Could I become a day trader?

I did quite well on my first go-around with buying mcxFee shares at a low price and selling at a high price.  I gained a total of 0.8 BTC when I sold them off.

Then I bought two of them back at 0.8 and 0.85 BTC.  And then I waited for the price to shoot back up again.  I placed sell orders at 1.10 and 1.15 BTC respectively just in case they hit those highs while I was not online.  I watched the price climb to the high .90s and got hopeful.

Meanwhile some of the people on the troll box–that’s another name for the infamous mcxNOW chat window–talked about how well Primecoins were doing and how there was going to be a pump.  So I wound up putting down a total of 0.75 BTC into Primecoin, buying  paying between 0.0046 and 0.0055 BTC apiece.

I watched hopefully as the price climbed for a little while–I had sell orders placed to earn a modest gain–and then suddenly the buy support evaporated and the price started to fall fast.  I guess I should have heeded the advice someone in the trollbox wrote in response to a question I asked:  When you engage the trollbox, don’t trust anything anyone says.

During all this time the price of Bitcoins climbed up to over $200 per Bitcoin before it started to fall again.  I’m not sure if it’s the Silk Road business or the surging interest in China or the Vinklevoss twins or the recent US government shutdown which led to this most recent price spike.  Perhaps a combination of all three; perhaps other factors I’m not taking into account.

If I were ready to trade out my Bitcoins for Dollars I’d be thrilled with the recent price spike.  But since I’m not ready to trade them out yet, I actually find these price surges to be most disruptive of everything else I like to do.  Whenever the price of Bitcoins goes up, the price of alternative cryptos as well as Bitcoin denominated stocks all crash.  It’s because people who are speculating on the price of Bitcoin want to dump all their assets so they can then cash out their Bitcoins.  It’s only when the price starts dropping again that the price of the alternative cryptos and the stocks begins to recover.  Of course, in terms of Dollars, it’s possible that the prices aren’t really crashing that hard.  I haven’t run the calculation.  However at this stage in my game I tend to value everything in terms of Bitcoins, not Dollars, so the price of everything else falling is quite disconcerting, especially when I’d just bought some of those things.  The price of Devcoins especially is hard hit by the price of Bitcoins going up, which means I am very reluctant to sell mine, which then means I can’t get more Bitcoins to add to my CoinLenders account or otherwise play with.

And it’s annoying that for the time being at least I’ve lost quite a bit of my Bitcoin value because of my unsuccessful market timing efforts.  If I sell my Primecoins or my mxcFee shares I will have effectively cut my value in half or even a third, totally negating the recent gain I realized from selling them at the right time.  And I can’t even sell off some Devcoins to replace them.

On the bright side I now have a much better sense of how Dollars, Bitcoins, Alt coins, and various securities interact with each other.  I realize now that I bought my Primecoins at way too high a price and I may be sitting on them for quite a while before I’m ever able to sell them for any higher.  But I also have a good sense of how low Primecoins can drop and when might be a good time to buy them next time around.  As a consolation, the 146 or so expensive Primecoins I’m sitting on are collecting “interest” and mcxFee share dividends while they are waiting to be sold at the mythical high price.

In the mean time, I finally accumulated enough Litecoin from the Litecoin Faucet to get my first deposit directly into my mcxNOW account.  The price of Litecoins had been dropping quite steadily with people in the troll box running Litecoins down, but now that I have some in my account, the price seems to be recovering.  I’m trying to sell mine at a price I once remember seeing Litecoins go for.  I’ll probably be waiting a while to get that order fulfilled, but it’s nice to see I didn’t work on collecting them for nothing.  Maybe Litecoins will go up to as high as I hope to sell mine for; maybe they won’t.  Either way I’m collecting just a bit more “interest” now that I have a bigger balance.

For a while–OK, just a day and a half–I recorded the range in the bid and ask prices for all the alt coins on mcxNOW at different times.  I thought if I could essentially sell at the ask price and buy at the bid price I’d be able to gain a little bit on the spread.  If I had my buy and sell orders up simultaneously it could work, and I’d easily earn about 0.01 BTC per trade involving a total volume of 1 BTC.  I’d only have to make about 50 such trades each day to make some decent earnings–at least until I could put 10 BTC into each trade for a gain of 0.1 BTC per trade.

I didn’t get very far with that fantasy.  I’m not sure if it would even work, but I do know I just do not have the volume.  I’m simply not that rich yet.  But even if I were, the sheer amount of time it would take for me to monitor all that and pay attention to all the various factors is more than I’m willing to put in right now.  I’d have to be paying attention to the price of Bitcoin relative to the Dollar, I’d have to know what’s going on in the world of each alt coin, and I’d have to be aware of planned pumps and dumps, as very rapid movements in the bid and ask prices could strand either a buy or a sell order.  I believe blatant price manipulation of either stocks or currencies is illegal in the “real” world, but it’s common practice in the cryptoworld.  This means that without some knowledge and experience you don’t know if the price you see a given alt coin going for on mcxNOW is a genuine price or the result of some coordinated pump or dump scheme.  Buying or selling when you don’t know what’s going on can get you burned.

I can pick up some of this information by keeping my eyes glued to the troll box.  But then there’s this secret chat window that you can only see if you are invited to join it where the real deals are made.  I haven’t been invited to that chat window.  And when it comes to the troll box, you don’t just get trading tips.  Sometimes you get all kinds of controversies, politics, cuss words, or just plain drivel to wade through.

I’d have to take the time to do all of the above if I want to become a successful day trader.  I think it probably would be a lot easier to make some big gains on mcxNOW than it would be on FOREX or the stock market.  But it would still take a lot of time and it would still be incredibly risky.

So I’ve come to the conclusion that day trading is not for me at this time.

However, I can probably make out OK by placing strategic buy and sell orders on a few of the alt coins whose normal price fluctuations I have already begun to observe.  It’s not that much different from me placing Devcoin sell orders starting at 75 satoshis even while the price right now is 29 satoshis.  I place the sell orders and then I wait.  When there’s a pump some of those orders fill and I end up with way more in Bitcoin than I would had I sold at market price.  If I want to I can then turn around and place buy orders on the low end.  I’m quite familiar with the normal range of Devcoins.  I could get familiar with the normal range of these other alt coins.

But then I would have to be very patient.  I would be placing buy and sell orders at various prices and then waiting for them to fill.  It could take weeks or months.  For example, in the five or so months I’ve been dealing with Devcoins I’ve observed the price pumped twice, averaging one pump every couple months or so, which is like forever in the crypto world.  If I need daily action this could drive me crazy.

On the other hand, given that I have a life outside of managing my cryptocoins, this could be just right.  There’s always the option to just forget all this trading stuff and keep adding Bitcoins to my CoinLenders account and watch that account earn a small amount of return each day.  A bit on the boring side, but I can’t argue with the upside.

I’ve sworn off day trading for the time being.  However, I just might become a pretty darn good month trader!

Read Could I become a day trader? on the Devtome!

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