There are several ways to earn — or lose — from cryptocurrency. One of the most popular methods is cryptocurrency trading.
Cryptocurrency trading is speculating on cryptocurrency price movements via a Contract for Differences (CFD) trading account or buying and selling the underlying coins through an exchange. Cryptocurrency trading does not require acquiring ownership of the relevant currencies.
Technical traders can choose from four different styles of trading, such as scalping, day trading, swing trading, and position trading.
The shortest-term type of trading is scalping. These short-term trades are aimed at tiny intraday price changes. The goal is to perform a large number of rapid transactions with little profit gains and to allow profits to compound over the day owing to the large number of deals being done in each trading session. Traders who use the scalping style also tend to trade only during the busiest times of the trading day.
Day traders open and close their positions on the same day, eliminating the danger of any significant overnight movements. They conclude their trade with either a profit or a loss after the day. Since trades are often held for a few minutes or hours, traders have to analyze the markets and routinely check positions throughout the day.
Unlike day traders, who often maintain positions for less than one day, swing traders typically hold positions for multiple days, if not weeks. Swing traders typically employ trading methods such as trend trading, counter-trend trading, momentum trading, and breakout trading. Swing traders focus on price action rather than long-term growth and fundamentals.
Position traders are interested in long-term price movement and maximizing possible returns from large price movements. Position traders often analyze and assess markets using weekly and monthly price charts, using technical indicators and fundamental research to find suitable entry and exit levels.
Choose your trading platform
After you’ve picked your trading style, you can now start choosing your trading platform. In order to create an account, you’ll need to provide some basic personal data, such as your name, address, phone number, and email address.
You’ll need to link your bank account once you’ve joined a crypto exchange. Debit cards, wire transfers, and P2P trading are the most common methods of bank funding for most crypto exchanges. Wire transfer is often the most cost-effective method of depositing funds into your trading account.
Consider which crypto pair to trade
After that, consider which cryptocurrency to invest in. Bitcoin and Ethereum are the two most popular cryptocurrencies among active traders. Trades using technical indicators may be simpler with larger cryptos because of their greater stability and predictability.
Many cryptocurrency traders invest a portion of their wealth in altcoins. Although small and mid-cap cryptos are riskier than large-cap cryptos, they have greater upside potential. Many altcoins have grown more than 1,000% in a couple of months, making them appealing options for risk-averse investors.
As a beginner, limit yourself to one or two cryptocurrencies to trade or invest in first. With only a few cryptocurrencies, tracking and identifying opportunities is simplified. This allows you to invest in smaller increments of money.
A strategy does not have to be successful all of the time to be profitable. Many successful traders may only profit on 50% – 60% of their trades. They do, however, make more money on their victories than they do on their losses. Make certain that the financial risk on each trade is limited to a certain percentage of your account and that the entry and exit methods are specified.
Basic Charts and Patterns for Trading
The following are three typical techniques that day traders use to decide when to make an entry into the crypto market:
- Candlestick chart patterns, including engulfing candles and dojis
- Other technical analyses, including trendlines and triangles
Losses can be reduced by placing limited orders
Setting a daily loss limit that you can afford is advisable. When you reach this stage, you should end your transaction and take the remainder of the day off. Observe your plan. In any case, tomorrow is a new trading day.
Before you can begin buying and selling crypto, it is essential to understand the different types of orders and when to use them.
Market orders are the most basic type of trade. It is an order to either buy or sell at the current price immediately. Limit orders, also known as pending orders, enable traders to buy and sell at a specified price in the future.
Test your trading strategy
Take a look at past charts by using TradingView to locate entry points that match your own. If your stop-loss order or price goal was hit, make a note of it here. At least 50 to 100 deals can be done this way. Determine whether or not the plan would have been profitable and whether or not the outcomes suit your expectations.
Stick to your trading strategy
The crypto market might put you to the test from time to time. Learning to control your emotions as a crypto trader is essential. When making decisions, logic should take precedence over emotion.
Successful traders must move quickly but do not need to think fast. Why? Because they have planned a trading strategy ahead of time and only need the discipline to stick to it. Rather than chasing profits, it is critical to strictly adhere to your plan. Don’t let your emotions take over and cause you to forsake your strategy.
Remember the trader’s mantra: plan your trade and trade your plan.