Cryptocurrency trading today is more popular than ever and a huge number of investors tend to take advantage of the popularity of this topic to make easy money. Nevertheless, it is important to understand that the start of cryptocurrency trading is not as fast and simple as it may seem at first glance.
Next, we will look at the main components for starting cryptocurrency trading – although in this case it is not so much knowledge that is crucial, but the ability to perform them in such a way as to make a profit. Also pay attention to some features of trading in the cryptocurrency market.
- Cryptocurrency market open 24/7
Unlike traditional fiat currencies, cryptocurrencies can be traded 24 hours 7 days a week without any restrictions. The difference in trading volume may vary throughout the day, as traders from different countries enter the market at different times. However, these changes are usually not significant and do not affect the current situation radically.
- Cryptocurrency market is extremely volatile
A cryptocurrency market can fly up or fall even by tens of percent in a matter of minutes or hours. It is completely different from the stock market or the classic forex market and you need to understand that when investing in cryptocurrency, capital is at high risk.
The cryptocurrency market is perhaps the easiest to enter, even in the case of beginners. Nevertheless, it is extremely important to realize that the huge price surges that occur with cryptocurrencies on a regular basis do not always bring large profits to investors. Moreover, they may well have devastating consequences for capital.
A clear understanding of the best trading methods and technologies can significantly reduce risks, but the increased volatility of the cryptocurrency market in any case introduces a significant element of unpredictability in the activities of even qualified investors.
Cryptocurrency selection and evaluation of its cooperation
Before you start trading on the cryptocurrency market, each trader must conduct their own research, which will result in a clear understanding of which cryptocurrency to invest in. There is no point in investing your money in something you do not believe in.
When you conduct your own research of cryptocurrency variants available on the market, there are several aspects that you should pay attention to first.
These four aspects can be considered in determining the potential of a cryptocurrency and your chosen cryptocurrency must demonstrate strong positions in at least three of them in order to be considered a really promising option for trading.
Finding the best crypto-broker is not an easy task. There are quite a few companies on the market today that offer a wide variety of conditions for cooperation.
- Trust and regulation
If we are talking about the European space, the broker should work under the auspices of CySEC – the regulatory body that controls the activities of legally operating brokers. This body also provides insurance for deposits of up to $ 20,000 in the range of up to 100%. For investors from Australia, for example, it makes sense to look for brokers with an ASIC license, etc.
The less you pay, the more you can earn. Therefore, it is logical to find a broker with the lowest possible commission. Most brokers pay a spread to open a position. Spread (spread) – is the difference between what you pay for cryptocurrency coins and what you get when you decide to sell it to a broker. In addition to spreads, a fairly large number of brokers charge a swap fee when you hold selected positions for a long time. Such brokers are usually best suited for everyday cryptocurrency trading and brokers without exchange fees are more beneficial for long-term investments.
- The range of cryptocurrency available
If the broker does not offer those cryptocurrencies that you want to trade with, there is absolutely no point in creating an account there and starting trading activities. Make sure that your chosen company provides the opportunity to trade all the cryptocurrencies of interest at once.
Leverage can help you benefit from small price movements of cryptocurrency. Leverage is a very powerful tool in the hands of professionals, but there are more risks in the hands of newbies to use it to their own detriment than to get real benefits. That is why you should either use it with great care or not use it at all. The cryptocurrency market is volatile enough to make a good profit even without it.
Plus 500, IQ Option, Markets can be attributed to the brokers tested and quite profitable under the terms of the conditions, although there are many other worthy options for every taste.
Work with price fluctuations in cryptocurrency
Every novice trader must have heard about the fundamental principle “buy at a low price, sell at a high”. Despite its banality, it really is in the heart of any trading – the only question is to correctly determine the moment when the price changes its value from high to low and vice versa.
Each time you need to determine where the price of the selected cryptocurrency is at the moment. Is it now at its multi-week low? Can it be considered prohibitively high?
Consider a good example of how this happens in practice. Below is a chart that displays the price movement for Ethereum cryptocurrency from the beginning of 2017 to June 12 of the same year.
It seems that the price of cryptocurrency is steadily growing and now is just the right time to buy it at a relatively low price, until it has grown many times. However, the following happens next
The initial price of cryptocurrency collapsed almost doubled in just one month – as it turned out, the forecast that this price was low and will continue to grow only turned out to be incorrect.
Of course, situations are quite possible when a certain cryptocurrency with good technology, funding and media coverage continues to grow steadily over a very long period of time. However, such investments for beginner traders are quite risky, because it is difficult to determine how much more the price may increase in the near future.
One of the best investors of all time, Warren Buffet, once said, “Be afraid when others are greedy and be greedy when others are afraid.” This maxim offers a sufficiently adequate approach for those who are afraid to make decisions only on the basis of false optimism that the growing price of the chosen cryptocurrency will continue to grow.
Do you have a cryptocurrency at your disposal, the rapid growth of which is already optimistically predicted by absolutely everything? Well, it is likely that the right time has come to pick up the existing profits and safely exit the trade.
Initially, the purchase of a cryptocurrency is made if we consider its current price low. When prices rise too high and market participants are clearly addicted, the key question that a cautious investor should ask himself is whether you yourself believe that this cryptocurrency is worth more. If you think that there is no more room for its growth, the time has come to exit. After all, there is no point in holding of the cryptocurrency, if there are many other interesting options on the market.
In the end, it is often not entirely reasonable to chase after the highs and follow the false optimism that dominates the market. That is why a competent analysis of the market dynamics of the chosen cryptocurrency is a crucial condition for successful trading.
External factors monitoring
There are dozens of fundamental factors that may affect the current price of a cryptocurrency, as well as whether it is in a downward or upward trend.
Among them are several who need to be monitored day after day, because they are able to influence the current price drastically.
- Government regulation
Whenever a government makes a public statement on cryptocurrency regulation, the price always reacts to it. For example, when China banned ICO, the price of bitcoins and other cryptocurrencies fell almost instantly. It is extremely important to keep track of such events, even if you are no longer a beginner in the cryptocurrency trade, because their value can not be underestimated.
- Media coverage and expert opinion
Cryptocurrencies increase their value when they receive positive media coverage, due only to the fact that more people learn about the merits of this cryptocurrency and are beginning to be interested in buying its coins. Also, do not forget about certain public figures, which by their statements can significantly influence the perception of a particular cryptocurrency and the market as a whole. As a rule, we are talking about people who have a good recognition and authority in the field of finance and investment. When, for example, Jamie Dimon, CEO of JP Morgan, the largest US bank, publicly stated that he considered Bitcoin to be an ordinary fraud, which ultimately would certainly come to nowhere, the Bitcoin market was badly damaged. There were even accusations on the part of market participants that Dimon just wants to manipulate the price of Bitcoin for his own selfish purposes.
- Acceptance of cryptocurrency by major players
If such world-famous companies as Amazon or eBay announce that they are now ready to accept payments in Bitcoin, this will almost certainly become an incentive for the price growth of not only the mentioned Bitcoin, but also other cryptocurrencies with it, since such solutions are undisputed This is a plus for all cryptoindustry. In addition, when large technology companies of the caliber Microsoft and Intel begin to invest their resources in the implementation of projects related to the cryptocurrency market, this becomes another reason why the price can go up.
- Technological change and innovation
With each new technological change, there is a significant likelihood that it can significantly affect the cost of cryptocurrency. For example, if you plan to release a new security protocol, which will make a certain cryptocurrency even more reliable, secure and scalable, such a positive signal for the market will certainly affect its price.
- The state of other markets
Not surprisingly, cryptocurrencies also respond to changes in other markets. When other markets experience difficulties, cryptocurrencies usually show marked tendencies towards strengthening. As of today, gold and the Japanese yen are no longer the only instruments that are classified as safe haven investments.