Trading Crypto 24*7, Be CAREFUL!
Although the advantage of trading cryptocurrencies around the clock may sound attractive, not all traders may benefit from engaging in crypto trading all day due to various factors.
Here are some points to consider:
Emotional and Mental Well-being: Keeping a constant watch on the markets and carrying out trades can take a toll on one’s emotional and mental well-being. The unstable nature of cryptocurrencies can result in rapid price changes, which can cause traders to feel stressed and anxious. Trading for extended periods can lead to exhaustion, impaired judgement, and heightened emotional responses to market shifts.
Lack of Sleep and Work-Life Balance: Engaging in cryptocurrency trading throughout the day can disturb your sleep routine and have an adverse effect on your overall health. You may have to stay up during unusual hours, which can affect the quality of your sleep and productivity. Additionally, it can result in an imbalance between your personal and professional life, as incessant trading may occupy a considerable amount of your time and focus.
Increased Transaction Costs: Engaging in frequent trading may lead to increased transaction costs, including trading fees and spreads, which can reduce your overall profits. This is particularly true if you participate in short-term trading where price movements are minimal. Therefore, it is crucial to factor in the effect of transaction costs on your trading approach and potential earnings.
Overtrading and Impulsive Decision-making: Traders may be tempted to overtrade or make impulsive decisions based on short-term price movements due to the market’s constant availability. This can result in excessive buying and selling, which increases the risk of losses and weakens the effectiveness of your trading strategy. It is crucial to maintain discipline and avoid making rash decisions driven by emotions or FOMO (fear of missing out).
Market Volatility and Liquidity: The volatility of the cryptocurrency market can be significant, particularly during periods of high trading activity and liquidity. This can result in unexpected price fluctuations and slippage, increasing the risk of executing trades at unfavorable prices. Therefore, it is crucial to evaluate market conditions and select trading periods that match your risk tolerance and approach.
Focus on Quality Trades: Instead of spending the entire day trading, it can be more advantageous to concentrate on quality trades that match your strategy and have a greater chance of success. To make quality trades, you need to conduct comprehensive analysis, research, and exercise patience. Continuously watching the market may cause you to make impulsive trades based on irrelevant information or momentary fluctuations, which may jeopardize the quality of your trading choices.
Individuals may have different trading strategies and preferences. Some traders may excel in short-term, active trading, while others may favor longer-term approaches. To determine the best trading frequency and duration, it’s important to evaluate your own trading style, risk tolerance, and personal circumstances.
Achieving long-term success in the cryptocurrency market requires a balanced approach, setting achievable goals, practicing risk management, and taking breaks to recharge.
Hi, I am Nikesh Mehta, owner and writer of this site. I’m an analytics professional and also love writing on finance and related industry. I’ve done online course in Financial Markets and Investment Strategy from Indian School of Business. I can be reached at [email protected].