Trading with cryptocurrencies has become more challenging as the demand for digital coins increases. However, blockchain technology is already complicated to understand, which hinders the trading process. Newbie investors find it difficult to choose the proper strategy, and they trade at any moment without knowing that trading with crypto is no different than at the New York Stock Exchange in terms of time.
Crypto trading must be done prudently. Therefore, trading hours are crucial when making a move because opening and closing positions can be more detrimental than rewarding due to the market’s volatility.
In the following paragraphs, we’ll define trading hours, discuss their importance and discuss how you, as an investor, can use them as a trading strategy that will make you successful.
What are trading hours?
Trading hours represent the hours in which the crypto market is open for trading and other actions. Unlike stocks and commodities, which are regulated, cryptocurrency markets are always available, running 24 hours a day, each day of the year. Traders are able to start their positions from 12 AM until 12 PM. There might be moments of a shutdown, but only during a period of maintenance.
The problem with trading hours is that they can induce FOMO (fear of missing out) because some hours may provide better trading opportunities, while sometimes they can make people miss big market moves due to the lack of regulations. FOMO will make investors take hasty decisions that negatively impact their portfolios, leading to considerable financial losses. But watching the trends in the market and taking decisions based on that is paramount for success.
Why are trading hours important?
Trading hours are decisive for people’s actions because during the highest levels of activity (mostly between 8 AM and 4 PM in local time). However, there might be other moments of the day when investors rush in to open or close their positions, depending on the news and events affecting the crypto market. This is why any investor should first be aware of what the media showcases about a certain cryptocurrency because that will affect the price.
Dogecoin is the best example to illustrate this phenomenon. When Elon Musk showed his interest and support regarding cryptocurrency, many investors hurried to trade it, which increased its value tremendously. Lately, after a period of commonness, Dogecoin increased yet again, up to nearly 16% more in the past few days due to the completion of Musk’s Twitter purchase.
Still, regardless of trading Bitcoin or Ethereum, which are the leading cryptocurrencies on the market, it’s crucial not to get overwhelmed by the amount of information surrounding a coin. For example, if you want to know more about Bitcoin or Ethereum price USD, know that their highs and lows happen due to investors’ sentiments changing after the media discloses new information about them. Therefore, their value increases or decreases, which is what makes the market volatile.
Opening and closing positions
Opening and closing a position is what makes trading unique. It entails traders inputting the price and the number of coins they want to trade. After that, they need to monitor open positions and close them when satisfied with the result. But let’s analyze the process in-depth.
An open position is an entered trade that will close its activity with an opposite transaction. It includes buying, selling, or adopting a long or short position. This position exposes the investor to the market’s risks, which is why closing a position should be done as fast as possible to avoid dramatic price changes affecting the trade. Depending on the investor’s objective, the open position can be held up to a few years, but that means a high-risk exposure that few can afford. That risk is eliminated as soon as the position is closed.
A closed position executes the transaction. For a short position, closing means buying back the security, while the long position requires the trader to sell it. But closing the position can be done for different reasons, like taking profits, stemming losses or reducing exposure. During the time between opening and closing a transaction, the holding period makes the difference between day traders who close their position on the same day and long-term investors who wait a few years to close the position.
Ways to close a position
Closing a position is more important than opening it because it can make your strategy profitable. On the other hand, closing too late or too soon can reduce your balance to zero. Therefore, you should learn how to perform the following strategies:
- Stop-loss is used to limit the maximum loss of a trade. Once the market price reaches a specific value, the asset will be liquidated so that the trader will have more control over its risks;
- Take profit is used to place a profitable position once the market reaches a certain price. This allows the trader to set predefined levels to lock in any profits as it closes the position;
- Trailing stop-loss is used for adjusting the stop price at a fixed rate below or above the market price of an asset. So, when the share price gets past the rate, the position will automatically be sold;
Finally, closing your position depends on the trading strategy. If you notice a sell signal, you should close your position, but doing so might require you to pay constant attention to the market changes. So, you may want to design a program (or choose an automated trading platform) to help you automatically close your position once the signal is visible.
Crypto trading hours represent the time of the day in which traders prefer to close and open their position. Depending on when most traders strategize their positions, it’s more or less profitable to trade your assets. At the same time, investors’ decisions are also influenced by media coverage of cryptocurrency news, so this is another factor contributing to the overall price. Therefore, you should take time and learn everything needed to earn money successfully.