With the global rise in living costs, traditional jobs do not offer the financial security they once did, and people are looking for new, easier ways to make money. A common question among such people is, Can you make a living trading crypto? Yes, you can, but it requires significant starting capital, thorough market research, trading strategy, and the right risk-reward ratio. Moreover, you should have backup sources of income, such as passive income from rent, freelance work, or a side business, because day trading does not guarantee steady monthly income.
There are some other characteristics you need if you want to become a successful trader. You should have a strong understanding of the market and also be able to remain patient when the market becomes unstable. Many new traders who jump into day trading without a clear plan and risk management strategy often get heavy financial losses. So, while the idea of trading crypto for a living seems appealing, you should understand that crypto day trading is not a fun and quick way of making easy money.
In this PlasBit article, let’s look at the features you need to make a living trading crypto. We will go over day trading methods, discuss psychology of trading, common mistakes made by beginner traders, trading success stories, and tips to manage your emotions while trading. Whether you are a new trader or trying to research and refresh your knowledge, this guide will provide the necessary knowledge to help you on your trading journey.
Starting Your Journey as a Day Trader
Day trading is the process of buying and selling financial assets, like cryptocurrencies, within a single day. With this method, you try to find and use small price changes to make quick profits. But there are a few things you must learn before becoming a day trader.
Starting Capital
The cryptocurrency market is really unstable, going through large swings in a short period of time. So, if you don’t have enough money, one bad trade can be the end of your trading career. Having starting capital ensures that you can survive market downturns and not be forced to exit trades at a loss. Furthermore, higher capital means you can invest in multiple trades throughout the day, increasing your chances of making a profit. So, without a financial safety net, the risk of failure increases, especially for beginners.
Market Research
Trading without thorough market research is mostly gambling and is not a reasonable strategy to achieve success. This is because prices are influenced by factors like market sentiment, news, and technological changes. Moreover, if you want to predict market changes correctly, you have to be able to analyze charts, indicators, and patterns, too. You can also increase your chance of success by studying various coins and their potential, which helps you to make informed decisions and avoid reckless trading.
Persistence
Day trading is not a get-rich-quick scheme; to be successful, you should have patience and be persistence. To reach your goal, you have to stick to a plan and have the discipline to manage your emotions when the market does not behave as you expected. Successful traders have self-control when faced with setbacks and stay committed to their strategies through both winning and losing periods.
Risk Management Strategy
Crypto markets are known for their unpredictability, so you need different strategies and trading filters to protect your capital. Strategies like stop-loss orders, which means you sell an asset when it reaches a certain price, limiting your losses. Or deciding how much capital you use in each trade, which is called proper position sizing, this guarantees you are not risking more than you can afford to lose on any single trade. Without such safeguards, you could quickly lose most of your capital.
Backup Income Source
You can increase your income with day trading, but your earnings will be inconsistent. Sometimes, unlucky accidents like market downturns, unfavorable trades, or major events like war can wipe out weeks or even months of profits. In case of such events, you should have a backup income source to maintain financial stability. To do so, you can invest in other sectors, do freelance work, or have a side business. This allows you to continue trading without the pressure of relying solely on the trading market. Furthermore, having a backup plan gives you peace of mind and helps you manage the emotional ups and downs that come with trading.
Common Beginner Mistakes in Crypto Day Trading
Going through your trading journey, you will learn many important lessons with experience, but each of these lessons will cost you a portion of your assets. So why not discuss some of these beginner mistakes to reduce your future losses. As we go over these mishaps, you will get a more detailed answer to your question. Can you make a living trading crypto? Yes, but only with the right approach. The right approach involves avoiding beginner mistakes that lower your chances of success.
Lack of Research
Many new traders dive into trades without doing enough research. Instead of carefully analyzing charts and market trends, they follow hype or advice from infamous individuals. Using such unreliable information, they make trades that result in unnecessary losses. So remember to always do your research before making trades.
Overusing Leverage
Using leverage allows traders to borrow funds to increase their trading capital, increasing both potential profits and losses. New crypto traders are often attracted to the concept of bigger profits, not realizing that if the market moves against their investment, overusing leverage leads to losses bigger than what they can afford. Beginners should only use leverage if necessary and do so after knowing potential risks. In PlasBit, we recommend that beginners start crypto trading with small and manageable investments.
Emotional Trading
The extreme highs and lows of the crypto market can result in strong emotions in traders. Experienced traders know how to deal with such emotions, but beginners let emotions like fear and greed drive their trades. For example, they might buy at the top because of their greed and sell at the bottom because of their fear. So, to avoid emotional trading, you should Control your emotions and use logic to trade.
Overtrading
Some new traders think that by continuously investing in different trades, they can increase their chances of success. This is wrong because when there is no good opportunity in line with your trading strategy, overtrading leads to an increased risk of financial loss. Furthermore, it creates high transaction fees that will eat into profits. Experienced traders choose high-quality trades over high number of trades and know that it’s better to make fewer, well-decided trades than to jump into the market at every opportunity. There’s a famous quote among traders highlighting this point: Trade like a sniper, not a machine gunner.
No Risk Management
Many beginner traders underestimate the importance of risk management strategies. For example, if you set up stop-loss orders, your losing positions automatically close when they pass a set amount. Such effective risk management strategies help traders avoid major losses and allow them to have more opportunities to gain their losses back.
By recognizing and avoiding these common beginner mistakes, you can develop beneficial trading habits and significantly improve your chances of success.
Day Trading Methods in Crypto
There are several trading methods used by crypto day traders, each with its own unique strategy and approach. Learning these methods is important because the answer to the question can you make a living trading crypto? Also depends on finding the right method for your skill level and risk tolerance.
Scalping
Scalping is a fast-paced method that focuses on making small profits from numerous trades throughout the day. Traders using this method aim to gain small, frequent profits by focusing on small price changes. If you want to use this method, you need to have a deep understanding of technical analysis and the ability to monitor charts and indicators constantly. Scalping is a stressful method because you need to make fast-paced decisions while also managing and analyzing the risks of each trade. We suggest not to begin scalping as a new trader cause it needs years of experience and professional trading skills.
Momentum Trading
Traders who use this method try to ride the wave. This means that they analyze the price momentum and buy when the price starts to rise, and they sell immediately when it stops or starts to fall because the momentum is reversed. To be able to identify strong trends, momentum traders need strong analytical skills. This method is risky because sometimes traders might not recognize the current trend, or fail to enter a trend in time, and also might fail to exit it before it reverses.
Arbitrage
This method is about finding the same asset on different exchanges, then buying it on the exchange where the asset is cheapest and selling the asset on the exchange where it is more expensive. You should have fast calculating skills to assess the transaction fees and make such trades profitable. To avoid any drop in the price of the selected asset, you should also finalize your transactions quickly.
Reversal Trading
Using this method involves finding overbought or oversold assets. When using this method, traders look for assets that have gone through extreme upward or downward price swings and enter a trade with the strategy of profiting from the price correction. This method requires you to be skillful enough to identify reversal signals correctly. In your first years of trading, try to trade with the trends. Reversal trading can cause you sequential stop losses.
High-Frequency Trading (HFT)
High-frequency trading (HFT) is a method that uses sophisticated algorithms and bots to execute trades. These computer programs scan the market for opportunities and make trades in milliseconds, capitalizing on tiny price differences. HFT typically requires advanced technology and deep pockets, making it accessible mainly to institutional investors. This method demands significant investment in technological tools and is subject to multiple regulations due to its complex legal status. Moreover, human HFT trading is never suggested, as it would not be logical to enter and exit trades frequently by human traders.
There are many day trading methods, each approaching the market differently and each with its own risks and benefits. You should analyze your own risk tolerance, expertise, and financial goals and then decide which of these methods fits your situation the best.
Success Stories of Day Traders and Their Strategies
There are several successful day traders who have reached unimaginable peaks while starting with limited capital; here are a few examples of such traders and their strategies for success.
Timothy Sykes - Penny Stock Trading
Timothy Sykes made a name for himself through his penny stock day trading strategy. His strategy involves short selling of stocks that are overbought and will most likely decline in price. Using this strategy, he took $12,000 of bar mitzvah money and turned it into over $1.65 million. Sykes focuses on risk control, employing small trades and stop-loss strategy to minimize losses.
Ross Cameron - Momentum Trading
Ross Cameron is the founder of Warrior Trading and a professional day trader who focuses on momentum trading. Using a small capital, he made more than $100,000 by trading in popular and highly unstable stocks. Cameron would find assets that were in a trend, experiencing a surge or a drop in price, and then sell them as soon as the momentum began. He emphasizes on technical analysis of stocks and uses the stop-loss strategy.
Steven Dux - High-Frequency Trading and Scalping
Steven Dux is a highly successful day trader who combines high-frequency trading and scalping. Starting with $27,000, Dux reportedly made over $10 million in profits by making multiple small trades throughout the day. His strategy focuses on finding tiny price changes, often holding assets for just minutes or even seconds. This strategy requires fast execution, discipline, and knowledge of technical analysis.
It is important to note that thousands of traders use the same strategies daily, but only a few reach such levels of fame and success. This is because these few traders use trading strategies with unmatched Self-control, risk management, and understanding of market trends.
Lessons from Trading Losses
Day trading offers the potential for significant profits, but can you make a living trading crypto without encountering losses? No, the truth is most traders experience setbacks at some point in their careers. Below are examples of individuals who suffered significant losses and what they learned to improve.
Jesse Livermore's Fortune and Downfall
In 1929, one of the most famous traders of all time, Jesse Livermore, had a net worth of $100 million, which is $1. 5 billion today. Throughout his trading career, he made millions in profits but eventually lost it all. This is because he made risky trades and did not even follow his own recommended trading rules. This stresses that regardless of how experienced you are, you need to stick to a well-defined plan.
Richard Dobatse's Robinhood Experience
Starting with a $15,000 investment, Richard Dobatse made around $1 million in the 2020 stock market boom. Unfortunately, he later lost almost everything and only had $6,956 left in his account. This case shows how overconfidence, lack of financial background, and trading without any risk management can lead to disaster.
Matthew Schneider – Multiple Losses
Matthew Schneider, a former stock trader, had lost his life savings five times, and by the time he was 19 years old, he had lost more than $40,000. These failures were a result of his aggressive approach to trading and lack of concern for risk management. He later learned the need to take smaller risks, diversify his income sources, and change his trading strategy accordingly.
Each of these traders experienced major losses; however, by analyzing their losses and learning from them, you can use this newly gained knowledge to develop safe and effective trading strategies.
The Psychology of Day Trading Crypto
Day trading crypto presents unique psychological challenges that can affect a trader’s performance. Can you make a living trading crypto while managing these psychological hurdles? Yes, you can, but to achieve success, it's essential to be aware of common emotional traps and biases. Below, we explore the psychological factors that often affect day traders and how you can deal with them successfully.
Emotional Stress and Market Volatility
In the crypto market, prices change by the minute, forcing traders to make quick and rapid decisions. This instability of the crypto market can lead to emotional stress. Furthermore, when traders' only source of income is their trading career, this stress Increases. To manage this stress, traders should practice self-control.
Fear of Missing Out (FOMO)
When traders see the rapid price growth of a particular asset and hear stories about others' success, they buy that asset because they fear that they miss out or just as a simple impulse. FOMO, or Fear of missing out, is one of the most common psychological Traps in day trading. To avoid FOMO, traders should stick to their strategy and make data-based decisions, not emotional ones.
Loss Aversion
Some traders cannot accept a losing trade and are unwilling to exit that bad trade. They ignore data and hold on to bad trades, hoping for a market recovery. However, holding on to a losing trade without any logical reasoning and only hoping for a miracle just results in bigger losses. To prevent such cases, you should use stop-loss orders and have predetermined exit points, even if it’s emotionally difficult.
Overconfidence
Overconfidence clouds judgment and makes traders overestimate their skills and the accuracy of their predictions. This leads to traders going out of their plans and taking bigger risks, ignoring all warning signals because of their ego. To avoid trading based only on confidence, you should maintain humility, regularly review past trades, and adjust strategies based on market performance.
Trader Burnout
When the market is in a swing, the stress of continuously being on edge is very tiring to your mental health. Also, constantly watching the market and being pressured to make quick decisions harms the trader's psychological health. This results in burnout, which increases the potential for emotional and illogical decision-making.
To manage various psychological challenges that trading comes with, traders can practice techniques such as mindfulness, journaling trades, and taking regular breaks.
Mastering the Psychology of Crypto Trading: Tips for Better Mindset Control
Below are some practical tips to help you manage your emotions and keep a clear head while navigating the crypto market.
· Set Clear Goals and Stick to Your Plan
Define your trading goals and entry and exit points, and stick to your plan to avoid emotional decisions.
· Limit Emotional Reactions
Try to remain logical in any situation and control your emotions at all times. You can also use tools like stop-loss orders to remove emotion from your trades.
· Take Regular Breaks
Avoid burnout by scheduling breaks, especially during intense market movements.
· Keep a Trading Journal
Tracking your trades helps you evaluate your decisions and understand your emotional triggers better.
· Practice Relaxation
To reduce stress and improve your decision-making, you can meditate or try different mind and breathing exercises.
· Limit Leverage
Over-leveraging increases emotional pressure and risk. Use leverage carefully and only when you fully understand the risks.
· Learn from Losses
Accept losses as part of the learning curve. Analyze your mistakes and improve your strategy rather than react emotionally.
By practicing these tips, you can achieve safe and logical trading. Also, keep in mind that you should not get discouraged by losses; rather, you should use every loss as a learning opportunity. In summary, self-awareness and emotional control are the keys to becoming a successful crypto trader in the long run.
Conclusion
In this PlasBit article, we discussed various elements contributing to day traders’ success and failure. Elements like day trading strategies, the psychology of trading, common mistakes, and lessons from successful traders. Each of these elements contributes to a trader’s ability to make a living from crypto.
Before you choose a day trading career, you must understand that almost 90% of traders do not reach long-term profits and that your future and financial security will be at risk. However, you can increase your chances of success by properly preparing before trading. This means that you have to do thorough research before every trade, have a clear strategy, use risk management measures, keep in mind many risks and psychological traps that come with trading, and create a revenue stream besides trading. And even after doing all of this, you don’t have any guarantees of success. So, if you genuinely like trading as a career and are willing to put in all this work, you have a chance for success, but if you lack any of these features, you should consider your options more carefully.
