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Can you make a living day trading cryptocurrencies?


Our friends at Reddit says “Absolutely.” Actively trading cryptocurrencies or cryptos for several months can certainly make a decent living if done full time.  Before doing so, the following one needs to consider the following important things:

Research – if you’re not trading you should be reading. Be familiar with current trends such as community loyalty, developer competence of the platforms you use, market confidence, and other trends which may affect the price of a cryptocurrency.

Opportunities – based on your research you should be able to spot investment opportunities and gauge participation based on risk vs reward. Often times grinding out small, low risk moves (such as running arbitrage) can be just as lucrative as catching a big move. Knowing price trends in terms of BTC and USD is vital. Sometimes gains can be made in BTC but not USD and vice versa.

Don’t be greedy – the crypto space is very volatile but it’s not too dissimilar in its trading and price discovery than the stock market. Rallies eventually lead to selloffs and its better to lock in profit early than take on unnecessary risk for a slightly higher move. Also, sometimes doing nothing is better than doing something.

You have to be able to recognize opportunities regardless of market behavior. The market moves relative to the price of BTC.  Even if BTC is in a down trend you can make money by purchasing altcoins (Alternative to Bitcoins, such as COMPUCEEDS, DOGE, LTC, XRP, BTS) that are oversold by trading the altcoin-to-BTC ratios. Sure, your purchasing power in USD may be lower but as long as your purchasing power in BTC is still increasing you’ll be ok.

One thing worth noting is that most interest gained on money is considered to be a strong investment at around 7% interest per year. However, when actively trading, especially day trading you can easily make 10%+ in a day. The important things to realize about day trading are:

You can make money when the market goes down by strategically buying, but also never waiting for the bottom or the top. In the words of Warren Buffet “Catch the Falling Knife” if you wait for the lowest price you’ll miss it.

You will make some horrible losses. When I used to day trade there were days where I made losses of 15%-30% of my portfolio, however, at the end of the month I was up 17% in total as I didn’t let those losses deter me. They will happen, it will be soul crushing, you just can’t quit.

Only invest what you can afford to lose. Some people think this advice is in regards to simply caring about your financial future and if you are ok with risks then you can ignore it. That is NOT the case. This advice actually exists to reflect the decision making model that is required for successful day trading. In day trading you don’t have the opportunity to hesitate and you do have to take occasional gambles, if your dealing with money that you can’t afford to lose then no matter how hard you try, your decision making will be affected and you will not be risk adverse enough.

As far as actually making a living let’s talk about what that would take:

Let’s say it was for $100,000/year (although I know many would be happy with less, we shall assume that someone educated enough to be an active day trader would be aiming for). This breaks down to roughly $2000/week or $400/work day in a week. If we exclude the earlier cases of cryptocurrencies growing thousands of percents a day, and exclude the general stability that we saw in the past few weeks, then it’s easy enough for an experienced day trader to pull of 10-20% a month or more.

For the sake of this math lets say they get a 12.5% return each month: 12.5%*12 = 150% return per year (ignoring compounding) So with an investment of $60,000 a modest decent day trader could be making a decent living. That being said if you were shooting for around the $50k~ income bracket, you’d only need a $30k~ investment to go full time (if you knew what you are doing).

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