You've seen crypto traders flaunting their expensive lifestyle on social media, right? It might surprise you to know that the truth about crypto day trading is far from the notion that such sites give you. If you want to be a crypto day trader, you need to be aware of some hard truths.
1. Crypto Day Trading Does Not Ensure Monthly Income
Even the best traders are not guaranteed a profit. The market is unpredictable, and the best you can do is make sure you're using a strategy that you've tested or traded on paper to make sure it works.
A typical day trading result combines profit and loss, which are added together to give the final result, which may be higher or lower than the initial margin.
You are almost certain to receive your salary at a predefined time when you have a job. However, when day trading, you still don't know when your profit will come. Remember that there will be weeks when you won't earn anything.
2. You can lose all your profit or your account with a small mistake
Due to the high volatility of the market, a minor mistake like a miscalculation can wipe out your profit.
Mistakes 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 in which you want to execute trades , and many others can set you back months or even wipe out your trading balance.
3. A Substantial Sum of Money is Needed to Generate Significant Income
Regularly making profits through day trading requires considerable investment. Having a large sum of money as your initial margin allows you to invest more, which increases your chances of making substantial profits.
You will have a hard time making a living with a $100 account. You need thousands of dollars to be a full-time trader or earn a living from crypto trading.
Although it is possible to start crypto trading with a small amount of money, traders who want to earn huge sums must constantly increase their trading balance or deposit the large sum in their trades.
4. You will lose money no matter how good you are
Losses are part of the game. No matter how experienced you are or how well you know a strategy, you will lose money. Failing to accept this fact soon enough can make you feel like you have a bad strategy or feel bad every time you lose a trade.
The crypto market experiences short-term price fluctuations, which makes it difficult to predict the direction of the market. Even when you predict the direction correctly, you can still lose for different reasons, such as a quick price spike hitting 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 doesn't necessarily mean they aren't profitable. Some other factors, such as their risk management techniques and risk-reward ratio, also determine their overall profit.
5. Trading is different from many other ways to make money
When you day trade, you are not necessarily working actively as you would in a normal workplace. Your typical day might require you to perform an analysis and then wait patiently for your setup to form. You can wait all day for a setup without doing anything else.
Waiting for your setup to form doesn't necessarily mean you'll be free all day. You need to watch the crypto charts closely to avoid missing your trading edge when it forms. To do this, you need to stick to your screen or watch it at specific intervals, such as after the close of each 15-minute candlestick.
Another way day trading is different is that you are constantly trying to avoid losses. Unfortunately, losses are part of the trading process and traders have to accept those losses. Of course, ordinary businesses do not want to lose money, but this does not become the sole purpose of business.
6. Most day traders give up in the first year
Day trading is tough and most day traders give up within their first year. One of the main reasons for this is that they have unrealistic expectations because they believe they will make a profit quickly and easily. So when these expectations are not met, they give up and many even lose their money in the process.
Another reason traders drop out of the first year is that many people approach trading without sufficient knowledge. Successful day trading requires significant experience and knowledge that you must acquire through practice. However, many aspiring traders do not pay attention to learning, aiming to make quick profits.
Factors such as poor emotional management and trading psychology along with insufficient capital are also common reasons why traders give up early.
Don't rush into day trading
We've outlined some harsh realities that you need to understand and accept in order to be successful in day trading. While it is possible to make a profit from crypto day trading, you need to approach the endeavor with a realistic mindset and continue to learn from your mistakes.
Day trading can be very profitable, but it can also be your worst nightmare if you don't understand how it works before you get involved - it's not an easy way to make money. Take the time to learn how it works and the factors affecting market price movement.