Bitcoin enthusiasts have been lamenting the decline of Bitcoin's value since January, but keen-eyed day traders have made a fortune riding the swings of the market. The downward trend of BTC has prompted plenty of holders to buy even more, but here's how a cryptocurrency day trader should play it safe in this bear market.
The Bear Market is Headed Downwards
Despite analyst predictions to see an upturn in the cryptocurrency market heading into December, the bear market remains strong nearly nine months into the year. After short gains made over the summer, the price of Bitcoin has steady declined taking other popular cryptocurrencies along for the ride. Both Ethereum (ETH) and Litecoin (LTC) have seen their values steadily decline over the last four months or so. Experts are warning day traders to set tight stop losses for both short-term and long-term trades to take precautions in this slumping market.
The Volatility of Bitcoin Can be Disastrous if Not Managed
It's important to keep your eye on the price of Bitcoin if you're day trading cryptocurrency, even if you're not trading Bitcoin directly. The price of this cryptocurrency affects other altcoins just as a dip in gold prices affects silver prices. The price of Bitcoin can vary from 0.5% to 15% in just 72 hours, so day traders must keep their eye on the price of Bitcoin to avoid taking massive losses.
Buying the Dips Accurately is Harder in a Bear Market
There is a lot of money to be made in buying the BTC dips each time they happen, but it's hard to know when a dip will turn into a falling knife. No one wants to be left bag holding, so traders often get antsy when those red candles start popping up. That's coupled with the fact that plenty of amateur bitcoin traders got into the market last year at the height of its value and they've been suffering from low prices ever since. Sometimes all these inexperienced traders can do is cut losses and move on, which causes the bearish sentiment to continue.
Stay Away from ICO’s
While it can be tempting to trade ICOs in the hopes of hitting it big with a new startup, it's best to leave these investments to angel investors who aren't looking for a return on their money immediately. ICOs have become the new way for Silicon Valley start-ups to gather funding through promises of future ownership in the company. At best ICOs are overly optimistic, while at their worst they can hardly be separated from pump and dump schemes. Never invest in any ICO without doing proper due diligence. Day trading ICO tokens is out of the question, no matter how popular the company attached to the start-up.
Plan Your Trading Strategy
Understanding that the cryptocurrency market is still bearish in nature doesn't mean you have to give up day trading. Properly employing a trading strategy can still net gains if you are smart with your investments. Whether you plan to do some breakout trading, news trading, or pullback trading, make sure you stick to your plan. Take the gains you planned instead of being greedy and never be afraid to set a stop-loss in the event of a sudden market downturn.