I tried it so that you don't have to...
A few months back I had tried to get into 'day trading' crypto. The first thing to keep in mind is that roughly 25% of all of your profits get paid to the IRS when your taxes are due. So imagine that you buy 3 ether for $333.33 and then sell them when it hits $340.00. You would have profited $20.31 with the intent to buy back in when it drops below $333.33 again, rinse, adjust, repeat…
That $20.31 profit you made only really pockets you ~$15.22. If you purchased the Ether with a debit card, you would have paid a markup as well as fees which realistically brings your profit down to under $8.00. If you purchased it with ACH, you pay much less in fees, but can't trade immediately. There is about a 1 week waiting period. The best method is to load USD (or your currency) into the exchange and set ‘limit buys'.
So best case scenario, you made $8.00 profit off of your first 2 trades, or you made about $15.00 granted everything worked out the way you had hoped and the market didn't fluctuate too much during the week you had made the purchase. Eventually you start to fear missing out (FOMO) and you invest more than you had initially intended because you don't want to miss an opportunity.
Those are some of the best case scenarios. Now let's say that the money is already in your exchange account and again you buy in with all of your money (Let's say $1,000.00 to keep it simple) to get about 3 ether. Now the price of ether drops to $270.00. This is not only possible, it's likely given the trends of Ether. It's great long-term but not so great short term. You've now lost $190.00 and that $1,000.00 you started with is $810.00. Given the first example where you make $20.31 profit (or a similar likely circumstance) it will take you 9 good trades to get back to your initial investment.
Now keep in mind that nothing I'm saying is truly relevant because anything can happen, I'm just pointing out that the risk of investing a small amount of money in crypto for a short term investment is usually riskier than the payout is worth.
Realistically speaking, if you 'day trade' $1,000.00 worth of Ether for a week carefully and get lucky, you may make up to $200.00 per week assuming the price stays stable. BEST case scenario, you could make $1,000.00 if the price of Ether by some freak occurrence doubles but more likely you will trade off making small profits and small losses until you realize that with such a small sum of money, the short term investment isn't worth it. On top of that with 25% of your profits going to the IRS, it's not as lucrative as you'd think.
Your best bet? For every $1,000.00 you have to invest- buy 3 Ether and forget about it for a year. By that time any inevitable gains you've made will only be taxed at about 15% and you will have made a great investment.
I think it's a good idea to start by saying that I don't recommend trying to day trade crypto unless you have a few thousand to play with. By a few, I mean around $10k. That is where you will start making a few hundred dollars quickly. Think of it like this: $10,000.00 is about 30 Ether. Now for every dollar that Ether rises, you make $30.00, for every dollar it drops, you lose $30.00. You can buy in at $330.00 and sell it all at $340.00 to make $10.00- 30 times. That's $300.00 and can realistically happen in a day. Then you have to hope it drops again so you can rinse and repeat. It's realistic that this $10.00 rise and drop will happen 2 or 3 times in a given week. Sometimes it will happen a dozen or more times. Sometime it will drop by $30.00 and you'll lose $900.00, but you just walk away from the exchange for a few days and it'll usually recover.
If you can afford to invest $10k, live with the stress of losses and not act on emotion, you'll be OK. If that's not the case, it's a dangerous game.
If you are a cryptocurrency enthusiast or you just have some disposable income that you are willing to play with in your free time, it could be fun but as a reliable source of income? No. Crypto may feel a lot like stocks in some ways, but where it differs is that you can study the crypto/ICO of your choice nonstop for weeks to make an informed decision but at the end of the day the short-term trades are nothing more than a crapshoot. I will always advocate for long term investing in cryptocurrencies that are backed by a solid idea that will improve the world in a meaningful way. I have found that 'day trading' crypto is more stress than it's been worth for me. The fun is almost completely overshadowed by stressing over a market that doesn't sleep.
Keep in mind that this was just my experience and my personality traits carry into my investing habits. I work 40+ hours per week and started playing with crypto as a hobby as early as 2013. Now that the barrier to entry is significantly lower, I'm well aware that this question is on peoples' minds. What I had determined personally that 'day trading' less than $10,000.00 worth of any single coin is not going to provide you with enough extra income to quit your day job. Always keep in mind that there is a possibility (although I have a hard time seeing it become a reality) that the price of any crypto can drop to $0.00 with little to no warning. Please be careful and invest within your risk tolerance.
Too much stress for me , I buy and just hold mostly, Say you sell ETH at 300$, and willing to buy back 275$ to gain some Eth, Eth hits 280, you still waiting, now if Eth goes to 350$, are you still waiting?, or you saying screw it and buy back in at loss, I know people who waited for BTC to hit 1500$ never happened, now its past 4000$. Also only invest in what you believe in, if you holding it long term.
You're absolutely right. It isn't worth the stress. There's certainly no magic formula and waiting for a drop has never worked. The best option always seems to be to buy as soon as you possibly can and hold for as long as you can. It's not worth being a slave to pennies on GDAX.
What I find out the best time to buy, is when bitcoin loses more than 25%-35% , its hard for bitcoin to lose more, and a bounce usually occurs without going much lower, that's about the best time to buy, but one doesn't know when that happens, but if it does, Its easy to spot. 2800 to 1800 , 3000 to 1800, 5000 to 3000, know the low support lines , right now low support is 3000ish and highest is 4160.
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STOPInteresting post, thanks for sharing! I've been day trading for a couple of months now but have just recently started tracking my progress, which I'm going to be sharing here on Steemit on a weekly basis.
I know the odds are against day traders, but I think that with well set rules, basic TA, and realistic expectations, you can do fairly well. And at the very least, you learned something along the way.
In my first week day trading on Binance, I'm up 50.85%. Hoping to keep the momentum going but we'll see how things go. It's a bit easier for me to day trade as I am able to do it while I work, but I realize this isn't possible for most people.
Anyway, thanks for sharing your experience!