How to sleep at night while trading crypto

How to sleep at night while trading crypto

By beachbummer | CryptoBeach | 20 Aug 2019


What if you are holding a day job and wish to trade in the volatile crypto markets? There is little chance for you to closely monitor the market movements like a day trader and you are worried that you are unable to trade out of trouble when things turn against you.

By following some simple suggestions, you may find your anxiety levels going down because your trades will be less affected by every small movement of the market.

In summary

  • Learn Technical Analysis (TA)
  • Your acceptable candlestick duration
  • Risk/Reward Ratio
  • Stop-Limit Order is your friend
  • Ensure sufficient liquidity
  • Be careful with Market Orders

1. Learn Technical Analysis (TA)

Do not trade on rumours and guesswork. For crypto trading, it is extremely important to learn (TA) as Fundamental Analysis (FA) plays a smaller part. At the very least, read up about support and resistance levels and lean about candlesticks. Candlesticks are an extremely important trading tool and you will soon find out.

2. Your acceptable candlestick duration

To be less anxious, determine what is a comfortable candlestick duration for you. As a rule of thumb, it should be as long as the amount of time you will be spending away from a trading terminal. For instance, if you need to spend time with work, friends and family and it is possible that you will not be able to see the markets for the better part of a day, use 24-hour candlesticks to see the price action and judge the status of your positions.

3. Risk/Reward Ratio

Once you have found a suitable candlestick duration, look around for a suitable setup with a Risk/Reward Ratio that is acceptable to you. You should at least have a trading setup where your chances of reward are 2x the risk.

As an example, let's say the coin is now trading at $1.50 on your candlestick charts. You can see that the support is at $1.00, while the resistance is at $4.00. By a quick calculation, you can see that your potential reward is $2.50 while your risk is $0.50 (or more). Do note that this is just a simplistic example and is just meant to give you a rough idea.

To lower risk even further, you might want to zoom out your candlesticks one more step (e.g. from 1 day to 1 week) to see if the trend you are observing also applies in the longer term.

4. Stop-Limit Order is your friend

Always set a stop-limit order, whether to protect against a loss or to lock in profits. If your exchange does not offer a stop-limit order, then you might want to find another exchange. Binance (referral link included) is an exchange that supports such order types.

A stop-limit order works by automatically triggering a pre-determined order to go into the market once certain conditions are met. For example, you can set a stop-limit order to automatically put a sell order of $9 if the price of your coin drops below $10. I will cover Stop-Limit Orders with more details in another article as it deserves much more attention.

5. Ensure sufficient liquidity

Make sure that the coin's order book has sufficient liquidity for you to trade in and out of your position comfortably. If the order book is thin, and you place a large order, the price will move very quickly.

6. Be careful with Market Orders

Market Orders are dangerous because they only have a specified order size with no specified price. What this means is that you are willing to pay (or take, if you are selling) any price as long as you are able to get the number of coins/tokens you specified. When your order size is large compared to the order book, you will see the price moving in big jumps.


If you made it up to here, I hope you have learned a bit more about managing your trades better and taking your life back from the crypto-trading frenzy. Do note this is not specific trading advice and you will need to do your own study and research to develop yourself further.

Let me know in the comments if you need further clarifications or have any suggestions for future articles!

Image from Pixabay

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beachbummer
beachbummer

Professional in Financial Services


CryptoBeach
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