Start trading cryptocurrency
The global online marketplace offers plenty of opportunities to make money online, and with the advent of blockchain, the list of possible sources of income has expanded even further. Cryptocurrencies and related transactions make up a large part of remote earning.
Cryptocurrency is an emerging market that is becoming increasingly popular due to the widespread adoption of Bitcoin and Ethereum based on blockchain technology.
E-money earning involves opening speculative positions to buy or sell digital cash tokens. When investing through the exchange, you can earn only on the growth of this asset. By trading through a broker, you can increase your financial investment either by buying or selling.
Trading e-currency on the exchange can bring both significant capital gains and loss of investments if the trader does not know how to prevent losses and avoid them. This is one of the most important skills that every investor should have in order to maintain long-term capital growth. Otherwise, all profits will be equalized due to unsuccessful trades. Investment loss prevention is the main goal of every cryptocurrency trading strategy.
How to start trading cryptocurrency? Let's look at the following trading strategies:
- Averaging. Instead of investing all the funds in an asset at once, it is better to divide the amount into several parts and invest in stages. It is impossible to predict the cryptocurrency rate in advance, but if you invest in parts, you will always have the amount to buy a coin in case of a sharp decline in its rate.
- Diversification. Diversification is at the heart of trading. It is recommended to divide the investment capital into several parts and invest in different crypto-assets. This is especially true now, when a lot of startups appear on the market. Many of them will fail, but some will succeed. It is impossible to know which project will reach the heights and publicity, therefore, in order to reduce risks, it is better to play it safe and diversify investments.
- Stop loss. Learning to trade cryptocurrency includes not only explaining the strategy and gaining the skills to read charts - it is also important to learn not to be afraid to take losses and exit positions. It is important to understand in time that the project will no longer grow and will not bring profit, and exit it without hoping for an increase in the rate, that is, close the position. To do this, there is a tool - stop loss. These are sell orders that are triggered if the asset price drops to a certain level.
To properly start trading cryptocurrency involves choosing assets for investment, studying risks, choosing a reliable cryptocurrency exchange or brokerage platform with a simple interface, choosing a wallet for storing assets, strategies, studying trends and behavior of cryptocurrencies.
Most Popular Coins
Different electronic money is traded on the market, some of them are very famous like Bitcoin, others are less known like Tron. Here is a list of popular currencies that can be traded:
- Bitcoin is the "original" cryptocurrency and still the most expensive digital currency by market capitalization. Its main advantage lies in the limited amount of capitalization - 21 million tokens. This means that each new bitcoin purchased reduces the amount of remaining coins. This trend allows the Bitcoin exchange rate to grow exponentially. Thanks to active investment in bitcoin, the entire cryptocurrency market begins to flourish, including altcoins, which are characterized by good volatility and liquidity.
- Ethereum - the currency of "smart contracts". Ethereum is the first virtual currency to use smart contract technology. The currency appeared in 2015, through crowdfunding - a voluntary donation of money via the Internet. Donations were collected in bitcoins. If Bitcoin occupies 40 percent of the crypto-market, then Ethereum - 18 percent, thus occupying an honorable second place in the list of popular cryptocurrencies. Ethereum works in much the same way as Bitcoin because the underlying code of Ethereum is borrowed. Just like in the Bitcoin system, Ethereum blockchains are stored on the computer of each user. Therefore, it is impossible to forge records - then it would be necessary to forge records on all computers. The amount of Ethereum is unlimited. Blocks for storing information in the Ethereum system appear every 10-15 seconds, unlike bitcoin, which takes 10 minutes to create a new block.
- Bitcoin Cash is a standalone virtual currency resulting from the first "hard fork" of the original bitcoin chain. It has acquired a number of differences, including an increased amount of memory and a fast recalculation of network complexity.
- Ripple is the fastest cryptocurrency. Most new cryptocurrencies appear due to small changes in the bitcoin code. But in the case of Ripple, the code was written from scratch, under the order of venture funds (an investment fund focused on working with innovative enterprises and projects, investing in securities or shares of high-risk enterprises in anticipation of extremely high profits). Ripple was created to increase the speed of banking transactions and save on them. Ripple cryptocurrency is a centralized system in which all digital money already exists and belongs to one company - Ripple Lab. And if the Bitcoin and Ethereum systems require empty mathematical calculations in order to "slow down" the creation of new blocks, then Ripple Lab issues coins for useful calculations - the processing of scientific data from different universities.
- Litecoin - digital money for fast transactions. It occupies 2 percent of the total value of the digital asset market. Litecoin appeared in 2011, thanks to the former Google engineer - Charles Lee. Litecoin, like Ethereum, is a hard fork from Bitcoin. One of the few differences between Litecoin is the transaction processing speed - it is faster than in Bitcoin. If in bitcoin blocks are created every 10 minutes, then in Litecoin it happens faster - every 2.5 minutes. That is why Litecoin can process more transactions than in the Bitcoin system. The number of cryptocurrencies is limited.
Analysis of the cryptocurrency market
In cryptocurrency trading, the most important thing is strategy. Choosing the right strategy will provide you with a reliable income, while choosing the wrong strategy can backfire.
Without the ability to analyze market trends, no strategy will work.
For cryptocurrency trading to be effective, you need to carefully study the market. There are two types of analysis that allow one or another to predict the price of a cryptocurrency and the dynamics of its development - technical and fundamental analysis.
Technical analysis is the study of the dynamics of the digital asset market, mainly using charts (additional tools such as candlestick analysis or indicators can be used), in order to predict future price movements.
The basis of any technical analysis is three postulates:
- The market takes everything into account. These are the basics of technical analysis, if there are any reasons that affect the price, they are already taken into account in the price of an asset. Any changes in the dynamics of supply and demand are reflected in the price movement. All you need to be able to do is analyze this price movement correctly. Everything that affects the market price of a cryptocurrency is certainly already reflected in the price, and you need to be able to study and track price dynamics.
- Price movement is subject to trends. Everything that happens in the cryptocurrency market is subject to trends or trends. The main task of cryptocurrency technical analysis is to identify these trends at an early stage and move in the direction of the trend.
- History repeats itself. All price movements in the market are subject to human psychology. All graphical analysis models are repeated. If some models worked in the past, then there is every reason to assume that they will work in the future.
Fundamental analysis focuses on the factors that determine the dynamics of the value of a cryptocurrency. In particular, the trader studies the features of the coin - practical application, popularity, media background, involvement in the real economy, and much more.
Fundamental analysis is more time-consuming and complex, since it requires knowledge and understanding of many factors of the crypto market and the real economy, the relationship between them. When used correctly, it allows you to evaluate the value of an asset in comparison with its speculative price. A trader can identify overvalued and undervalued cryptocurrencies and use this information when trading.
Fundamental analysis uses the analysis of a large amount of information about the internal and external factors surrounding a token in order to choose an entry or exit point.
Technical Analysis Indicators - Using Moving Averages
Technical analysis is not something innovative in trading and investing. The use of indicators and charts has the simple goal of using historical data to make more informed decisions.
As markets have become more sophisticated in recent decades, hundreds of different types of indicators have been developed, but few have become as popular as the consistent use of moving averages (MAs).
Although there are various variations of moving averages, their main purpose is to give clarity to trading charts. This is achieved by smoothing out the charts to create an easily decipherable trend indicator.
There are different types of moving averages, most often divided into two separate categories: simple moving averages (SMA) and exponential moving averages (EMA). Depending on the market and the desired outcome, traders can choose which indicator is suitable and profitable when setting up.
Overview of the Stochastic Oscillator indicator
Stochastic Oscillator is a technical indicator of the oscillator type. For its simplicity, it is popular with beginners. And professionals love it for its signal accuracy and versatility. The indicator is designed to determine the momentum of the price.
Its main task is to compare the current closing price of an exchange instrument with the prices for a specified period of time. Stochastic Oscillator has two lines in its working arsenal: main (%K) and secondary (%D). %D is the moving average of the %K line. Typically, %K is shown as a solid line, %D as a dotted line.
Stochastic is able to clearly determine the moment of a trend reversal and earn even on short-term corrections against the trend in the market.
RSI - Relative Strength Index
The instrument gained its popularity due to the ease of interpretation and the quality of the signals it gives. The entry points given by this indicator alone and together with other indicators show a very good risk-reward ratio in volatile and trending markets.
What is this relative force itself? This is the ratio of the average price increase to the average price drop over the period. This value allows you to assess whether buyers or sellers had a stronger influence on the price in the selected period and to suggest further developments. To calculate the relative strength, all candles of the selected time period are selected that closed higher than the previous candle, and the average value of the increase is determined using the exponential moving average formula. A similar operation is performed for candles that closed below the previous one. The ratio of these two quantities will give the value of the relative strength (RS).
What are Bollinger Bands?
The Bollinger Bands indicator is an oscillating indicator that is used to measure market volatility.
It allows you to evaluate whether the price is high or low compared to the recent moving average, and to predict the possibility of falling or rising to its level. In particular, this data helps you make a decision to buy or sell an asset.
Bollinger Bands consist of three main bands (lines).
The central band corresponds to the simple moving average of the price. The upper and lower bands represent levels at which price can be considered high enough or low enough relative to the recent moving average.
When the price reaches the upper band, the asset trades at a high enough price and is considered overbought. In this case, you can sell it, expecting the price to fall further back to the central band, which is the moving average.
When the price hits the lower band, the asset trades at a relatively low price and is considered oversold. In this case, you can buy it, expecting the price to rise further back to the central band, which is the moving average.
However, you need to be careful: the mere fact that the price reaches the upper or lower band does not mean that the price will reverse. More information is needed – such as candle patterns or another indicator – to confirm the reversal before a trade is entered.
Bollinger Bands also help determine market volatility based on the distance between the upper and lower bands. A large distance corresponds to high volatility, while a small distance corresponds to low volatility.
You can start trading cryptocurrencies today
To become a successful trader, you need not only knowledge and skills. Discipline, self-control, a systematic approach - all this is also extremely important. It is important to learn how to stick to the strategy, not give up and take the time to deeply analyze the cryptocurrency and the market.
Cryptocurrency trading provides ample opportunities for earning. You can start trading on the stock exchange with minimal investment, but for profitable trading you will have to make a lot of effort.
You can start trading cryptocurrency at any time convenient for you. And you can start trading by registering on the platform today.