As traders, the main objective is to exploit opportunities in the markets. Every so often, these opportunities present themselves in the form of completely new markets. Cryptocurrencies are a unique investment opportunity, and it is not easy to venture into cryptocurrencies without relevant knowledge. Cryptocurrencies are complicated, and before investing, it is advisable to understand how they operate and where they get their value proposition.
This post will explore the cryptocurrency market and give you a total beginner guide on buying and trading them. Make sure to bookmark this vital post because we will be updating the information as things change in the cryptocurrency market. For the experts, the information here will be more straightforward. Still, the primary objective is to make this post as easy as possible for beginners to make rational decisions on the opportunity.
Everything you need to know to trade cryptocurrencies like BTC and ETH
To begin with, you will need a cryptocurrency trader, exchange, or wallet to trade on. Cryptocurrency trading is the process of purchasing low and selling high. In contrast to investing in crypto, which means acquiring crypto and holding it over-time until its value appreciates, trading involves speculating price movements by analyzing the entire sector and price charts.
Traders use two primary methods to speculate the price of cryptocurrencies, such as Bitcoin – Fundamental and technical analysis. To successfully trade cryptocurrencies, you have to sacrifice a lot of time, effort, and finances before you can become good at it. To start trading crypto assets, you will need the following:
- Registering an account with a cryptocurrency trading platform or an exchange. (e.g., Bitcoin Revolution, Binance, etc.)
- Verifying your identity and passing KYC.
- Funding your account with the initial deposit.
- Executing your first order (buy or short sell).
Cryptocurrency trading vs. Investing
Before venturing deep into cryptocurrency trading, we need to understand between trading and investing. Investing in cryptocurrencies, let’s say Bitcoin, means that the investor is buying Bitcoin to hold it in the long run. That is to say; these investors believe that the price of Bitcoin will rise in the future irrespective of the challenges that it will face. Generally, investors buy Bitcoin because they are convinced by the technology underpinning it, the concept, and the cryptocurrency developers. Crypto investors are inclined towards HODLing their crypto assets in the long term. HODL is a common term used in the cryptocurrency sector born back in 2013 as a typo of ‘hold.’
On the other hand, cryptocurrency traders buy and sell crypto assets from a short-term perspective. Traders always execute orders whenever they see an opportunity to profit from regardless of the profits made. Contrary to investors who view cryptocurrencies as assets, traders see cryptocurrencies as trading instruments for generating profits. At times, traders are not worried about the technology or ideology behind the instrument they are trading.
Notably, unlike the traditional markets like stocks and commodities markets, which have a specified opening and closing period, the crypto market is open 24/7, and traders can trade at any given time. Besides, the cryptocurrency market is massively unregulated, making it somewhat easy to begin trading without the hassle of the prolonged identity and address verification procedure.
Trading strategies employed by professional traders
Although all the traders are after one common goal, they all employ different strategies to attain it. Let’s look at the most popular trading strategies utilized by experts today;
The unique hallmarks of the crypto market require one to be equipped with knowledge of how it works. If not, it is like trying skydiving without a parachute. Day trading cryptocurrencies can be a profitable venture due to the high volatility associated with the cryptocurrency market. Before trading crypto assets such as Bitcoin, it is wise to wait until the market volatility is at a peak level. The advantage of trading cryptocurrencies is that even when the volatility reading has dropped, it is still possible to generate decent profits, unlike other markets. Below are the steps to day trading:
- Research and select cryptocurrencies with high volatility reading and high liquidity.
- Apply the Money Flow Index Indicator on the 5-Minute Chart.
- Wait until the Money Flow Index hits the 100 level.
- Buy if MFI = 100 and if the next candle is bullish.
- Hide your protective Stop Loss under the lowest price of the day. Take Profit during the first 1 hour of opening the trade.
Scalping has become an increasingly popular day-trading strategy among cryptocurrency enthusiasts. Scalpers’ main aim is to make the maximum profits from the slightest price fluctuation. Traders popularly describe this strategy as “picking up pennies in front of a steamroller.”
Scalpers focus their attention on exceedingly short-term trading opportunities. The whole idea behind scalping is that generating small profits frequently and creates opportunities for scalpers. They open hundreds to thousands of positions each day, and a trade can be closed within seconds.
Swing traders attempt to exploit the natural swing of price cycles. In other words, swingers identify a price trend as it commences and opens a trade then. The trade continues until the price movement fades off for the swingers to close the trade. Notably, swingers can hold on to a position for weeks or even months until the anticipated level is reached.
I’m sure this piece has covered the basics of crypto trading. If you are willing to venture into cryptocurrency trading, ensure that you arm yourself with the relevant knowledge required before diving in. Day trading cryptocurrencies can be an excellent way to start enhancing your digital assets portfolio, and it is massively rewarding. However, you will need a powerful trading platform to begin. You can start here and build your portfolio with a robust platform.