How to trade cryptocurrency: key points and tips
The Cryptocurrency market is quite new and there are many people who know nothing about it. Except traders. Most of them added cryptocurrency to their portfolio at the very beginning. Why? They noticed another possibility to earn money.
So, how many people trade crypto and get piles of money every day?
Some words about crypto
As you know, the first digital asset, Bitcoin, was founded in 2009. Then, different projects gave the world more and more alternatives, like Ethereum, Litecoin, Ripple, Bitcoin Cash and others. According to Coinmarketcap, there are more than 2,000 cryptocurrencies. Active traders are spoiled for choice.
However, less active or new altcoins may have limited trading opportunities. They provide fewer buyers when it’s time to sell. Traders want to be sure of their success, so very often, they only focus on some of the leading cryptocurrencies.
But how do they define the value of different projects?
Cryptocoins are generated by computational alchemy, also known as mining. A lot of processing power is needed to produce new coins. The more hashrate each chain has, the more transactions it can process. This gives rise to greater demand and value.
How to understand cryptocurrency trading
Generally speaking, trading is an extremely complicated activity. It’s not only about money and mathematics, but about stress, information processing, fast decisions and cold-blooded actions. Warren Buffet, George Soros and Steven A. Cohen all build capital today because they understand how the market reacts to different facts. Therefore, they understand trading.
Michael Novogratz is one of the most successful cryptocurrency traders. He made his fortune on Bitcoin, Ethereum and different ICO. How? He understood cryptocurrency trading. In 2013, he said:
Invest some money in Bitcoin. Come back in a few years and your investment will cost a lot more.
He was definitely right because at that time, Bitcoin was trading at a price of about $200 per coin. In 2017, it was $20,000. Even now, it is much more than $200. The profitability of Novogratz’s cryptocurrency investments turned out to be incredibly high.
What is it?
The main concept is almost identical to the stock or currency market. You buy/sell one asset for another, believing that the crypto you buy will increase in value.
Cryptocurrency trading is about earning money via a CFD trading account or simply buying and selling different coins via an exchange.
CFD is a derivative, which allows profit on cryptocurrency index changes without taking any ownership of related cryptos. You may set a “long” (for buy) position if you consider a cryptocurrency will grow and a “short” (for sell) position if you think its value will get a spill. You have to create a deposit to begin trading.
Working with an exchange means that you have to first buy crypto on this platform. You have to create an account, verify it and open the position. As usual, you must store your assets on the exchange wallet.
How does crypto trading work?
If you want to earn as much as possible, you’re obliged to know this. Be ready for what comes next: we can provide the theory and explain someone’s experience, but you’ll only be able to see the full picture if you practice on your own.
Firstly, you should learn some main principles:
- cryptocurrency trading is similar to real market trading, but it isn’t a fraction of a regular stock exchange;
- it is a 24-hour market;
- The crypto market is particularly volatile.
Secondly, you must understand the standard way of working with crypto exchanges:
- Traders send their existing coins to an account on an exchange or use the platform to buy crypto.
- They observe the prices of other assets available on an exchange.
- They choose the desired trade.
- Traders then place buy/sell orders.
- The platform finds a seller/buyer to match orders.
- An exchange completes the transaction.
An exchange platform charges a fee for every deal. It commonly costs around 0.1%, which is too much. Why? Because everyday volume is over 55 billion dollars. The “lucky” ones built great capital doing this.
There is one last fundamental thing that you have to understand: traders don’t just use their mathematics skills. Experienced traders know that such an enormous market needs more to earn money. Therefore, they use many different programmes to choose the proper assets at the right time. This may involve software, which helps to analyse the market.
Financial engineering is the use of innovative technologies to analyse more statistics in a shorter time. It helps to invest in the best fields or currencies.
How to begin trading cryptocurrency
You’re either an experienced trader from the stock market or a simple newbie to this field, and you don’t know how to begin trading cryptocurrencies. Traders from real stock markets have only one privilege in this context. They know technical analysis, so they don’t have to learn basic fundamentals about trading.
Even though you’re full of motivation and want to see the algorithm for using an exchange, you’re not yet ready. First, you need to learn some vocabulary. It will give you some understanding of how to learn to trade cryptocurrency.
How to buy and trade cryptocurrency
You are almost ready to earn money. However, if you want to get something, you have to give something. This rule refers to crypto trading. You should send fiat money (or crypto from your wallet) to the exchange.
- Establish an account on an exchange.
- Verify it.
- If your budget consists of fiat, you need to create a payment channel.
- Verify your identity (if necessary). Usually, exchanges ask for this because of the AML policy. The other reason is security: they fight with trading bots.
- Deposit funds.
So how do you trade cryptocurrency?
Now, try to answer this: how do you trade cryptocurrency? People will ask you about this each time when talking about trading. So, short-term or long-term?
Short-term is about buying an asset to sell after a short distance. Usually, beginners think that it is after a few minutes or hours. In fact, this can be anything from seconds to a few months. You may buy a definite crypto because you think its cost will grow in the near future.
The main benefit is a good chance to make a high profit in a very (even extremely) short period of time. Why? Because the cryptocurrency index may triple overnight or within some hours. The fiat currency market cannot give such opportunities, because prices usually only change for 1% through a day.
You can always find a buyer or a seller. People often go to short-term trading with big projects such as Monero, Ethereum or Dash. These cryptocurrencies have big demand, so you will not be obliged to wait for each deal.
Volatility is the biggest problem of the crypto world. If you perform short-term positions, you will need to spend a lot of time analysing the market before trading. Because of such volatility, you can lose all your money in just one second.
You must have a good grip on your psychological condition. Short-term means that you cannot be the champion every time.
Long-term trading is about “HODL”. You won’t have heard this word if you are a newbie in trading.
HODL means ‘hold on for dear life’. It is not in the dictionary, but describes the whole long-term trading market. Even if there is huge volatility, the index should rise over the long term.
Firstly, you don’t have to make a big technical analysis with complex trading charts. The recipe is very simple: you just buy and wait. You can check the price just once a day and sell crypto at the most appropriate time.
Secondly, you don’t need a big budget for this type of trading. You can buy small amounts and let them grow over a few years. Many people bought Bitcoin for $0.35 and forgot about it. Over 5 years, they got a profit of over 60,000x their initial investment.
You may lose a good chance for short-term trading. Sometimes, prices rise very quickly, only to fall down over a few days. However, if you have enough time and knowledge, you can combine long-term and short-term trading.
With long-term trading, you don’t spend much time on market analysis. That’s why you may miss some news which could influence the price.
There are many platforms, so you have to choose the best variant for you. There are some differences between them, so it is useful to do some research. You have to look out for:
- available currencies (be sure that the crypto you want to trade is supported);
- leverage (a high leverage is not recommended for newbies, but it is good for a big profit);
- hedging (provides insurance and reduces the possibility of loss; good for beginners);
- minimum investment;
- support (you will definitely have some questions, so choose a platform with good staff).
Also, you have to check feedback, security issues and history of an exchange. Don’t work with platforms that raise doubts for different causes. There are many good exchanges such as Poloniex, Kraken orDinance. You can choose any one of them and begin your trading cycle.
Best crypto wallets for trading
When choosing a ‘digital purse’, you should analyse its history and security issues. It defines the reliability of your investments. We analysed the market and completed a list of the best crypto wallets for trading. The final decision was based on security, number of cryptocurrencies for store and fees.
- Ledger Nano S, Trezor and Keepkey (for long-term trading).
How to know when to trade cryptocurrency
How do you trade cryptocurrency? Meaning, how do you manage to do this? Crypto Trading is very complex and risky. Theory is not enough to be successful in this market.
Trading is based on analysis. There are two types: technical and fundamental. The first is about graphs. You have to learn trends, history of prices and just about everything on figures. The second is about news. Follow the informational portals about cryptocurrency to learn everything as fast as you can.
Crypto trading signals
This is about technical analysis. Crypto trading signals are trading ideas or suggestions for actions on the exchange. They are generated by professional traders or by software. You can find these signals on your own. However, if you lack knowledge, it is better to pay for a subscription. You will lose less if you have expert suggestions.
In addition, you can follow some suggestions from popular traders on their Twitter.
However, be careful. They can cheat you via Twitter in order to get more profit for themselves. Moreover, if they play with their own, they can lie to their own.
The crypto market moves due to supply and demand. Nevertheless, because of decentralization, it is free from the world’s politics and economics. While there is still a lot of factors that influence this market, prices can change in just one moment due to the following causes:
- capitalization (the value of all coins);
- press-releases (media defines almost everything that happens in the financial world, so follow the news);
- integration (how different payment systems and exchanges refer to each cryptocurrency);
- key events inside the project (update, security changes, hacks and others).
Market analysis is also known as fundamental analysis. It is very important to do when trading. This defines your success.
How to start with StormGain
StormGain is one of the cryptocurrency exchanges that lets you start trading very fast. You can start in 4 steps:
- Create an account via email and password, and verify it.
- Make a deposit with fiat or cryptocurrency.
- Analyse the market.
- Place a position.
5 golden rules for crypto trading
We can’t tell you everything about cryptocurrency trading. Why? Because it’s about experience. You have to practice to double and triple your capital. It’s the first and main rule. Fake it till you make it.
Next, analyse as much as possible. Whoever owns information, owns the world. You cannot be a good trader without learning everything about the market.
Don’t trade over your capital. You should never forget about real life. If you don’t have enough money for dinner and taxes, you won’t have a clear head to make the right decisions while trading.
Understand the cryptocurrency you are buying. Even if your portfolio consists of 30 coins, you have to know everything about each of them. It’s the only way to invest in an appropriate way.
Lastly, remember, it’s not a shameful thing to lose sometimes. You can’t always win. Therefore, if you lose, keep a cool head.
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