How to Trade Cryptocurrencies in 2021
Types of trading, how to trade, what to trade, and what you should be aware of.
We've got you covered.
Someone once said cryptocurrency traders are a lot like vegans or cross fitters, zealous and unquestioningly devoted to their cause. While these ambassadors are to be admired, revered even, there’s no need to be intimidated. It’s absolutely ok to be ‘just a bit’ curious about crypto. Or trade ‘just a bit’ of crypto. Or to just add crypto as a ‘side’ to your main trading.
While you don’t need to understand all the lingo (‘Time to HODL!’, ‘Whooaaa! Watch out for that whale!’) There is something that you absolutely must understand.
Cryptos are volatile.
Likely, this is what drew you like a moth to a flame in the first place. Being volatile means the value can experience huge upwards and downwards movements in a very short space of time, and to price speculators that means one thing only. Opportunity.
Just look at the chart below. Bitcoin (BTCUSD) is the purple line and gold (XAUUSD) is the orange line. Need we say more.
‘Why are cryptos so volatile?’ we hear you ask. Well, it’s all down to market size. Gold has a market cap of around $7 trillion, compared with crypto’s market cap of around $320 billion - over 20 times smaller. Imagine someone added another $320 billion to the crypto market, theoretically it would increase the market cap by 100%. Adding $320 billion to the gold market would be a mere drop in the ocean in comparison.
'Ok. We get it. There are lots of trading opportunities with cryptos. What’s next?'
Well, there are two ways to trade cryptocurrencies; Exchange Trading and Contract for Difference (CFD) Trading.
Traders who are interested in buying and holding over the long term may choose to buy actual coins from an Exchange.
Price speculators interested to profit from the highs and the lows in the short term choose CFDs. This is exactly the type of trading that CryptoAltum offers, and it has a few key advantages over exchange trading.
Firstly, CFD trading allows you to take short (sell) positions without having to buy first what you want to sell. That’s right, it’s price speculation only trading, so you can profit from falling markets as well as rising ones. Crucial in crypto trading.
Secondly, CFDs are leveraged products. This means you can control a much larger position size than your investment amount. For example, Bitcoin is trading around $34,000. We’re guessing you don’t want to put up $34,000 of your own funds, so this is where leverage comes into play. CryptoAltum offers the highest leverage possible (1:500), so this $34,000 becomes $68. Much more manageable, right?
Despite there being over 6,000 cryptocurrencies out there, we recommend (in the beginning at least) you pick just 1 or 2 cryptos to trade, preferably from the King, Bitcoin, and his loyal subjects Etheruem, Ripple and Litecoin.
‘Why is that?’. Simple. There is ample market data available for these cryptos, and you will also learn much quicker if you focus on only 1 or 2.
'How can I be sure which way the market is going to move?'
In this life, only one thing is certain…. and cryptocurrency price movements are most definitely not it. There are however, two type of analysis you can use to at least put the odds in your favour.
This is reading about and analysing what is going on in the world that could be affecting the price of Bitcoin, or whichever crypto you are trading. Make sure you only source news from high quality sites to avoid falling victim to false rumours. Our Blog is updated daily with the breaking stories that we believe are most likely to impact pricing.
This is looking at the charts (just like the one above) to identify patterns and trends that could signal which way the market will move next. Our inhouse professional analysis team provide daily emails to our clients covering Bitcoin, Ethereum and Ripple. Even if you are not yet a client of CryptoAltum you can still subscribe to our Telegram Channel for daily updates. Go on, check it out. It’s free! If you want to learn how to apply technical analysis concepts yourself, our Blog is just the place. Start with the Moving Average and Relative Strength Index (RSI) and you’ll soon get the idea.
Next thing to do is open your CryptoAltum account and install the trading platform.
Here’s what it looks like:
You have all your trading instruments on the left, your charts on the right and your open trades at the bottom.
To trade Bitcoin, you simply click on BTCUSD (highlighted) and then select Buy or Sell. Couldn’t be simpler, right?
In this example, we opened a sell position at $16,115.50 and the market moved in our favour, down to $15,851.67, giving us a profit of $263.83 (0.01664367 BTC). Of course, the market will not always move in your favour, so it’s important to not invest more than you can afford to lose. This way you have limited risk (the funds in your account) with unlimited profit potential.
There you have it!
To start trading cryptocurrencies, you need to:
1. Choose the cryptocurrency you will be trading. In the beginning this will most likely be Bitcoin, Ethereum, Ripple or Litecoin.
2. Do some market research and decide which way you think the price will be going
3. Install the trading platform and start trading!
Remember, if any of this is confusing the best thing to do is start with a demo account. That way, you can practise completely risk free without risking any of your own funds. Once you are confident on the demo, it’s time to trade for real on your live account.
Learning is Key!