As many of you have heard cryptocurrencies are becoming extremely profitable and more prevalent in today’s economy. As technology continues to advance the availability of new cryptos will continue to rise. The heir to the crypto throne Bitcoin, once trading for pennies on the dollar is making an explosive upward trend this past year.
As this article is being written the price of Bitcoin is reaching close to €60,000! The individuals have made 1,000x on their money and have become what is known now as Crypto billionaires. But has the train for making money on Cryptocurrencies left the station? The answer is no!
This is simply the beginning. Those who start to learn how to trade and understand market trends now will be substantially more profitable in the coming future through cryptos.
In this article, we are going to break down simple rules and strategies in order to teach you How to Trade Cryptocurrencies successfully, the content in the article is basis Trading & Investing 101. If you want to be successful in trading then review some of the research we have gathered below!
Fundamental Analysis
Warren Buffet the self-made millionaire investor followed a traditional route of investing that utilized public information on companies in order to understand a company’s financial status and progression.
Fundamental Analysis in trading deals with reading expense reports, researching the head employees, and looking at SEC filings in order to value a company’s standing. Through all this research and data collection one can make a strong prediction as to whether this company will fail or succeed.
This type of analysis holds true with crypto’s as well.
If you are looking to invest in a cryptocurrency, you have to understand the technology behind the coin as well as the team that is trying to make it happen. There are many cryptos out there that have substantial volatility in their market trends. However, after some simple research, one can come to understand that this type of coin has no future value.
Fundamental analysis is crucial when it comes to investing or trading so it is imperative that you do your research before throwing money at a failing company.
Technical Analysis
Technical Analysis involves reading market trends and charts in order to make a prediction of how a stock will react given the price action. Price action is exactly what it sounds like, “what action is the price of the stock taking?”, does the price have an upward trending action or a declining action. Understanding market trends and volatility is how many investors make serious profit margins. The one thing about the market is that it has a history of repeating itself. When stocks have insane spikes in the past followed by extreme crashes the possibility of this happening again in the exact same fashion is very likely. Take Bitcoin for example after a couple of days of it running a strong uptrend, the value of the crypto drops by €1,000-€2,000 almost every time.
When you get in sync with a market trend the ability to play the strengths and weaknesses of the stock is insane. Technical Analysis is a vital tool to have in your arsenal when it comes to trading. In combination with Fundamental Analysis, one can make a very strong predictor of how this stock will act a day, week, or even month from its current state.
Now that we have gotten the two analytical perspectives out of the way, let’s jump into some basic rules when it comes to trading cryptocurrencies that will help you be successful.
Buy the Rumor, Sell the News
When it comes to trading cryptocurrencies the one thing you will find out very soon is that the news and press release dramatically affect the price action of the stock. However, when it comes to trading you have to buy the rumors and sell the news. What does this mean? When there is speculation that a cryptocurrency is up and coming, or a press release marks this cryptocurrency as the hot stock to play it is a good strategy to implement that you play the stock prior to the actual release of the news. Why? When people hear rumors of positive news there is such a large influx of buyers that try to hop on the bandwagon early. This drives the price of the cryptocurrency through the rough. Then when the news actually comes out and does not live to the hype of the rumor there is a massive wall of sellers. This dramatic movement to sell causes the cryptocurrency to plummet in price. Some of the best profit margins are made in the hype of the rumors.
Buy Low Sell High
This may seem like a fundamental rule but there are a lot of traders out there that forget this golden rule. In order to make a profit, you have to buy low and sell high. One trading strategy that incorporates this rule to the heart is Dip Buying. Dip Buying involves buying a stock after it crashes hard in order to sell into the upward trending bounce.
Don’t Chase!
I have made this a subsection of the Buy Low Sell High rule because it deals with the inverse. Meaning that when a cryptocurrency is up 20-30% on the day or spiking heavily DO NOT CHASE IT! Chasing an upward trending stock is not a beneficial trading strategy to learn. You do not know where the top is. You could buy a large quantity of stock right at the top and then watch as the stock begins to fall. This is the exact opposite of buying low and selling high. Instead, wait for your opportunity on the Dip Buy as we discussed above.
Cut Losses Quickly
When you go into a cryptocurrency it is imperative that you have a plan. Meaning you know where your target price is for selling and where your loss price is. DO NOT HOLD AND HOPE! When a stock dips below your cut losses price it is essential that you stick to your plan. Creating discipline around this strategy will help you become successful in trading. Do not hold any stock and watch as it plummets down hoping to sell into some point of strength in the price. This will blow up your account very quickly. Have a stop loss on all your stocks and make sure to stick to it.
Look for Perks in Volume
Typically right before a cryptocurrency is about to break out and drastically increase in price there first will be an increase in volume. This increase in volume is an influx of buyers that will drive the price up and the more volume the higher the price will go. In addition, it is good to remember that you never want to be more than 1-2% of the total trading volume. This makes it difficult for you to either enter or exit a trade and could cause you to lose substantial profits. If you buying 100K shares of a cryptocurrency that has a volume of around 300K shares. The ability for you to exit on your target price will be substantially harder. Then if you were to have say 10-20k shares.
This wraps up our How to Successfully Trade Cryptocurrencies article if you want to know more about trading crypto’s leave a comment below or check out our Facebook or YouTube Channel for more helpful information.
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