Crypto Trading for Beginners
19 May, 2022
Crypto Trading 2022
The crypto market is currently worth $2.04 trillion, a figure that has emerged in just a decade. This explains the worldwide interest in adopting crypto as a mainstream payment method for financial transactions. If you’re looking to invest, learning cryptocurrency trading strategies is extremely important in order to maximize profits. Below are some basic tools and tips that will be helpful to learning crypto trading for beginners, whether they’re investing in just one cryptocurrency or in multiple digital assets at once. Even though some of these strategies are more complex than others, they can all be valuable additions to your cryptocurrency trading knowledge base as you begin to invest or trade in cryptocurrencies on various exchanges.
What is Crypto Trading?
Taking a financial position on the price direction of individual cryptocurrencies against the dollar (in crypto/dollar pairings) or against another cryptocurrency (in crypto to crypto pairs) is known as cryptocurrency trading. Trading cryptocurrencies can feel like a daunting task for beginners. However, like with other markets, it’s not that difficult if you learn how to do it first. In fact, cryptocurrency trading is more simple than you might think. If you want to learn more about crypto day trading for beginners and how to get started with it, there are numerous online crypto trading courses available that help you invest in virtual currencies.
How to Start Crypto Trading for Beginners
If you have no idea where to get started, follow these simple steps to begin trading:
Sign up for a cryptocurrency exchange
Signing up for a cryptocurrency exchange is the first step as a beginner-level crypto trader. These exchanges are designed to provide you with a crypto trading platform from which you can buy and sell cryptocurrencies easily and quickly. In most cases, users can buy or sell different types of coins (and sometimes fiat currencies like USD) with other users on these exchanges through paired trading. This means that if you want to sell Bitcoin for U.S. dollars, then you will need to find someone who is willing to buy Bitcoin using U.S. dollars from you. In addition to this, you’ll want to find an exchange that offers low trading fees, high liquidity, minimal verification requirements, and many payment options. Some common options include credit card payments (with Coinbase) or bank transfers (with Kraken).
Fund your account
As a beginner, your first priority is probably figuring out how to get your hands on cryptocurrency. The easiest way to do that is by signing up for online exchange and then funding your account with fiat currency, usually via a bank transfer or debit card. Once you’ve done that, you can start trading. Most exchanges will also require you to set up two-factor authentication (2FA) in order to access your account more securely.
Pick crypto to invest in
There are over 1,400 cryptocurrencies on CoinMarketCap, so you’ll want to narrow it down. If you’re looking for something with a bit of history and a proven track record, Bitcoin is your best bet. However, if you think you can handle more risk, investing in an altcoin, like Ethereum, that shows growth potential, might be better for you. Both options come with their own pros and cons. Another viable option is investing in multiple coins in order to diversify your portfolio. Whatever you choose, make sure to do plenty of research before diving in headfirst.
Each platform has a unique UI, but you can start trading by using the Buy/Sell page on your platform’s website or app. Be sure to check out the platform’s added features, for example, automated crypto trading. Automated trading allows bots to trade on your behalf and provide the best results on your investments with the information that they are fed.
Store your cryptocurrency
In order to trade cryptocurrency, you’ll need a digital wallet in which to store it. Some platforms offer a built-in wallet, while others will send you a code to set up your own. Hardware wallets like Ledger and Trezor are meant for long-term storage (i.e. years) of cryptocurrencies. They are less prone to hacking and viruses so you can protect your investment. If you plan on regularly trading crypto, it’s worth it to keep some of your coins in an exchange so that you can jump into trades at any time.
Basics of Trading Crypto for Beginners
If you’re just getting started in cryptocurrency trading, there are a few things you should know:
Cryptocurrency trading is not as complicated as you may think; it’s a lot like day trading stocks, except with more factors to take into account.
Do your research: in addition to doing some reading on digital currencies and their value—or lack thereof—you should also familiarize yourself with the best crypto-trading platforms and their quirks.
Keep an eye out for scams: cryptocurrency trading is still relatively new, so there are plenty of people looking to make a quick buck by preying on inexperienced traders. Be wary of any investment opportunities that seem too good to be true or require little effort on your part.
Don't follow your emotions as they will damage your trading. Greed can turn your profit into a loss, and panic selling of your investments can leave you without gains. Here when crypto trading bots come into play — since they do not have emotions, you will be able to react right away to any market changes 24/7.
Structure of a Crypto Trade
Before you start trading cryptocurrency, you need to understand how trades are executed and structured. To execute a trade on Coinbase, first, click Sell or Buy at the top-right of any page. This will take you to a page where you can enter at your desired price. At the bottom-left of that same page is an entry box labeled Amount. Enter in either a dollar amount or BTC amount (depending on currency). Next, click Submit Order when done.
Reading the Markets
To start off your journey of trading cryptocurrencies, it’s important to have a firm grasp on how cryptocurrency markets operate. Crypto markets are still very much in their infancy, and they don’t respond in exactly the same way that traditional securities do—meaning what worked yesterday may not work today. Cryptocurrency markets are decentralized, meaning they are neither issued nor backed by a central body like the government. Instead, they're distributed across a computer network. Cryptocurrencies, on the other hand, can be purchased and sold on exchanges and held in wallets. Moreover, unlike traditional currencies, crypto only exists as a shared digital record of ownership maintained on a blockchain. A user sends cryptocurrency units to another user using their digital wallet. The transaction isn't deemed complete until it's validated and added to the blockchain via a process known as mining. New cryptocurrency tokens are frequently created in this manner.
Technical analysis is a method of trading that uses financial market data, primarily price and volume, to predict future prices. At its most basic level, it can be thought of as trend analysis combined with fundamental analysis. There are many different kinds of technical analysis; one popular method is called candlestick charting, which was developed by Japanese rice traders more than 400 years ago. Candlesticks take into account both price and volume, giving you an idea of how much demand there is for an asset at a given time. Candlesticks also make it easy to spot patterns in prices over time, including support and resistance levels—the areas where buyers tend to step in when prices fall below them, or sellers step in when they rise above them. Moreover, there are fewer chances that you’ll lose money if you stick to top-tier coins (Bitcoin, Ethereum, Ripple, Litecoin). Smaller currencies may have potential, or they may not be worth your time and effort. Thus, make sure you understand the following concepts before investing in a digital currency:
Market structure and cycles
Traders who use technical analysis believe that everything in the markets moves in trends and cycles (also called price action), so it’s important to understand these cycles and their relationship to asset prices in order to have any hope of making consistently profitable trades. Using the data of the crypto market from the past decade, it can be said that the cycle of a coin is thought to run roughly for four years on average. However, there is no definitive time frame. While market cycles can last for years, the cycle of a single cryptocurrency can last anywhere from a few days to a few weeks.
Chasing the whale
If you’re looking to buy large amounts of cryptocurrency, you might consider contacting exchanges or other trading platforms and seeing if they offer bulk discounts. If not, another strategy is to aim for what’s known as a whale. Whales are investors with deep pockets who can drop hundreds of thousands (or even millions) at a time on an investment – which allows them to influence prices. As such, many traders chase whales in hopes that their investments will pay off big. While chasing whales may be risky, it could also yield big rewards. As they say: the higher the risk, the higher the reward.
The basics of cryptocurrency trading are pretty simple. These are highly volatile assets and not a great place to put money you need on a short-term basis. Crypto moves up and down very quickly, so you need to be prepared for sudden changes, even if you’ve analyzed past price trends. You can expect to see your investment drop 50% in value in one day and rise 70% the next. Fortunately, experts have come up with technical analysis tools that can help you predict market trends based on psychological factors. For example, the Relative Strength Index (RSI) indicator may indicate when an asset is overbought due to a strong positive market sentiment (e.g., excessive greed). Another indicator that can be used to detect different psychological stages of a market cycle is the MACD. In other words, the relationship between its lines may reveal when market momentum is shifting (e.g., buying force is getting weaker).
Crypto investors use the following tools to predict changes in price and thus, buy or sell accordingly:
Support and resistance
When trading on a daily chart, use technical analysis to find support and resistance levels, which are points where traders tend to catch their breath before moving in one direction or another. Once you know where these levels are on a chart, you can use them as entry and exit points.
Trendlines are a visual representation of a crypto market’s price over time. If a trendline is upward-sloping, it implies that prices have been rising; if downward-sloping, they’ve been falling. One of the easiest ways to draw a trendline is by using an online graphing calculator like TradingView. To add a trendline to your chart, just select your timeframe (use 5-minute for beginners), click on Chart at the top, and then select Trendline. Move your cursor to draw a line based on two points that indicate an upward or downward trend. To get a more detailed explanation of how to use trendlines to predict cryptocurrency movement, check out Cryptowatch Academy. Trendlines are simple tools and generally easy to spot on most charts; however, as with any investment tool, they should be used with discretion.
The first and most basic tool in day trading crypto for beginners is simply learning to recognize round numbers in relation to currency price. These include: $100, $200, $300, $400, $500 and all multiples of these such as $900, or even more unique rounds like $1,338. Once you start seeing patterns in terms of where prices like to bottom out around these numbers at certain times of the day or during certain parts of an economic cycle, you’ll be able to recognize opportunities quickly and efficiently.
A moving average is a simple trend-following strategy that smooths out short-term price volatility. It does so by averaging (or adding together) past trading prices and plotting those values on top of one another in an attempt to capture trends, rather than trying to pick tops or bottoms in any given market.
The idea here is that price movement tends to repeat itself, meaning that history repeats over and over again. This isn’t true all of the time, but many investors have found it extremely helpful in being able to trade effectively.
Are you confused about how to trade in cryptocurrency? How do we determine market capitalization and if it's a good or bad time to buy into an altcoin? What are some of the most common crypto trading strategies for beginners? In order to answer these questions, let's first explore the fundamental analysis of the crypto industry:
Cryptocurrency developers are computer programmers who are proficient in coding languages such as Ruby on Rails, Node.js, PHA, Java, Python, C#, etc., which are often used in APIs to connect various mobile apps and web services to the cryptocurrency blockchain.
A community is essential for the survival of crypto. This is because a coin is only successful if people adopt it for mainstream transactions. Without the community, cryptocurrency may as well be void.
Each cryptocurrency has its own specifications. For example, XRP’S infrastructure allows it to improve the payment process. Its neutral, internet-based protocol allows for communication between banks and payment systems. Moreover, banks can use XRP as a general ledger to settle and clear transactions. Similarly, Ethereum runs on its own blockchain with a different infrastructure in place.
According to the capital markets organization, the crypto market is part of the global economy's march toward automation, digitization, efficiency, and productivity. It has now reached a critical juncture. "At its most fundamental level, we believe blockchain technology and the crypto economy could be the most significant breakthrough of our lifetime," say McKenna & Ryan.
Liquidity (and whales)
In essence, liquidity is how much volume a coin or token has and its ability to be bought or sold at any given time. Generally speaking, liquid coins are usually paired with high market capitalization. Some common exchanges that are considered liquid for cryptocurrencies include BitFinex, Binance, Kraken, GDAX (owned by Coinbase), Gemini, and Poloniex, to name a few. Because there are more whales but much smaller volumes and liquidity across these exchanges, cryptocurrencies are particularly vulnerable. These whales are locked in a figurative swimming pool without enough liquidity, destined to send massive waves through the market as soon as they move.
Branding and marketing
There are various "coins" fighting for dominance in the cryptocurrency realm, and many are gaining popularity quickly. But who will emerge victorious? Because the success of these newcomers to the world of finance will hinge on widespread consumer uptake and effectively explaining a complex and abstract concept to the people, the answer may well come down to branding.
In order to start trading cryptocurrency, you’ll need an account with a cryptocurrency exchange. Unfortunately, not all exchanges are created equal, so research is important before choosing one. You’ll also need some funds to trade with. There are two main ways to acquire cryptocurrencies: buying them on an exchange or accepting them for goods and services. Whichever method you choose, make sure that your crypto trading software for beginners can handle multiple currencies. The last thing you want is to accidentally send Bitcoin when you meant to send Ethereum (or vice versa). And don’t forget about taxes! Depending on how much trading you do, it may be wise to pay quarterly taxes on crypto trading. Otherwise, depending on where you live and the crypto laws enforced, you may have to pay heavy fines and penalties.
To start crypto futures trading for beginners, it’s important to get a strong understanding of crypto trading terms and crypto day trading rules. It’s also important to pick up some technical knowledge on where and how to trade cryptocurrency. And if you’re looking for beginner-friendly ways to begin investing in cryptocurrencies or want an overview of how blockchain works, use this guide to get started and trade successfully!