Cryptocurrency trading has become a popular concept these days, especially after it helped thousands of traders all over the globe earn a fortune. However, you need to understand exactly what crypto is all about before you can enter this market because it is highly volatile. If you are new to this field, here are some of the top tips you should know for crypto trading online:
Learn about blockchain
Not many people fully understand the concept of cryptocurrencies and even fewer people understand blockchain technology. But, the fact is that this technology underpins the growth of cryptocurrencies so it is necessary for traders to do their homework on it. Knowing the ins and outs of this technology will give you a leg up over other investors because you will be able to identify profitable trades and promising investments more quickly and accurately.
Know what currencies to trade
There are more than 1200 coins in the crypto market and more are being added every day, which makes it certain for a new investor to be befuddled. How do you decide what cryptocurrencies to trade? When you are just dipping your toes in the market, the best place to start is from the top i.e. choose cryptocurrencies that have a high market cap. Why? These cryptocurrencies are less volatile as opposed to others and can also serve as a long-term store of value. Yes, smaller altcoins can be quite profitable in the short-term, but they also carry a higher risk. Therefore, beginners should focus their attention on Bitcoin, Ethereum, Litecoin, Ripple, Doge and Bitcoin Cash amongst others.
Do your research
As mentioned above, Bitoin, Ethereum and the like are safer investments for new traders and there are significant risks when dealing with lesser-known coins. Some altcoins might be undervalued, but others are just pump-and-dump schemes that boost their prices artificially through speculation and hype. When a poor quality or fraudulent coin crashes, your funds will go up in smoke and that’s not what you want. Choosing a quality coin is a lengthy process because it requires research, but it is worth it because it gives you profitable trades and prevents panic-selling.
Opt for an exchange
Signing up on an exchange is necessary for crypto trading online because you need to have some Bitcoin, Ethereum or Tether that you can trade for other cryptocurrencies. Selecting a trustworthy exchange is of the utmost importance because millions have been stolen previously from exchanges through hacks and you don’t want to be a victim. Nevertheless, there are reputable exchanges such as Coinbase, which is not only secure, but also lets you buy cryptocurrency with credit card. Likewise, there are other options such as Kraken, CEX, Changelly and lots more that you can go with.
Understand the basics of crypto trading
You need to understand exactly what happens in crypto trading. Similar to forex, crypto is also traded in currency pairs. This means that when you buy a particular crypto, you are weighing its value in relation to another. Since the price of cryptocurrencies are constantly changing, these fluctuations can be used to earn more profits, as long as you have good trading skills.
Learn to effectively use limit, market and stop order
In order to manage the risks associated with the crypto market, you have to understand how to use Limit and Stop Order functions effectively. Market order is the simplest trade that can be made, which involves immediately buying or selling your coins at market price plus fees. This might not be favorable in a volatile market because you may end up selling at a lower price than what you paid for buying it.
Limit order means when you set a specific price at which you prefer to buy or sell. When this limit is reached, your cryptocurrency will be traded automatically at this price. The beauty of this order is that it allows you to get a better price or one that you want. But, if the price of your chosen crypto drops, then your coin is sold at a specific price for restricting your loss. Thus, this prevents you from suffering any unnecessary losses and guarantees you a profit from a positive price movement.
Become familiar with advanced trading analysis
Analysis can help you in predicting how the market will move and this can be immensely useful in making decisions of buying and selling. There are different kind of analyses that can be performed by traders in the crypto market. First and foremost, there is fundamental analysis, which involves studying exterior events to determine the price movements of a cryptocurrency. The second option is technical analysis, which might be a tad more complex, but is based on the rules of supply and demand. It is simply a statistical approach that assumes everything moves in trends and factors in price, volume and similar features.
Some newer form of analyses include sentimental analysis, which is all about market psychology i.e. how people are feeling about a market. How a coin is viewed can have a dramatic impact on the value of a particular cryptocurrency. Momentum analysis is also performed, which involves traders keeping an eye on coins that are moving up rapidly and jumping on the bandwagon to buy and then sell at a higher price.
Follow cryptocurrency news
As the size of the crypto market is still small as compared to the forex or stock market, news can have a strong impact on the movements. When new partnerships and developments are announced, the value of coins can rise. In contrast, announcement about regulation, security breaches, legitimacy and technical issues can cause prices to plummet. If you stay one step ahead, it can be a great way of performing momentum analysis and making decisions that are profitable for you in the long run.
You can use these tips for learning how to trade crypto online successfully and earn a greater return on your investment while keeping losses at a minimum.