I’ve been around long enough to know that it’s really stupid to assume anyone has common sense. So, for some of our readers, this might come as a no-brainer but for others, these little market knowledge bombs will save some day traders a lot of heartache.
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First of all, Crypto Day Traders are a diverse and unique breed of people. They really believe in cryptocurrency and they want to accumulate as much of it as possible. No one really knows the depth and breadth of their motivation. Having tried my hand at it, I can say that it takes patience, patience, an iron stomach, and oh, more patience.
But more than that are the very basics that are needed to dive into crypto day trading. Like any game, you need to know the rules, the boundaries (so you can push them), and the penalties. So let’s highlight some of these market knowledge bombs and you tell me if you’re taking advantage of them.
Average Daily Range
As a day trader, before risking your capital to trade in just any market, you must know what the daily average of the trade is. If you don’t know what your average daily range is, you are not giving yourself a chance to profit.
The average daily range is a volatility indicator that shows how much an asset moves, on average, during the day.
This information is essential to successful day trading. If your average daily range is 100 points, for example, and you buy at 98 or 99 points then you are not anywhere near the best rate for the highest profit margin.
Knowing the average daily range helps you to avoid getting into trades too late or too early, but it also allows you to plot your profit targets and determine where to place your stop losses.
As day traders, what we are looking for is anything that can increase our chance of success. Bearing in mind what your range is and framing your trade within that expected range is important for successful trading.
Active vs Quiet Times
If you watch the markets long enough, you will see that there is a steady stream of events all the time, but there are also times in the day when the market is a lot more active.
A friend of mine would always say, “What did China do last night?” before he signed in to see the U.S. market activity. I called him the Time Zone Guru because he was certain that their busy activities based on their time of day would be mirrored in our activity when we hit that time of day.
You know, with Day Traders, sometimes you just have to say, “To each their own” or “Whatever works for you, dude.”
The point is, most markets are very active early in the trading day and right before it closes. In crypto, it’s a little different because we don’t have “office hours”. It’s not like the stock market when it has the closing bell.
Watch the News
For example, the Asian market generally will still be sleeping when the US market is open and very active. Knowing these variations and knowing when one continent is waking up, and the movement of liquidity is essential. This will help you in knowing what to expect and how to plan your day. The volatility expansion on the market will determine the risk you take and opportunities for your trade.
News and Data
There is always news and data being released on social media, news outlets, and whatever crypto group you subscribe to. Good news, developer insight, strategic partnerships, or losing partnerships and bad news plays a huge part in how the market will churn.
If you’re smart and limiting your trades to a choice few crypto tokens then it’s easier to stay apprised of any updates that might affect the markets you’re trading in. On the other side of the coin, there have been situations when an older project got a new marketing team and they’re testing out the schema with A/B testing and you’re getting caught up in the wave of new messaging. It happens.
Whatever the situation, be aware of the news and dig for fact-based articles, not just the hype. This will definitely have an impact on how you handle your trades in a volatile crypto market.
But here’s a key. The goal is not to be on the lookout for the bulk of the news article in the field; the goal is to look out for specific news and data that drives the market within your time frame.
That being said, maybe my time zone guru is on to something. News cycles, time zones, waking hours with fresh eyes on volatile markets is definitely a contributing factor to activity.
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