What are the best time frames for making short term crypto investments? If you want to earn more profits from your investments you should be ready to take on more risks.
Just like it is in all types of investments, it is true in case of investing in cryptocurrencies as well. This is even more applicable if you want to make some quick return in the short term.
Though it does not mean that you should be ready to lose your money altogether, you should be well aware of the fact that there is a high possibility of it.
This may happen if you do not choose the right time frame to make your investment and earn high returns.
Remember, choosing the right time frame is very important especially in the crypto market given the fact that it is highly volatile.
Since short term investment and trading can be well denoted as aggressive trading, you will need to maintain a constant balance between the risks involved and the returns expected along with having proper knowledge of the trade-offs.
Short term investment and trading in cryptocurrencies can be divided into three specific categories depending on the time in which you want to realize profits. These are:
- Time frame of hours or Day Trading
- Time frame of days or Swing Trading and
- Time frame of weeks or Position Trading.
Ideally, the shorter the time frame you want to trade in, the higher will be the risks involved in it.
3 Best Time Frames for Making Short Term Crypto Investments
There are a few specific sessions in the crypto market that will offer you with better and higher trading opportunities.
These include sessions that have a higher trading volume. It also depends on the volatility level during that specific time frame.
Therefore, choosing the best time frame is not an easy task. This article will help you significantly to do so, with special emphasis on the shortest time frame, where you can make profits within hours.
1. Time frame of hours:
This actually involves what a day trader does. This is one of the most aggressive forms of short term crypto investment and trading.
In this process, your primary objective is to buy crypto coins and sell them at a profit after a certain period of time which can be after one hour or a couple of hours but essentially within the same day of buying the coins.
However, this is not easy to decide simply due to the fact that the crypto market is not like the traditional stock markets, which typically closes at 5 pm every day.
Instead, the crypto market is open 24/7, even on Christmas. This means that you will need to select the hours of trading according to your convenience and schedule.
This involves a lot of research and responsibility as well. The best way to select the best hour to invest and trade crypto coins is to ask a few relevant questions to you and follow the tips suggested by the experts.
- First, ask yourself whether you have the time needed to dedicate to making such moves successful. If you are engaged in another full-time job, this is not the right move for you because it will require staring at the computer screen all day. This will not help your trade and you may also get fired from your actual job. Double trouble.
- Second, now your risk tolerance over and above your financial affordability to lose your money. The question is how much you are actually willing and afford to lose. If you get anxious with the ups and downs, a common feature in day trading, this is once again not the right move for you.
Now, if you feel you are good enough to take this route, here are a few tips to follow in order to be successful.
- Trading sessions – First, you should have a well defined trading session, especially if you want to trade internationally. This is important because different financial capitals have different trading sessions, which is pretty similar to the forex market. For example, Sydney may allow you to trade from 5 pm to 2 am the next day, it may be 7 pm to 4 am in Tokyo, 3 am to 12 pm in London, and 8 am to 5 pm in New York. See the difference.
- Basic analysis – It is quite hard to make the fundamental analysis for cryptocurrencies which would help you to create a better trading strategy and set a more productive time frame. This is because it is different from trading traditional stocks, forex or any other conventional financial asset. Here you will have established data of the companies to help you out while the crypto market does not have any such risk-even calendar. Therefore, you will need to refer to different trading signals, charts, and price trackers for deciding the right time frame.
- Time convenience – You must set your trading time aside according to your convenience and other commitments. It may sound quite cool that the crypto market is open day and night but losing your sleep over it may backfire and affect your health. Therefore, consider this flexibility more judiciously.
- Be alert – Staying alert is the key to make crypto investment and profits by hours. This will help you to develop new trading strategies or make adjustments in your old ones according to the trading opportunities identified. It will also help you to manage the risks involved in making such trades.
- Always start small – Since there are quite a significant amount of risks involved, you should start small while day trading. When you get the feel and hang of it, you can gradually increase your investment amount. You will make more profit due to your gained experience. However, at no point of time you should consider taking the risk route by using margin or leverage tools.
- Minimize risks of losses – You should not take too many risks while day trading. According to experts you should not stake more than 2% of your account while trading. This will minimize the losses, if any. Never, ever, invest more than you can afford to lose is the rule of thumb.
- Use secure wallets – This is a major problem. Most of the online crypto wallets are not secure because these are vulnerable to hacking which may result in losing your money. However, you will still need to keep your capital handy while day trading. The best way to make sure trades is not to buy and sell crypto coins actually but to speculate the market movements and price actions by using specific and secure brokers.
- Avoid scalping – Scalping is the shortest-term strategy wherein you jump in and out of any trade frequently, often within seconds. This is good only if you do not have to pay transaction fees every time you move in and out. This will eat up your profit. Moreover, it will also expose you to a lot of market risks.
In short, discipline is the key when you want to day trade and make profit on your crypto investments in the short term – by hours.
2. Time frame of days:
If you do not want to take a less risky route than day trading by hours, you can choose to trade by days.
With such a time frame you will get enough opportunities to speculate and contemplate making more profits from your crypto investment in the short term.
This will also allow you to do your other jobs, full time or part time, not having to stick to your computer screen all the time.
Ideally, this is a more flexible time frame and is often used by the swing traders – ones who hold their assets overnight.
Cryptocurrency range trading is the most common strategy followed by the swing traders. In this method you do not follow the common trend and ride with it.
Instead, here you must look for the prices of those crypto coins that have been rising up and falling down within two consecutive prices.
The main objective here is to find the bottom of the range and buy the coins at that time. You should hold your coins till the range reaches the top once again and sell them off.
However, this specific time frame is not devoid of downsides. One of the most significant downsides of swing trading is that you may not get a perfect tax rate or the same one available for day traders.
Also, depending on the broker you choose, you may also have to pay a high amount as commission or fees when you hold your positions overnight. This will eat up your profit and prove your strategy to be unproductive.
3. Time Frame of weeks:
This time frame is much shorter than long term crypto investment and can be availed by you if you want to make some quick profits.
In traditional markets, this falls under the position trading category and is considered to be less risky than any other forms of short-term crypto trading. However, do not mix up ‘least risky’ with ‘no risk.’
In this type of crypto trading time frame, you will get ample time to identify the ups and down as well as the current market trends.
This will enable you to wait until the time when the price hits a support or resistance level.
Ideally, in this method you should invest in crypto assets in an uptrend market at the pullback and sell them at resistance to make maximum profit.
Sounds confusing? Well, for that you should first know what a support and resistance level means.
- A resistance level is when the price of the crypto coins fails to rise any further due to the psychological barrier in the market.
- The support level is just the opposite when the price of it cannot simply break below.
And, to be successful in position trading, you will need to follow a few specific steps such as:
- Identifying a specific trend of price and the market by using proper tools for technical analysis
- Waiting for a pullback
- Buying during the pullback and within the uptrend and
- Making a sale at a resistance to maximize profits.
Also, you should know that if you want to hold your coins for several weeks, you will have to store them in the online wallet.
This will surely expose it to additional risks of hacking. The best way is not to own the cryptocurrencies.
You can do that by using a broker that offers price speculation service for position trading.
Just as it is mentioned above, you should set a time frame for making crypto investments if you want to make some notable profits in the short term. However, choose one according to your convenience and never go overboard.