Cryptocurrency trading is undoubtedly a dream career for many people around the world. Why? Many of us dream of outsmarting the market and achieving financial independence. Cryptocurrencies allow anyone to become a trader. There is no need to sign up with a brokerage, pay high fees, qualify for trader status – nothing like this is associated with crypto trading. All you need to do is create an account with Kriptomat or any other exchange and start trading. Trading cryptocurrencies is more accessible and exciting than trading stocks, gold, or futures.
Three tips for crypto trading
This guide will help you navigate the exciting yet risky world of cryptocurrency trading. Our goal is to give you a sound perspective on crypto trading that most traders only learn after months or years of trial and error.
You should start with the most important information: trading is not a reliable way to make money. In fact, the general rule is that most traders lose money – despite what the ads on trading platforms say.
This guide does not provide any financial advice. Trading is entirely at your own risk. Also, it is for educational purposes only. We hope it will help you assess your risks more accurately and make better choices if you decide to trade cryptocurrencies.
Cryptocurrency trading means buying and selling digital assets (tokens, coins, NFTs) such as those listed in our Cryptocurrency prices tab. For the purposes of this discussion, it is worth noting that a trader is not an investor. Investors set goals for themselves and build a portfolio for long-term profit. Instead, the trader focuses on present profits. Its main objective is to get in and out quickly, raking in profits along the way. That’s what cryptocurrency trading is all about. The truth is that most traders lose money. However, some are making profits.
There are three main tips for trading:
Fundamental analysis is based on the fundamentals of the company or project, including the product vision, existing customer base, team quality, partnerships, current revenue, etc.
Technical analysis focuses on the price chart, using various indicators from the past to make predictions based on historical patterns. This is the main point of most trading.
Psychologically, trading is about developing the right patience, discipline, and trading methods to reduce risk. This is the most important element of a trading strategy.
The basic questions about trading boil down to this:
- What should I buy?
- How much should I buy?
- When should I buy?
- When should I sell?
The value of coins rises and falls based on the market’s perception of their value. These insights are based on traders who observe the patterns of the price chart (technical analysis) and on other market participants following the news regarding the modernization of the project (fundamental analysis).
Choosing what to buy and when depends on a large amount of market analysis and lucky timing, while relying on market cycles.
How to trade cryptocurrencies
Investing is both a skill and an art. Below are some important considerations to make when learning how to trade cryptocurrencies and how to trade crypto in the short term.
One of the most popular ideas behind cryptocurrencies is the “up and down” market cycle (referring to a brief upturn and then a downturn) described here:
The idea presented here is that markets repeat somewhat predictable trends:
- Bull trend: prices are rising. Hope turns to optimism, which turns to faith, then to thrill, and finally euphoria when prices reach extraordinary highs.
- Bear trend: prices start to fall, and traders are too happy with the results to sell because they think the uptrend will continue. However, later on, when prices continue to fall, anxiety sets in, leading to emotions such as denial, panic, anger, and depression.
A full market cycle from rise to fall can take many months or even years.
The Business Cycle and Trading Bitcoin
Bitcoin is subject to constant changes in value, which means that its price rises and falls sharply. The last sudden increase in Bitcoin’s price occurred in January 2018, when BTC reached a price of 15,000 euros. Whereas, a sharp drop in value occurred in December 2018, when the price of one Bitcoin was 2,400 euros.
The cryptocurrency trading platform you choose should provide a wealth of information on market cycles – especially if you’re trading Bitcoin. Visit our Bitcoin price page to see the live price chart for BTC. This pattern is fractal, which means that it repeats itself on different time frames. Small growth/decrease cycles in medium increase/decrease cycles over the time frame of large increase/decrease cycles. The exact same pattern is not always visible, but the main shape of the cycle can be seen with the naked eye as soon as you take a closer look.
This fractal dynamic allows a savvy trader to spot cycles on different time frames (hourly, daily, weekly, monthly) and then use this information at the right moment by setting the right entry and exit positions.