Cryptocurrency trading 101: Learn to trade like a pro

Despite its volatility, the cryptocurrency market is still making waves all over the world. More and more people are getting hooked on crypto trading because of its transparency, accessibility and decentralized nature that gives users complete control over their assets.

Although its concepts are challenging to grasp at first glance, it’s nothing a comprehensive cryptocurrency guide can’t help you understand. Thankfully, you can learn the most basic crypto trading knowledge here at BTC Post with the guide below:

What is crypto trading?

Trading is a concept that involves the buying and selling of assets. It can be any kind of goods and services where the buyer pays a certain amount to the seller as compensation.

In most cases, it entails the exchange of goods and services between two parties. In the context of cryptocurrency, crypto trading refers to the act of buying and selling coins through a specific platform. It can also be the act of predicting the price movements of different cryptos in a CFD (contract for differences) trading account.

Trading vs Investing

A trader and an investor share a common goal: to gain profit in the financial market. Although investing and trading may appear similar, they work in different ways.

The former focuses more on allocating resources like capital to generate profit from it in the long run. Meanwhile, the latter takes advantage of market volatility. Traders tend to enter and exit the market frequently with smaller returns in each trade.

Where to start trading: Platforms you can use

Start crypto trading today by familiarizing yourself with the different platforms available. Here are some examples:

Exchange sites

Most crypto trading activities happen across different exchange sites. They act as the middleman between the buyers and sellers. These operate fully online and allow you to trade digital coins to fiat money or other cryptocurrencies and vice versa. Some of the largest crypto exchange sites you can try are Binance, Coinbase and Kraken.

Peer-to-Peer marketplaces

Peer-to-Peer (P2P) marketplaces are online platforms where you can buy and sell crypto directly. It is where you can contact a seller who determines the price for the purchase. You can consider various options like Localbitcoins, Bisq and Paxful.

Two analyses you should learn before trading

To gain a good amount of profit in crypto trading, you need to first learn how to assess several factors to make better decisions. There are two different kinds of analyses you can use to upgrade your crypto trading skills:

Fundamental Analysis (FA)

Fundamental analysis (FA) is a method used to assess the value of a certain financial asset. It looks into both the economic and financial factors of an asset to determine if it has a fair worth. These include checking macroeconomic circumstances such as the state of the national economy, different conditions in the industry and the business connected to the asset if it’s applicable. Once a fundamental analysis is finished, analysts weigh if the asset is undervalued or overvalued.

Technical Analysis (TA)

Compared to fundamental analysis that looks at the overall state of the market, technical analysis (TA) has a different approach. Its main idea is centred around using the past price action of the market to predict how it is most likely to behave in the future.

Analysts don’t check the intrinsic value of an asset, rather they study the historical trading activity and find opportunities based on that data. This includes analysis of the price action and volume, chart patterns and technical indicators. TA aims to evaluate the strengths and weaknesses of the market.

How to be on top of the trade: 4 kinds of trading strategies

A trading strategy is a plan that you can follow when executing trades. It has different variations, depending on which suits your profile and preferences. The four trading strategies you can utilize are namely:

Day trading

As its name suggests, day trading is a strategy where traders enter and exit the market within the same day or within 24 hours to profit over short-term market changes and price fluctuations. The term originated from legacy markets that are only open for set time frames during the day. With crypto trading, you can trade at any time of the day.

Swing trading

With swing trading, you can gain profit by taking advantage of market trends and entering and exiting the market in a longer time interval. Positions can typically last from a couple of days to a few months.

The goal in swing trading is to find an asset that appears to be undervalued but is most likely to rise over time. Traders then wait until the price rises before selling to get a larger return.

The opposite is also applicable like pinpointing an overvalued asset that could decrease in value. You can sell these assets while still at a high price to get profit then buy them back for a lower rate after they decrease in value.

Position trading

For a more long-term strategy, go with position trading. This is when traders purchase assets that they hold for extended periods, usually for a couple of months. Your objective in position trading is to make a profit by selling your assets at a higher price in the future. Unlike swing traders who look at the different shifts in the market, position traders are more concerned about the overall trends in the market.

Margin trading

Margin trading is a method of trading that uses borrowed money from a third party. It is commonly used in stock, commodity and cryptocurrency markets. In a traditional setup, the funds borrowed are from an investment broker. Meanwhile, in the crypto market, they are usually lent by the exchange to the trader in return for a funding fee.

There are also some cases where you can borrow from other traders on the platform. Although initiating a margin trade is advantageous at first because it increases your purchasing power, you also need to be cautious about it since you might end up losing your assets if you don’t end up paying the necessary fees.