10 Tips For Cryptocurrency Trading You Probably Knew Nothing About
Every day we listen to reports on various news platforms about this or that with regard to cryptocurrencies and, with the recent market correction, the market has been in a state of confusion. Some, like ABC News as can seen in the video below, reported that there is a possible bubble in market prices months ago.
But that’s exactly the issue; everyone seems to be pointing out the problem, but no one actually seems to be keen on providing solutions. And those that care enough to guide others, do so at a fee in the form of online courses, paid seminars, and more.
This is why I saw the need to put up this post and provide some useful tips to guide your trading in a time when the market seems to be bullish. Other than the tips, I will also share with some of the most volatile cryptocurrencies you need to watch out for and the best one among them for day trading.
These tips are more of safety rules; and as the soldiers would have it, such rules are written in blood.
Even though we’re not talking about risking human lives here, losing your coins due to trading without a proper guideline isn’t a fun moment.
So, how can we avoid making costly mistakes? How can we ensure that we always remain on the green side?
First of all, you need to understand that profitable trading requires a lot of attentiveness; it isn’t a gamble and nor should it ever be one. Other than the following 10 tips, ensure that you pay close attention to the market forces of demand and supply to be able to know when this or that tip applies. It is paramount to internalize every tip in this guide and to understand the reasoning behind it.
With that, let’s begin!
Tips for Cryptocurrency Trading
Tip#1. Have a motive for entering each trade
Now, I know this may sound obvious but it’s important for you to have a clear purpose for getting into cryptocurrency trade. Whether your purpose is to day trade or to scalp, you need to have a purpose for starting to trade cryptos. Trading digital currencies is a zero-sum game; you need to realize that for every win, there is a corresponding loss:. Someone wins; someone else loses.
The cryptocurrency market is controlled by the large ‘whales’, pretty much like the ones that place thousands of Bitcoins in the market order books. And can you guess what these whales do best? They have patience; they wait for innocent traders like you and me to make a single mistake that lands our money to their hands due to avoidable mistakes.
Whether you are a day trader or scalper, sometimes you’re better off not gaining anything on a certain trade than rushing your way into losses. From our years of market analysis, we can comfortably tell you that on certain day or periods, you can only stay profitable by keeping off some trades.
Tip#2. Set profit targets and make use of stop losses
If you’ve not heard of the term stop loss in trading, check out this link to help you understand what it’s all about.
Every trade we get into requires us to know when to get out, whether we’re making a profit or not. Establishing a clear stop loss level can help you cut your losses; a skill that’s very rare in most traders.
Choosing a stop loss is not a random activity, and perhaps the most important thing to note here is that you shouldn’t be carried away by your emotions – a great point to set your stop loss is at the cost of your coin. If, for instance, you acquired a coin at $1,000, set that as the minimum point you’re willing to trade your coin. This will ensure that if the worst comes to pass, you can walk away with what you invested in the first place.
The same applies to profit levels if you target to get out of the market after hitting a certain minimum profit; stick to that. Don’t be greedy; it’s never a nice color on anyone!
Tip#3. Welcome to FOMO!
FOMO is an abbreviation for the fear of missing out. This is one of the most notorious reasons as to why many traders fail in the art. From an outside point of view, it is never a good scene seeing people make massive profits within minutes from pumped-up coins. Honestly, I never like such situations any more than you do.
But I’ll tell you one thing that’s for sure…
Beware of that moment when the green candles seem to be screaming at you and telling to you to jump in. It is at this point that the whales I mentioned earlier will be smiling and watching you buy the coins they bought earlier at very low prices. Guess what normally follows? These coins usually end up in the hands of small traders and the next thing that happens is for the red candles to start popping up due to an oversupply and, voila, losses start trickling in.
Tip#4. Manage Your Risks
Little pigs eat a lot, but big ones get eaten. This is especially true of market profits when trading cryptocurrencies. Wise traders never run in the direction of massive profits; nope, they don’t!
They would rather stay put and gather small but sure profits from regular trades.
Consider investing less of your portfolio in a market that is less liquid. Such high trades require more tolerance, while the stop loss and profit target points will be allocated further from the buying level.
Tip#5. Underlying Assets Create Volatile Market Conditions
The prices of most altcoins depend on the current market price of Bitcoin. It is vital to understand that Bitcoin is relative to fiat currencies and is quite volatile.
The simpler version of this is that when the value of Bitcoin goes up, the value of altcoins goes down and vice versa.
The market is normally foggy when the Bitcoin price is volatile and, as you would imagine, this prevents most traders from gaining a clear understanding of what goes on in the market. At this point, it is advisable to either have close targets for our trades or simply not trade at all.
Tip#6. Don’t Buy Simply Because the Price is Low
Most beginners make one common mistake: buying a coin because it’s price seems to be low or what they consider affordable. Take, for example, someone who goes for Ripple instead of Ethereum simply because the latter is much cheaper.
The decision to invest in a coin should have very little to do with its affordability but a lot to do with its market cap.
Just like the conventional stocks are gauged by their market caps, which is evaluated using the formula Current Market Price X Total Number of Outstanding Shares, the same applies to cryptocurrencies.
There is no difference between having a coin priced at $10 per coin with a total number of 1 million shares in the market and the same coin being priced at $100 with 100,000 shares in the market. For this reason, it is more justifiable to use a coin’s market cap to decide whether or not to invest in it than using its price. The higher a coin’s market cap, the more suitable it is for investment.
Tip#7. A Tip About Crowd-Sales/ICOs
During an ICO (Initial Coin Offering), startups offer the general public an early chance to invest in their idea through a crowded sale. In return, these investors are allocated tokens at a lower price with a promise to sell them at a much higher price when listed on an exchange.
Time has proven that ICOs can quite successful with records showing that some tokens ended up more than ten times the value of the projected returns.
But what’s the catch in this, you might ask…
ICOs have attracted a large number of investors clearly due to their high returns; however, another large number of ICOs have turned out to be total scams. People have lost millions worth of investments.
There’s a need for one to be more than cautious when looking to invest in any ICO. Knowing when to or not to invest in an ICO is not about science; rather, it’s about paying close attention to those details that most people seem to overlook while only focusing on the promised returns.
Conduct a background check on the team behind the project and analyze their ability to deliver on their promise. In addition, you should also look at the viability of the idea behind the ICO, poke holes in the project’s white paper and seek answers where necessary.
That will ensure that no stone is left unturned and, if by the end of it you still have doubts about the project, you’re better of passing than chance it investing in that ICO.
Tip#8. A Quick One for Altcoin Investors
A lot of Altcoins end up losing value over a certain period of time, sometimes in an unusually short period of time. It is, therefore, paramount to understand that whenever you hold an altcoin for the long term, be careful not to hold on to them for too long.
One of the best measures of coins that are perfect for long-term investments is the daily trading volumes. The higher the daily trading volume, the more suitable an asset is for long-term investments.
If you’re thinking of going long term with cryptocurrencies, consider investing in some of the following coins: Ethereum (ETH), Factor (FCT), Monero (XRM), and Dash. These have decent trading volumes on various exchanges around the world.
Be sure to also observe the charts of these coins and take note of the various price spikes – the patterns can help you know the periods are to sell or buy a coin.
Tip#9. Diversify, Diversify, and Diversify!
Investments are unpredictable; even those that seem to offer infinite positive returns can come crumbling down under certain economic condition. Cryptocurrencies are even more unpredictable.
As much as you can reap profits in thousands in a day or less, the opposite is also true. You can lose everything you invest in digital assets in a flash of a second. So, the best way to get past such uncertainties is through diversification.
Like I mentioned earlier, the value of all other coins is affected by the value of Bitcoin against the USD. When BTC loses value against the dollar, all other coins lose value and vice versa. From that, you can clearly see that diversifying your portfolio among various coins may not be enough to cushion you against bullish markets.
Do you remember when Bitcoin was at its all-time high in late 2017/early 2018? Everyone knew the way to go was to buy as many digital currencies as possible to gain more value over the dollar.
But having a volatile base asset like Bitcoin comes with its challenges as you may have noticed in the second half of 2018. Bitcoin made a lot of people rich in the shortest time than in the history of any known investment. The truth is, billionaires were made; and what most people never seem to understand is that a lot of people also lost money.
And in the midst of all this, the currency managed to grow its market cap by over thirty times more in the past year alone.
This means that it is okay for traders to keep Bitcoin as their base asset, but they also need to realize the value of the dollar cannot be overlooked. You need to diversify away from the same type of asset to different areas so as to spread your risk.
There are other equally viable investments that are not as risky as compared to cryptos; these include real estate, mutual funds, stocks, and more.
Tip#10. Super Tip!
This final tip will offer you practical steps to start implementing immediately in your trading.
Make use of the goal setting feature by placing sell orders: Make sure that you set your revenue targets by placing sell orders in the order books. You never know when your order price will be met, earning you exactly what you needed. Besides, sell orders attract fewer transaction fees since they are the market “makers”.
Take it easy while trading: They say the best traders mastered the art of maintaining their cool even when things seem to be out of hand. Yup, I know how insane that sounds but you’ve got to develop the skill of not trading emotionally, but objectively.
My two cents? Don’t start trading until you’re sure you can be decisive in terms of getting in and out of a trade. Emotional trades have been known to be losing ones; keep calm and watch out for the next opportunity. There’s always a better one to come.
For those who digest content better when in video form, don’t worry; below are some useful tips to help you trade like a pro:
I would be unfair to you if I only gave you tips for trading and not recommend assets to help you get started. In the next section of this guide, I will be taking you through some of the time-tested coins that you can start trading today.
5 Best Coins To Trade Today
Ethereum has been around for three years now, and within that time, it has managed to qualify as the second largest traded coin around the world after Bitcoin. It is both a decentralized platform and a coin, and more recently, they launched a token as well; it is known as ERC-20.
The Ethereum platform makes it possible for developers to create smart contracts and Decentralized Applications (DApps). These features protect cryptocurrency users from fraud, downtime, as well as enhance the privacy of transactions.
Ether is the platform’s token and the tool used by investors to make purchases of other currencies or to trade on exchanges.
Prior to its launch, Ethereum issued a pre-sale for its token and the response was overwhelming, ushering in an era of ICOs.
The Ethereum platform remains pivotal in the cryptocurrency operations; according to them, their platform can be used to codify, decentralize, secure, and trade just about anything. As at the time of writing this post, the platform’s market cap stands at $21.4 billion, while its coins trade at $207.95.
Bitcoin is the mother of all other cryptocurrencies; the coin was the first of its kind to be established in 2009 and currently controls the prices of all other coins. The coin is also the most capitalized at the time of this writing at $110 billion and is also the most traded coin globally.
Bitcoin trading isn’t big simply because it was the first currency to be established; contrary to that, the coin is quite volatile, making it suitable for day trading as well as long-term trades.
Volatile currencies enable traders to reap maximum yields when experiencing price spikes. This is the main reason why many traders prefer trading Bitcoin: it offers loads of profitable opportunities due to its volatility.
The volatility of Bitcoin is affected by a number of factors including changes in tech, news, and more. Whenever such triggers occur, the coin’s prices shift accordingly and traders cash in on the profits thereof. Be sure to watch out for both positive and negative developments relating to blockchain to prevent you from getting in and out of the market early or late.
Having been launched in 2011, this is one of the oldest coins in the crypto space. The currency was developed by Charlie Lee, an MIT graduate and former engineer at Google. LTC operates on an open source network around the world that is not centrally regulated, and it uses “script”, a password key generation function.
Despite drawing a lot of its features from Bitcoin, Litecoin has a faster block generation speed, making it more efficient in terms of transaction processing.
Litecoin is widely accepted by several merchants globally and currently boasts a market cap of $2.9 billion, and its coins trade at $50.56 as at today.
Ripple is a decentralized payment system that operates globally and most recently got a few endorsements from key financial institutions. Ripple offers an instant and safe payment system for its users around the world.
The platform was established in 2012 and with an aim of enabling banks to settle cross-border payments on a real-time basis.
Ripple’s coin, XRP, is one of the most unique coins since it cannot be mined unlike most other coins like Ethereum, Bitcoin, and Litecoin.
Ripple is premised on the belief that distributing value is a powerful way of bringing out certain values in people and organizations. This is why they are keen on distributing XRP to those who offer rigid payment methods and those interested in making faster and safer payments internationally.
Ripple is one of the most successful coins in existence today and commands a market cap of $21 billion and a coin market price of $0.524308.
This is another great cryptocurrency launched in 2016. At the time of this writing, Zcash had a market capitalization of $679 million and a coin price of $130. Zcash is a promising asset that offers privacy and transparency of user transactions.
Zcash boasts more security to its user transactions even after records of user operations are recorded on the blockchain. The platform ensures that information such as the sender, recipient, and amount remain out of the eyes of the public.
Users of the platform get to have “shielded” transactions, which allow their transactions to be encrypted using a cryptographic technique called ZK-Snark.
These coins can be traded in many exchanges; however, we recommend using a trusted one with high liquidity for their assets as well as well-secured accounts. Here are a few exchanges to help you get started.
We’ve seen some of the best coins to trade in today, but which are the most volatile? Volatile coins are not necessarily the common coins that you and I know.
Some of them might be new to you, but they offer the highest volatilities. While on this, I’d like to mention that there are no permanently volatile coins, so in case you read this article days, weeks, or months later, our choice of volatile assets might not be a representative of the true picture on the ground.
With that, let’s get right into it!
5 Volatile Cryptocurrencies to Watch Out For
Are you a day trader or leaning towards that mode of trading? Well, this might be the most important section for you in this guide.
If daily profits in the cryptocurrency markets matter to you, you might want to watch out for the volatile five coins we’ve listed below.
But before that, let’s briefly look at two key features that make these coins highly attractive to day traders and anyone looking for small but consistent profits from the market.
High liquidity: This is a key characteristic of currencies that fluctuate in prices within seconds and minutes. Illiquid assets can cripple your entry and exit from a market, meaning your cash can get tied up in an asset whenever you need to bounce back to fiat. If trading larger position sizes, you need a liquid asset to help navigate the various positions that generate profits.
With this category of assets, users can enter and exit a position quickly, as the trading candles keep moving. Illiquid assets, on the other hand, can lead to a slippage, which can cause you to miss out on timely profitable moves. Slippage means that you may be able to buy an asset at a higher price, only to exit the market with a lower rate due to its low liquidity.
Highly Volatile: This is the whole point of day trading – day traders prefer very volatile assets that can scoop profits every once in a while during the day’s trade. However, non-volatile assets can maintain one position for days or weeks, making them unsuitable for day trading.
Preferred day trading assets make between 5% – 10% moves within hours, and lucky for you, the below-listed assets have been known to record moves of between 10 % and 20% in a day or less.
With these two characteristics, you should be able to differentiate between assets that are suitable for day trading, and those that are not.
Without wasting much time, let’s look at the five most volatile coin as at this day!
NEO is among the best day trade cryptocurrencies today. Just like most other cryptocurrencies, Neo’s price stability is dependent on the trend of Bitcoin to either gain or lose value. But despite that, this altcoin has been known to go on big runs on its own, and may sometimes depict relative strength against popular coins in the market, including Bitcoin and Ethereum.
In the last couple of weeks, NEO has been on sharp upward and downward trends and, at the time of writing this post, it was trading at $15.49, a 2.87% drop from the last market update.
Ethereum has a massive trading volume and you would expect it to be less volatile. But this is another coin that encounters a lot of variation in its prices. Traders can easily short sale Ethereum on trading exchanges and earn decent profits when the prices are at a low.
Ethereum has been on a downward trend just like most other cryptos, and this might just be the perfect time to go for a short sale.
EOS has been experiencing a lot of runs since the news broke out of the potential of various applications on its blockchain. The coin has also experienced a few retractions every now and then due to some reported tech issues, but it has managed to portray some good bounce plays that have been profitable to day traders. EOS can be traded on various exchanges including Binance, Kraken, and Bittrex.
As the name suggests, this is the Binance exchange coin. This is one of the coins has come out strongly in face of price variations by Bitcoin and other major coins.
Binance coin has often set its own patterns in the market; here’s an overview of how it has been doing in the past few months:
Among the above-listed coins, this is perhaps the least volatile at the time but worth mentioning to anyone keen on day trading. The recent inclusion of this coin on one of the major exchanges, Coinbase, has played a big role in boosting its volatility. The coin has displayed a fairly volatile trend in the various markets and is slowly climbing up this list.
There you have it!
So, which is the most volatile cryptocurrency among the five listed above?
Well, the most volatile one among the five will be the one with the least market capitalization, and that is Ethereum Classic, followed by NEO, then Binance Coin, and EOS, and lastly Ethereum. The most volatile of them is also the best crypto for day trading.
Now that you’re ten cryptocurrency day trading tips richer and know the coins to start trading with, it is important to proceed to sign up on a reputable exchange that will safeguard your assets, personal data, as well as offer a wide variety of trading pairs.
The next step would be to get a wallet for your coins; it is advisable to go for the hardware ones that offer you an offline storage for your altcoins.
Lastly, do you have any tips for cryptocurrency trading that has worked for you in the past that you wish to share with the other traders? And if you do, which coins work with the tip best?