A day trade is an act of buying and selling a security within the same trading day. Traders who do day trading are called active traders or day traders. Day trading can be profitable in Australia, but risks are always involved.
Cryptocurrencies are a new asset class that has become popular in recent years. Bitcoin, the first and most familiar cryptocurrency, was created in 2009. Cryptocurrencies are digital or virtual tokens that use cryptography to secure their transactions and control the creation of new units. Cryptocurrencies are decentralized and not subject to government or financial institution control.
Day trading cryptocurrencies can be a profitable venture in Australia, but risks are always involved. Traders can make profits day trading cryptocurrencies by taking advantage of the volatile market conditions and making informed decisions. However, it is crucial to avoid the risks involved in day trading cryptocurrencies by understanding the market and using stop-loss orders to name a few.
How to day trade cryptocurrencies in the AU?
Here is a look at how to start day trading.
Find a reputable broker
Several brokers offer trading in cryptocurrencies. It is essential to choose a reputable and regulated broker. Some brokers may offer leverage, allowing traders to trade with more money than they have in their accounts. However, leverage can also increase the risk of losses.
Open an account and deposit funds
Once you have chosen a broker, you must open an account and deposit funds. The amount of money you need to deposit will depend on the broker and the type of account you open. Some brokers may require a minimum deposit, while others may not.
Choose your cryptocurrency
Many different cryptocurrencies are available for trading, including Bitcoin, Ethereum, Bitcoin Cash, and Litecoin. Each cryptocurrency has its characteristics and risks. Choose the one you want to trade based on your investment objectives.
Set up your trading platform
Most brokers will provide you with a trading platform, or you can use a third-party platform like MetaTrader 4 (MT4). After choosing a platform, set up your account and familiarise yourself with the interface.
Place your trade
Once you have chosen your cryptocurrency and set up your trading platform, you are ready to place your trade. Select the buy or sell order type and enter the amount of cryptocurrency you wish to trade. It would be best to review your order carefully before submitting it.
Monitor your trade
After you have placed your trade, it is vital to monitor it. Cryptocurrencies are volatile, and prices can move quickly. Use stop-loss orders to curb your losses if the market moves against you.
Close your trade
When satisfied with your profit or loss, close your trade by selling your cryptocurrency back to the broker. Review your trade history to see how well you did.
Risks of day trading cryptocurrencies and how to avoid them
Here are the risks of day trading crypto.
Cryptocurrencies are incredibly volatile, meaning prices can fluctuate a lot in a short period. Traders can avoid this risk by monitoring the market carefully and using stop-loss orders.
Choosing the wrong cryptocurrency
There are hundreds of different cryptocurrencies, and new ones are created every day. Traders must ensure they choose a cryptocurrency they understand and will likely be around for a while. Cryptocurrencies like Bitcoin, Ethereum, Bitcoin Cash and Litecoin are widely accepted and have been around for a while.
Not understanding the technology
Cryptocurrencies are based on a complicated technology called a blockchain. Before getting started, traders should understand how blockchain works and the implications of trading cryptocurrencies.
Not using stop-loss orders
Stop-loss orders are essential in day trading, limiting losses if the market moves against you. Without stop-loss orders, traders risk losing all their money if the market crashes.
If you do not take the necessary security precautions, your account could be hacked, and your funds could get stolen. Be sure to use strong passwords and two-factor authentication whenever possible.
Some brokers charge high fees for withdrawing your funds. Check the withdrawal fees before depositing money into a broker account.
Since cryptocurrencies are not regulated, there is a risk of market manipulation when traders artificially inflate or deflate prices by creating fake news or spreading false rumours. To avoid this, traders should only use reliable sources of information.
Many fraudulent cryptocurrency brokers will try to scam you. Be sure to research a broker before depositing any money. Only use regulated brokers that have a good reputation.