Cryptocurrency is in great demand for the last few years. Many of you have heard about crypto somewhere. The Crypto market is highly volatile and is beneficial for short-term trading. We are here to provide you some tips and strategies related to cryptocurrency trading.
New traders are required to learn about the tax policies, rules, and regulations of the market concerning crypto. We have also listed some of the top brokers which let you trade in cryptos without any complications.
History of CryptoCurrency?
Bitcoin was the first cryptocurrency founded in 2009 by an anonymous named Satoshi Nakamoto.
Then there are different kinds of cryptos that many miners mine. It is a decentralized form of currency that no one regulates.
A cryptocurrency is a digital form of currency that does not have any physical form. It is available only to exchange digitally and is not issued by any central authority.
When a cryptocurrency is minted or created before its issuance, it is issued by a single issuer in its centralized form. Each cryptocurrency works through distributed ledger technology, typically known as a blockchain, when implemented with decentralized control.
How to trade Cryptocurrency?
You have to decide that you want to own crypto or want to trade in the same.
- If you need to purchase crypto with the view of owning it, you need to contact an exchange.
- If you want to trade on crypto & want to speculate its price movement, you have to look for a broker. We have mentioned some top crypto brokers below in the same article. You can select any of them as per your requirements & choice.
Fund your Account
Buy the crypto you want or trade with it on its price.
Now you can carry out your trade with your broker using a real or demo account. But unfortunately, you can not use a demo account if you are moving further with the exchange.
Trading crypto is a little bit the same as trading stock, but the difference here is that the stock market is regulated, and you can look towards financial authorities in case of any fraud or mishappenings.
You can not approach anyone if you make a loss or anything wrong happens in crypto trading as the governing body of the world does not regulate it.
Cryptocurrency Trading for Beginners
Choosing a broker is the first step to start crypto trading, but before choosing a broker or platform, there are some specific & straightforward things that you are required to keep in mind.
Understanding these three things will give you a vast idea of the crypto world and its operations.
- Find out what is growing: Bitcoin, Ethereum, Bitcoin Cash top the list of tradability & ease of use. However, there are other cryptos like Litecoin, Das, Ripple, Monero, and several more. You have to do your homework before putting money in any of them.
- Embrace volatility: Cryptocurrencies are highly volatile. The price varies largely from time to time. It goes bottom to top in just a few months and vice versa. This is because there is only a 21million Kryptos available in the market, which makes it highly volatile.
- Understand blockchain: You don’t need to understand the technical complexities, but a basic understanding will help you respond to news and announcements that may help you predict future price movements. It is essentially a continuously growing list of secure records (blocks). Cryptography secures the interactions and then stores them publicly.
CryptoCurrency Trading Strategy
Once you have selected your broker, gained information about the platform & funded your account, now is the time to start trading.
As we have told many times that strategies are an integral part of trading. No trader can be successful if they trade without any system.
Money management skill is the next important requirement after strategy. Here we are telling you one of the straightforward cryptocurrency trading strategies.
You can find videos related to many strategies which can be used to trade in crypto. Now again, each trader has their understanding & own system which they want to follow. We explained only one kind of strategy, which is used mainly by retail traders.
This straightforward strategy requires vigilance. The idea is you keep a close eye out for a correction in a trend and then catch the ‘swing’ out of the sentence and back into the movement.
A correction is when candles or price bars overlap. You’ll find trending prices move quickly, but corrections, on the other hand, will not.
Let’s say on your cryptocurrency chart at 250-minute candles, you see 25 candles where the price stays within a 100 point range.
If the price contracted to a daily move of just 20 points, you’d be seriously interested and alert. You should see lots of overlap. This tells you there is a substantial chance the price is going to continue into the trend.
It would help if you then sold when the first candle moved below the contracting range of the several previous candles, and you could place a stop at the most recent minor swing high. It’s simple, straightforward, and effective.
Sometimes even after using the right broker, sufficient money, and strategy, we do not get the results we are looking for. Here are some tips which you can use before making any conclusion regarding your trade. These are the basics that will help you make better decisions.
News is the most critical & sensitive thing that plays a significant role in deciding any stock, crypto, or CFD. When any negative news flows down in the market, the price of the asset goes down.
While on the other hand, when there is any positive news is there, the market reacts accordingly by increasing the asset price. Hence keeping an eye on the information is essential.
Analysis helps us make buy or sell decisions about the asset. Technical analysis is all about reading charts & patterns to get an idea about the market. These patterns may help you learn about future profitability or loss.
This is one of the most important cryptocurrency tips. By looking at the number of wallets vs. the number of active wallets and the current trading volume, you can give a specific currency a current value. You can then make informed decisions based on today’s market price—the more accurate your predictions, the greater your chances for profit.
Trade on Margin
Trading on margin increases the chances of profit and losses for those who don’t know what margin trading is. It means that your broker will give you some leverage on your money; it will be 2x,5x, or 10x of your real money so that you can make a good return.
But trade on margin is also very risky. If you have made the correct predictions, it will lead you to profit, but it will give you a considerable loss if your predictions are wrong.
Hence if you want to trade using margin, be sure about the outcome; otherwise, you will lose money.
Many governments are unsure of what to class cryptocurrencies as, currency or property. U.S in 2014 introduced cryptocurrency trading rules that mean digital currencies will fall under the umbrella of property. Traders will then be classed as investors and will have to conform to complex reporting requirements. Details of which can be found by heading to the IRS notice 2014-21.
On top of the possibility of complicated reporting procedures, new regulations can also impact your tax obligations. In the U.S, the ‘property’ ruling means your earnings will now be deemed as capital gains tax (15%) instead of ordinary income tax (up to 25%).
Each country’s cryptocurrency tax requirements are different, and many will change as they adapt to the evolving market. Before you start trading, do your homework and find out what type of tax you’ll pay and how much.
If you have already got your right strategy and are getting a positive outcome using that, then you can put automated robots to trade on your behalf. According to your system, the bot will get to work & start executing trade from your side.
There are two benefits of doing this, one it will save a lot of your time. You are not required to read charts every time, plus it speeds up your execution time. Also, it allows trading multiple currencies & assets at the same time.
Trading using robots is also risky, as we know the market is so volatile, and it can crash at any time; that’s why you are required to monitor the workings of the robot every time so that you can bend the strategy according to the trend.
While robots are expensive, some brokers offer free 60 days trials. They charge you every month and take an amount from the profit you earn. They can also be costly if you have to pay someone else to program your bot.
So, while bots can help increase your end-of-day cryptocurrency profit, there are no free rides in life, and you need to be aware of the risks. Perhaps then, they are the best asset when you already have an established and effective strategy that can be automated.
There are many ways which you can use to learn about cryptocurrencies. You can go for blog reading, video tutorials, books, ebooks, curated courses from top universities, and more.
It is completely up to you which one you find comfortable to go with.
Everyone has their own means of understanding & it is good if you select as per your requirement. Now, instead of all this, there is one more thing which is the most beneficial of all & that is a demo account.
One should open a demo account with its broker to perform actions using the strategies they learn. This method allows us to correct mistakes and develop a better understanding of our methodology.
Once you have done your practice and picked out every mistake, you can now start trading with your actual money.
Cryptocurrency is said to be the currency of the future, and many of us are trying to purchase or trade-in it as soon as possible.
Consider this article as your guide to crypto trading. Choose a platform that is beginner-friendly and less costly.
There are lots of strategies available in the market; you can apply anyone to execute the trade. But make sure you must have good technical knowledge & always stay updated about the market news. And most importantly, be in the discipline while trading.