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is day trading bitcoin legal

Cryptocurrency is still in its infancy. It first entered the tech scene as an idealistic notion: taking control away from big banks and governments and returning it to the people. This would be accomplished by the creation of digital currency that could be secured via cryptographic methods and spent, peer-to-peer, without third-parties either taking a cut or tracking transactions.

That was the original vision for cryptocurrency, as laid out by the earliest so-called cypherpunks and the still-mysterious Bitcoin founder Satoshi Nakamoto. Bitcoin millionaires cropped up almost overnight as the coin surged in value, multiplying by many thousand percentage points over the course of just a few years.

This, then, was the new normal for cryptocurrency. Its ties to the once vilified financial sector increased, and today, there is a large contingent of professionals and semiprofessionals who make money shuttling value from coin to coin or even by reaping large profits from the arbitrage between different exchanges.

The explosion of available exchanges — and information — has somewhat returned crypto to its democratic roots. Now, with a little research, a little know-how, and a lot of courage, virtually anyone can try his or her hand as a day trader in the cryptocurrency arena. Day Trading is nothing more than the process of buying or selling an asset — be it a security, stock, precious metal, or cryptocurrency. The entire name of the game can be summed up as buy low, sell high.

The object of day trading is to get into the market, take a position, keep a close eye on that position, and then exit at a profit. Some bots, or automated computer programs that do your trading for you, can produce a flurry of trades in just a few seconds.

It should also be noted that some so-called day traders maintain some positions for weeks or even months, depending on certain security goals.

That sounds simple enough. That said, day traders can have several different ways of approaching that goal. The two broadest categories into which one can divide day traders are speculators and technical analysts.

Speculators do exactly that. They try to find outside market influences that seem to indicate a cryptocurrency will either suddenly gain or suddenly lose value. The best example of this is the newshound, who carefully watches the cryptocurrency wires for news about hacks, big coin tech developments, major adoptions, and other potential market movers.

The second category is more concerned with the internal workings of the market rather than outside pressures. This kind of day trader relies on financial charts to get a feel for where the price was in the recent past and where it might be heading next. The science of reading charts, or technical analysis, can be — indeed, is — fairly involved.

Think of the confusing squiggly lines, bars, and candles on your average financial chart as a road map. If you know how to read it, you can say with a pretty fair degree of certainty where those lines will be going next. Despite the meteoric rise of some cryptocurrencies and the relative ease of the day trading process, day trading is not a get-rich-quick scheme.

Even the best day traders rely on making small amounts of money over a relatively large number of trades. In many ways, day trading resembles gambling, albeit with slightly better odds. This is more important than it sounds. Different exchanges offer different coin pairings, fee structures, minimum trade amounts, and more. Pay close attention to those fee structures. If your trading style is likely to consist of very large volumes with very little profit made on each individual trade, those profits can quickly disappear into fees.

More importantly, however, it gives you options in terms of cryptocurrency availability, fees, and liquidity. Take a look at our guide to the best exchanges for trading crypto , we have also written in-depth reviews of most exchanges so look here to find the one you wish to use. Just in case, however — most centralized exchanges require some sort of identifying information, such as an email address, and may ask you for further identification for security purposes.

Decentralized exchanges are largely anonymous. The trade-off is that centralized exchanges function more like traditional stock exchanges, and they have in-built security systems and relatively high liquidity. Decentralized exchanges may lack ready liquidity, and every trade should be approached with a caveat emptor attitude, but your trades can be conducted in near-total privacy. This involves individual coins, any relevant news, any relevant technical analysis, and more. Most importantly, however, you need to set some ground rules for yourself.

One of the hard-and-fast rules in day trading involves never risking more than 1 percent of your total bankroll, or available investment money, on a single trade. This can be a tough one to practice.

Say you see a trade that seems like a sure thing. Day trading is a numbers game, ultimately. If you play long enough, you will definitely miss some grand opportunities. A second important factor when considering strategy is your stop-loss limits. These are your exit strategies. Most exchanges allow you to set a stop loss that will automatically exit a trade at a given price level. A related concept is the limit sell order, which automatically closes a trade when your coin reaches a certain higher price.

Some may be free, and some may be part of a service. We advise caution here. Moreover, different bots suit different trading styles, and they can and do make significant mistakes. To become a successful trader, you are going to have to know about Technical Analysis — that is the ability to read and analyze the charts using a number of methods and techniques. Knowing these will allow you identify trends and make predictions about price action. We employ a number of Analysts who create price charts here on Blockonomi.

Take a look at their posts which will help you start to recognize the patterns yourself. So, when do you jump back out? You should always factor in fees when deciding when to exit a trade. After all, if your profit disappears entirely into trading fees, did you make a profit at all? Individual comfort is also something to consider. How small is too small for you? Sooner or later, the question of taxes is going to come up.

A loose rule, however, is that day trading is going to be governed entirely by short-term capital gains rules. These can be high — as much as 40 percent. So, in addition to your expected profit loss from exchange fees, you need to take on your expected tax burden. Basically, any coin-to-coin trade or coin-to-fiat trade is a taxable event. A tax professional can help you select software to keep track of your trades to make tax filing simpler, and the professional may even be able to help you decide what your acceptable level of profit should be before you pull the trigger and create a taxable event.

Day trading has the potential to generate both large profits and large losses. A conservative trading strategy is highly recommended for everyone, particularly the beginner.

There are exchange fees to be paid, and the tax man will ultimately come knocking for his share. If the game seems too hectic, or the work outweighs the rewards, consider a different strategy, such as long-term holding or becoming involved with a professionally traded fund that you can invest in much as you would a common mutual fund.

No Spam, ever. All content on Blockonomi. The opinions expressed in this Site do not constitute investment advice and independent financial advice should be sought where appropriate. Hey Oliver, great informative article for beginners! You rightly said that day trading is NOT a get-rich-quick scheme and most of the new crypto day traders will lose money initially.

For those who are beginner, shorting basically means that you predict that the price of the crypto is going to fall. You make money when it actually does fall. This way, even if you are predicting a bullish run on the crypto, having some investment in shorting will minimize your loses in case the price falls and goes against your predictions. Your email address will not be published.

Notify me of follow-up comments by email. Notify me of new posts by email. Contents 1 What is Day Trading? You should consider whether you can afford to take the high risk of losing your money. Related Articles. Show comments Hide comments. One Comment Tarun Jain December 13, at am.

Leave a reply Cancel reply Your email address will not be published. Next What is Market Cap in Cryptocurrency? Guide to Market Cap vs. Coin Price.

is day trading bitcoin legal

Conclusion – Crypto Day Trading

Follow us on Twitter or join our Telegram. If you are looking to buy, sell, or spend Bitcoin, you should check if it is legal in your country. In fact, there are many countries with different cryptocurrency regulations. Some of them even single out Bitcoin, allowing it to be used as money, pay taxes, purchase goods, or trade it like a commodity. In other countries, even the mere possession of Bitcoin can get you to prison. Others have not even bothered to regulate it yet, leaving Bitcoin and other cryptos in legal limbo. Bitcoin and cryptocurrencies are generally welcomed in most parts of the world.

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Well before you do, I think you should read my guide first! This will start by explaining exactly what day trading is, followed by the things you need iss consider. By the end of reading my guide from start to finish, you will have all the information you need to decide if day trzding cryptocurrency is right for you. When people talk about trading, they are referring to buying and selling an asset with the aim of making a profit. For example, in legla stock exchanges, people trade all kinds of things.

This can include xay and shares like Apple, currencies like U. Dollars, bitxoin even metals such as Gold and Silver. Whatever is being traded, the objective is the.

Buy an asset and then sell it for more than you paid for it! This is exactly the same as trading cryptocurrency. There are different types trwding trading goals, which are normally split into short-term trading and long-term trading. This is determined by how long you like to hold an asset before you sell it. Day trading is very short-term trading, and it can mean holding an asset for just is day trading bitcoin legal few seconds, to a couple of hours.

Is day trading bitcoin legal idea is that you sell your asset before the end of the day, dy to make a small, but quick profit. However, it is important to remember that the above two trades are examples of a successful prediction. On another day, the prices could have easily gone the other way, which would have meant that both Peter and John lost money.

The main idea is that when day trading, you look for opportunities to make a quick profit. If you are planning on holding on to a cryptocurrency for longer, this is called bitfoin trading.

It literally just means to hold a coin or token for a long time and resist selling it. There are lots of different methods ,egal people use today trade, but the main two are based on either speculation or chart analysis.

Speculation is when a trader believes a price will go up or down because of a certain event. In the above example of Peter, he purchased Ripple because he saw a positive news story. There was no guarantee that the price would go up, but he speculated that it would be based on his own opinion. The other day trading cryptocurrency strategy often used is chart analysis.

This is where traders study the price movement of a particular cryptocurrency and try to guess which way it will go, based on historical price movements. When analyzing charts, you can look at how a price moves every few seconds, minutes or even hours. In the above section, I briefly discussed what day trading cryptocurrency actually is and some of the crypto trading strategies people use. This section is going to talk about the mental side of trading, which is probably the most important thing to consider.

Firstly, there are one major difference between day trading cryptocurrency and day trading real-world assets. The reason for this is volatility. Volatility is when the price legwl an asset moves up or down really quickly, meaning it can either be a great success for the trader or alternatively a great failure. For example, if you were day trading stocks butcoin the NYSE New York Stock Exchangeit is very unlikely that the prices would change that much in a 24 hour period.

This is because they are safe companies that have been operating for a long time. Of course, prices still go up or down, but compared to cryptocurrencies, it would generally only be by a small. On the other hand, the legall of cryptocurrencies are very volatile. In some circumstances, even. Anyone that bought the coin towards the start of the day would have made a lot of money, however, the people that bought it at its highest price would have lost the majority of their investment.

The E-Coin example is why it is important to understand that day trading Bitcoin and other cryptocurrencies will not always go to plan. You have to be able to accept losses when they happen, as this is a part of trading. Even the most successful traders in the world make losses, as it is impossible to always make the correct prediction. Chasing losses is the act in which a trader experiences a bad loss and they attempt to make it back by taking really high risks. This is one of the main reasons why the majority of traders fail.

You have to accept that you will always make losses at some point! Before you even think about depositing funds into your new trading account, it is really important that you practice. Although none of the major cryptocurrency exchanges offer a demo account, a good place to start would be Coins2Learn.

Coins2Learn offers a trading simulator that allows you bitxoin trade using fake money. The platform is really good for beginners and they even offer tips and how tgading become successful. You can access their website by clicking this link!

Once you have a better understanding of how the markets work, the next step is to do the real thing. This is why it is important to start off with really low amounts. In fact, the amounts must not be any cay than you can afford to lose. At this stage of your day trading cryptocurrency career, you will be learning about the highs and lows of the markets and is day trading bitcoin legal importantly, improving legall skills and knowledge.

Once you have figured out how the markets work and you feel you are ready da start trading with real money, you now need to set yourself some targets. This is really important as if you are planning to do this as your part-time or full-time job, you need to have expectations as to how much you hope to make. Although this sounds like a small amount, in the long run, this will protect you from kegal broke.

Ks important aspect to day trading cryptocurrency is that you set yourself a stop loss. A stop-loss is when you enter a price that you want to automatically exit your trade. This protects dat you a sudden decline in price, or if you were not at your computer to do it. If you feel that you will not have the mental desire, time or patience to become a day trader, you could always consider long-term investing instead.

Long-term trading is far less stressful, as once you buy a coin you can leave it to grow over a longer period of time. This could have been achieved without you needing to sit at your computer all day to check for any price movements. You can also apply the same trading techniques too, such as setting stop-losses or market limit-orders. However, if you are certain that you want to become a cryptocurrency day trader, then the next part of my guide is going to show you how to get started!

Now that you know what day trading cryptocurrency requires, as well as what you need to consider, I am now going to show you how to get started! The first step when looking at how to day trade cryptocurrency will require you to find a good exchange. A cryptocurrency exchange will allow you to buy and sell coins 24 hours per day. It is important to think about what kind of cryptocurrencies you are looking to get involved. If you are looking to day trade full time, then it is well worth choosing an exchange that has lots of difference pairings listed.

Note: A pairing refers to the two coins that are being traded. It is also important to dy an exchange that has lots of liquidity. This will ensure that you os always be matched with a buyer or seller, otherwise, you might not be able to close your trade when the price lrgal falling!

A good place to start would be Binance, as they tradinf hundreds of trading pairs available and they also have one of the largest trading volumes in the market. To find out more information on setting up an account at Binance, see my guide here! Once you have opened an account with an exchange, it is time to deposit some funds. If the exchange that you want to use does not accept real-world money deposits, then you can first go to Coinbase to buy is day trading bitcoin legal Bitcoin or Ethereum and then transfer it.

You also need to consider how much you are planning to deposit. Bitcin forget that the cryptocurrency markets are really volatile, so there is always a chance you could lose your entire investment.

Leval is day trading bitcoin legal with smaller amounts. Once you are set up and you have deposited some funds, take some time to understand the different features on the trading screen. Every exchange will have a chart, so it is a good idea to learn how to analyze pricing movements. You can visit dwy free guide. The green bars mean that the price has gone up, while the red bars mean that the price has gone. Learning how these tools work is really important as it will allow you to identify when there is a good chance that a coin is going to rise or fall.

However, bigcoin again, tradkng is iz guarantee that your traving will be right, so always make sure you bitcpin ready to exit a trade if things go badly! I know I have given you lots and lots of information, but I think it is really important dxy you to understand all of the risks involved. If you have read my guide from start to finish, you bifcoin now know whether day trading is right for you, as well as how to trade Bitcoin, and how to trade cryptocurrency in general.

As you have probably noticed, there are a lot of steps to consider before you begin your trading career. In reality, it will take a really long time before you are able to trade successfully as if you do things correctly, you will need to build things up slowly. Even though tradinng are never a good thing, when you do experience them in your early days of legaal, it will help you learn not to make the same mistake again! So what do you think about day trading cryptocurrency? Is it something you are going to consider, or do you prefer the sound of long-term trading instead?

Just make sure that you never invest more than you can afford to lose and that you never chase your losses. Now that you know how to day trade, and how to make money with cryptocurrency, visit web page me know your thoughts in the comments section.

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If problem persists contact site administrator. Discover Medium. If your trading style is likely to consist of very large volumes with very little profit made on each individual trade, those profits can quickly disappear into fees. On the other hand, the prices of cryptocurrencies are very volatile. Which is day trading bitcoin legal that frequent trading between bitcoin and rival fiat currencies would be a common practice. Related Articles. Our team at Trading Strategy Guides is lucky to have over 50 years of combined day trading experience. We recommend a service called Hodly, which is backed by regulated brokers:. Read. That has the potential to be less stressful and more profitable than day trading. Zulutrade work with a range of brokers that deliver trading on a huge range of cryptos - See each brand for specifics. If you are interested in learning how to day trade cryptocurrencybe sure to equip yourself with enough information before diving into the market. Has it been validated? This would be accomplished by the creation of digital currency that could be secured via cryptographic methods and spent, peer-to-peer, without third-parties either taking a cut or tracking transactions. The entire name of the game can be summed up as buy low, sell high. You might also consider maximizing the liquidity to which you have access by trading on a platform that allows you to access many different exchanges at once, rather than trading on only one or two specific exchanges.

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