When thinking about starting day trading, cryptocurrencies are one option. They offer a lot of volatility as well as volume, which is good for traders. However, there are big differences among cryptocurrencies as well. Few things to consider when choosing on what pair to trade with.
Choose a cryptocurrency with a good reputation for trading
Trading with the biggest cryptocurrencies can be a lot safer bet than trading with newer, non-legitimate ones. Trading with something that twitter bots have tweeted might not be a good idea, since they bring the risk of rug pull to your trading as well.
Rug pull means when people raise the price of certain, nonsense cryptocurrency. After the price is high enough and people have bought it enough, the founders or the ones making the rug pull sell everything they have, causing the price to crash. There has been numerous rug pulls in the cryptocurrency markets.
Sticking with the biggest ones will reduce your risk of being rug pulled. With the biggest ones, I mean by market value, and that have stayed on the biggest ones for quite some time. Compare them by market cap and by age and see what the best option for you is. If you want to play it safe, you can just trade with Bitcoin and Ethereum, since they are the biggest ones, at least for now.
CoinMarketCap is one of the places you can follow the prices, and it is the one I use. Link below (Not sponsored)
Stable coins or not?
Cryptocurrencies offer a new dimension to trading. When trading stocks, they are often bought and sold with dollars or euros, or other fiat currencies. Cryptocurrencies, however, can be traded with each other. If this was possible in the stock market as well, that could mean you could trade the difference between the two stocks directly.
If you wish to trade cryptocurrencies like stocks, there are stablecoins for that. Stablecoins are supposed to follow the price of fiat currencies, so you can trade the difference between bitcoin and the US dollar for example.
The other option is to trade, for example, the difference between Bitcoin and Ethereum. So even if the markets were on a downtrend today, if Bitcoin falls more than Ethereum and you had a long position on Ethereum, your position would increase even if the overall market was on a downtrend.
Other things to consider when choosing a cryptocurrency for trading
Trading is about having an edge over the market and making a profit in the long run. You can increase your odds of winning by several factors, but there are things that can make your odds smaller.
One of these is trying to trade rug pull coins. There is money to be made, but it is, at least in my eyes, unethical to be involved in such a thing. Even if you were just a trader profiting from other people’s mistakes. On top of that, it is very risky since you can’t predict, when the creators will take their money out.
When trading with cryptocurrencies, you have more options than trading with stocks. Pick wisely, the crypto world is still very unregulated, and this can mean high price movements in a short period of time.
I would say not to start your trading journey with cryptocurrencies, since there are even more factors that affect their prices. And if you do, I would say the best place is to start with stablecoins paired with one of the biggest cryptos such as Bitcoin or Ethereum.
Other day trading related posts can be found here.
Hopefully this was helpful to you, have a nice day.
This is not financial or investment advice. Always do your research before risking your hard-earned money. Some estimates say 95% of day traders lose money. When involved in cryptocurrencies, there is always increased risk.