losses. Day trading results depend on the sum of profits and losses, which can vary and may not always yield a monthly income. Having realistic expectations and focusing on using a well-tested trading strategy is important.

Can I Start Day Trading Crypto with a Small Account Balance and Still Make a Living?

Starting day trading with a small account balance, such as $100, can be challenging to make a living. While it’s possible, to begin with a small amount, achieving substantial profits consistently requires a larger trading balance. A significant amount is needed to make huge returns. Traders who make a living from day trading usually need thousands of dollars as their initial capital.

Is Day Trading Crypto Similar to Long-Term Investing or Traditional Employment?

Day trading crypto differs significantly from long-term investing and traditional employment. Day traders engage in extensive analysis, patiently waiting for short-term trade setups to form within the day. Unlike a regular job, day trading offers no fixed income or a set work routine. Traders must closely monitor the market and be prepared to make swift decisions. Day trading requires a different mindset, discipline, and continuous learning to navigate the dynamic crypto market effectively.