Are you like millions of others who wish that there was an easy (and fast) way to learn everything about how to start trading cryptocurrencies?
As a basic rule, trading cryptocurrencies like Bitcoin is a phenomenally high risk activity. Much more importantly, there is absolutely no way to learn how to trade digital currency profitably in just a few hours, days or even weeks. That said, there are a few ‘cheat sheet’ ways to get started trading, while potentially making substantial returns in the process.
For anyone looking to get started trading cryptocurrency, it is essential to gather a few key resources.
As for the most important first step when it comes to cryptocurrency trading, every novice trader should make it a rule to steer clear of trading top market cap coins like Bitcoin. - At least initially.
In recent years, early cryptocurrency investors and traders have made millions trading Bitcoin. At present, however, many new to market traders simply can’t afford to buy into Bitcoin. Much more importantly, traders with little or no trading experience can quickly lose everything in a single Bitcoin transaction.
Remember December 2017? New traders rushed in to buy Bitcoin, only to see prices crash from $20K to less than $7K. That said, new traders will first need to exchange their fiat trading funds for Bitcoin at an exchange like Coinbase. This is because almost all altcoin offerings which traders should be looking to buy and sell can only be bought with Bitcoin or Ethereum.
After buying Bitcoin, traders will need to set up, learn how to use, and most importantly of all, back up a reputable Bitcoin wallet. Once fiat funds have been used to buy Bitcoin and deposited in this address, traders will then be ready to start trading.
At its most basic, trading works by buying one digital currency and selling that currency when the coin price increases.
As part of a simple trade, a trader might buy $1,000 worth of DigiByte while prices are at $0.02. Later in the day, week, or month, DigiByte prices might rise to $0.04. In this case, traders stand to make 100% profit ($1,000) providing that they sell coin holdings at this point.
Does buying coins at prices like $0.02 and selling at $0.04 sound easy? Well, in truth, trading isn’t that simple.
The cryptocurrency market is flooded with coins which are effectively worthless and will always be worthless. Worse, many top social media influencers are paid to promote certain coins, in order to increase their value temporarily.
Because many cryptocurrency tokens have little more than purely speculative value, all prospective traders should make a whitelist of coins which they intend to trade. This means selecting and fully researching tokens independently. Where a coin can be seen to have real-world market potential, it should then be added to a whitelist. If not, it should be avoided at all costs.
Whitelisting coins is important as when many trash altcoin offerings crash, they rarely recover. DigiByte (DGB), for example, recently crashed alongside 1Worldblockchain (WBD). The difference between the two coins, however, is that while WBD will likely now disappear forever from the cryptocurrency market, traders who have lost out on DGB can still hold DGB, safe in the knowledge that prices will likely recover at some point.
Like with trading Forex, cryptocurrency traders can choose to trade day to day, or trade in the longer term. In the case, however, of novice traders, almost all should opt for a long-term trading strategy.
The key to trading cryptocurrency over longer-term periods is to buy coins (from pre-prepared whitelists) during dips in previously stable market prices.
When cryptocurrency prices are high, there is a high likelihood that trends will reverse, due to existing investors deciding to cash out. This being the case, traders should only buy dips in prices and when they do, plan to hold for a set period of time.
In both Forex and cryptocurrency trading, traders use graph-based market indicators to help predict minute by minute and longer-term cryptocurrency prices.
Common indicators include Moving Average indicators (MA), Market Depth indicators (MD), and Moving Average Convergence Divergence (MACD) indicators.
As for which are the best indicators to use, novice investors are often best served by Trading Volume indicators. This is because Trading Volume indicators show candlestick charts which detail when automated buy and sell orders by high volume traders will be executed. Because of this fact alone, investors can gain actionable predictive insight into (likely) longer-term coin price movements and the overall mood of the cryptocurrency market.
The most important thing for new cryptocurrency traders to remember, is that trading can be deadly for anyone without strong mental discipline.
The majority of long-term Bitcoin investors who panic sold Bitcoin at $6,000 recently have already lost thousands. In like regard, the majority of novice traders who bought into the hype surrounding Ripple XRP in December, are presently holding tokens worth just a third of their then value.
Given the risks involved, traders should never approach trading digital currency like any kind of get rich quick scheme. In every case, traders should research and prepare as robust a trading strategy as possible. Much more importantly, strategies should be strictly adhered to, even during periods of intense cryptocurrency market uncertainty.