Cryptocurrency trading for beginners

Before you choose a broker and try out different platforms, there are a few simple things to mess around with first. Understanding and accepting these three things will give you the best chance of success as you step into the cryptocurrency trading arena.

• Find out what’s going on – Bitcoin, Ethereum and Litecoin top the list for transactional and ease of use. However, there is also Zcash, Das, Ripple, Monero and a few more to keep an eye on. Do your homework and find out what’s up and focus your attention there.
• Volatility Embrace – Cryptocurrencies are volatile. For example, the price of Bitcoin went from $3,000 to $2,000 and then skyrocketed to nearly $5,000, all within three months in 2017. While this means high risk, it does. which also means that the profit potential is also huge. It always makes sense to check the volatility of the exchange you decide to take.
• Understanding blockchain – You don’t need to understand the technical intricacies, but a basic understanding will help you respond to news and announcements that can help you predict future price movements. It is essentially an ever-growing list of security records (blocks). Cryptography secures interactions and then stores them publicly. They serve as a public ledger, cutting out intermediaries like banks.

Wallet

If you want to own the actual cryptocurrency, instead of speculating on the price, you need to store it.

There is a large range of wallet providers, but there are also risks to using lesser known wallet providers or exchanges. We recommend a service called Hodly, backed by regulated brokers:

Strategy

Once you’ve decided on a broker, familiarized yourself with your platform and funded your account, it’s time to start trading. You will need to use an effective strategy in accordance with an effective money management system to make a profit. Here is an example of a simple crypto strategy.

Swing Trading

This simple strategy simply requires vigilance. The idea is that you keep a close eye on a correction within a trend and then capture the ‘shift’ out of the correction and back into the trend. A correction is simply when candlesticks or price bars overlap. You will see the trending price move quickly, but on the other hand, corrections will not.

Let’s say on your crypto chart at a 250 minute candle you will see 25 candles where the price is in the 100 point range. If the contract price moves daily by only 20 points, you will be really concerned and wary. You will see a lot of overlap. This tells you there is a significant chance the price will continue to follow the trend.

Then you should sell when the first candle moves below the contract range of several previous candles and you can stop at the most recent minor high. It’s simple, easy to understand and effective.

Advice

Even with the right broker, software, capital and strategy, there are some general tips that can help increase your profit margins and minimize losses. Here are some helpful crypto tips to keep in mind.

Use news

Short-term cryptocurrencies are extremely sensitive to related news. When news like government regulation or hacking of a cryptocurrency exchange comes out, prices tend to plummet.

On the other hand, if a large company announces they will incorporate the use of a currency into their business, the price can go up quickly. If you know any news and can react quickly, you will have an edge over the rest of the market.

Technical Analysis

Analyze historical price charts to identify said patterns. History has a habit of repeating itself, so if you can hone in on a pattern, you can predict future price movements, giving you the edge you need to profit on the day.

Academic figures

This is one of the most important crypto tips. By looking at the number of wallets against the number of active wallets and the current trading volume, you can try to give a particular currency a current value. You can then make a decision based on today’s market prices. The more accurate your prediction, the greater your chances of profit.

Margin Trading

If you predict a particular price change, margin trading willallows you to borrow money to increase your potential profit if your prediction comes true. Exchanges have different margin requirements and offer different rates, so doing your homework first is advisable. Bitfinex and Huobi are two of the more popular escrow platforms.

Remember, Trading or speculating using margin increases the size of potential losses, as well as potential profits.

Rules & Taxes

The digital market is relatively new, so countries and governments are scrambling to come up with crypto taxes and rules to regulate these new currencies. If you are not aware of these things before you start trading, you could find yourself in an expensive place that bothers you even more.

Rules

Many governments are uncertain about what to classify cryptocurrencies, currencies or assets. The United States in 2014 introduced cryptocurrency trading rules that meant digital currencies would fall under the auspices of the asset. Traders will then be classified as investors and will be subject to complex reporting requirements. Details can be found by going to IRS notice 2014-21.

Taxes

In addition to potentially complicated reporting procedures, new regulations may also affect your tax liability. USA, the ‘property’ ruling means that your income will now be treated as capital gains tax (15%), rather than ordinary income tax (up to 25%). Each country’s crypto tax requirements are different, and many will change as they adapt to the growing market. Before you start trading, do your homework and find out what taxes you will have to pay and how much.

Bots

If you already have an effective strategy, then a cryptocurrency trading robot might be worth considering. Once you’ve programmed your strategy, the bot will go live, automatically executing trades when predefined criteria are met. There are two benefits to this.

Firstly, it will save you serious time. You won’t have to stare at the charts all day, looking for opportunities. Transaction execution speed also needs to be enhanced as there is no need for manual entry.

Second, the software automatically allows you to trade on multiple currencies and assets at a time. That means bigger potential profits and all without you having to do any heavy lifting.

Risk

Having said that, bots aren’t all sailing. If you want to avoid losing your profits to computer crashes and unexpected market events then you will still need to monitor your bot to some extent.

They can also be expensive. While there are many options like BTC Robot that offer a 60-day free trial, you will often be charged a monthly subscription fee that will eat into your profits. They can also be expensive to set up if you have to pay someone to program your bot. On top of that, you will have to pay to update your bot as the market changes.

So while bots can help boost your end of day crypto profits, there is no free ride 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 simply be automated.

Education

The most useful crypto trading guide you can go on is the one you can give yourself, with a demo account. First, you will have the opportunity to try out your potential broker and platform before you buy.

Second, they are the perfect place to correct your mistakes and develop your craft. You will usually be trading with simulated money, so mistakes won’t cost you your hard-earned capital. Once you have tested your strategy and solved any folds, then start making real money trades.

Online you can also find a wide range of crypto day trading courses, plus a wide range of books and ebooks. The more information you absorb, the better prepared you are and the better chance you have of maintaining an edge in the market.

Key Points

Think of this as your guide to daily crypto trading and you will avoid most of the hurdles many traders fall into. When choosing your broker and platform, consider their ease of use, security, and fee structure. There are several strategies you can use to trade cryptocurrencies in 2017. Whichever strategy you choose, make sure technical analysis and news play a role. Finally, be aware of regional differences in rules and taxes, you don’t want to lose profits to unforeseen regulations.