Day Trading Cryptocurrencies 101 — Part 3

Welcome back, this is Part 3 of a six part series introducing you to the world of Day Trading Cryptocurrencies. If you haven’t read Part 1 and Part 2 then I suggest you go back now and read those before continuing with this article.

You have so far spent some time getting set up to trade, you have worked on your mindset and psychology, now we need to make sure when you gain some profits that you are able to hang onto them. You do that through the use of a wallet. There are two types of wallets commonly used to keep your bitcoins and other cryptocurrencies safe, Hot Wallets and Cold Wallets. In this part we will look at the pros and cons of each type of wallet so you can make an informed decision when choosing which wallet to go for.

Hot Wallets

Hot wallets are called hot because they are connected to the Internet which generally means it’s easier for hackers to access and potentially hack into and steal your valuable coins from you. Examples of hot wallets include those free wallets at exchange websites like Coinbase, Bittrex, Binance, Poloniex or Kraken. It also includes the various mobile wallet apps out there.

Desktop wallets are another form of hot wallet especially if you install it on a PC that is connected to the Internet. However, you do have control over your private keys, and some even allow you encrypt your wallet to prevent hacking attempts. The only downside of desktop wallets is if your computer gets stolen, breaks or dies on you, then you can pretty much say goodbye to your hard earned bitcoins.

Unfortunately there have been many instances of theft in hot wallets, especially on exchanges. Some hackers have even managed to steal millions of dollars’ worth of bitcoins!

Hot wallets are great for storing small amounts short term i.e. to use for your trading on an exchange. You should always move move your trading budget to offline storage or preferably into a cold wallet when you are not trading. This is a habit you should get into at the end of every trading day or at least at the end of the trading week. Moral of the story is never trust an exchange site no matter how much you trade on it.

Cold Wallets

Cold wallets are the preferred storage method of people with a significant amount of bitcoins. Examples of cold wallets include paper wallets and hardware wallets.

Paper wallets may sound a bit funny at first because we’re talking about storing digital currencies here, but it’s precisely why it’s one of the best types of wallet for long-term storage! With paper wallets, there is zero chance of anyone hacking anything on paper. The downside is it can be stolen, or it can get burned, put through the wash, torn, or destroyed. To keep your paper wallet safe, consider putting it in a safe environment like a safety deposit box at the bank.

The second type of cold wallet is the hardware wallet this is the preferred choice of many traders. It’s a physical offline device that’s pretty much like a glorified USB that can be plugged into your computer when you need to make a transaction.

There are three main brands that are very popular among crypto owners. These are Trezor, Ledger Nano, and KeepKey. All three will cost you some money but they will definitely help keep your bitcoins and other cryptocurrencies safe.

Some traders have two of these devices, one that they keep their trading budget on for the overnight transfers, this is the one they keep on them or locked away in their trading desk for ready access. The other device stores their main hoard of coins and they would normally keep this in a home safe or a safety deposit box at the bank.

Another form of cold wallet is using a Hedge Fund, this is what I do. At the end of the trading day I convert my trading budget over to a physical commodity…Gold. I use a service for this called Vaultoro, they store gold in a Swiss Bank account and allocate you a portion of it in your name. You can withdraw and take physical possession of your bullion or sell it for Bitcoin instantly. I use this service as the Swiss have very strong property laws and there is a public audit. I just use it as a hedge against bitcoins volatility overnight.

I hope this information gives you some food for thought so you can make an informed decision when choosing which wallet to go for for your trading.

I wish you every success in your Day Trading Journey. Happy Trading :-)

Disclaimer: All investment carries risk and you must take ownership of your day trading / cryptocurrency investments. Day Trading cryptocurrency carries a high level of risk, and is not suitable for all investors. The possibility exists that you could lose some or all of your investment capital and therefore you should not invest money that you cannot afford to lose. No representation is being made that any trading methodology will or is likely to achieve profits similar to those which may have been described here. Also past performance of any trading methodology or investment is not necessarily indicative or a guarantee guarantee of future results. The information in this article does not constitute financial advice. The author is not a licensed financial advisor and does not and will not provide financial advice. Any information presented is strictly for educational purposes only and should not be construed as investment advice or an offer to buy or sell securities. You should be aware of all risks associated with day trading / investing in cryptocurrency and should seek professional financial advice from an independent, competent, licensed accountant or other financial advisor.



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Grant Cause

Grant Cause

Grant is an IT industry professional with over 30 years of experience. Grant Day Trades Cryptocurrency and has developed his own Day Trading Method.