Many people believe that trading crypto is an easy way to quickly earn a lot of capital in a short period of time. This is true, but only partially. The opportunities that crypto trading offers cannot be found in other financial markets. With a skillful approach, you can quickly increase your trading deposit by dozens or even hundreds of times.
You have probably heard of such cases when traders became millionaires literally overnight. Those are real cases for the cryptocurrency market. The cost of an asset per day can change by several tens and sometimes hundreds of percent! It allows crypto holders to make huge profits and provide their living.
Such price movements are impossible for the traditional stock and currency markets, for they do not tend to such sharp and powerful changes in price. The difference is that traditional currencies are managed and controlled, unlike crypto. Neither government nor central banks can make a decision on the emission of crypto assets.
On the other hand, with the same speed, people gain millions from trading, they can lose everything in a matter of minutes when the market collapses. So, again, it is not worth taking crypto trading as a lottery and relying on luck only.
It is important to understand that before starting cryptocurrency trading, it is necessary to study the pitfalls of the market and take them into account. There is no need to think that this activity is very simple – to receive profit regularly, you need to have special knowledge and appropriate tools. In this article, we will talk about the nuances of trading in more detail and tell you the best place for buying cryptocurrency.
How Does Crypto Trading Work?
As mentioned above, cryptocurrencies are subject to increased volatility. Cryptocurrency market quotes are very unstable. They can change at a breakneck pace in the shortest time frame. The situation in the market can change radically even in ten minutes. Taking advantage of such fluctuations, you can make good money.
If you look at crypto trading live, you will see that the coins of some projects often show growth of up to 500-1000% or more within one day. But like everything else in the world, there is also the other side of the coin – along with quick earnings you can quickly lose all your money rapidly.
Prices for tokens often collapse at an even faster rate than they grow. And since the market is unstable, there are chances to both increase your fortune several times a day and lose everything within a few minutes after the start of trading activity.
So answering the question “What is crypto trading?” We can briefly say that this is a trader’s ability to ride the volatile market trend and get financial benefits from it.
How to Start Trade Cryptocurrency?
Want to commence trading and investing in Cryptocurrency? but have no prior experience in financial markets? here’s how you can proceed!
See, if you have no iota of how the financial market operates, it is better to start off with liquid and relatively stable assets, rather than going on a wild goose chase! ‘
Be it Bitcoin or Ethereum, all the paramount digital coins are considered liquid- which illustrates that you have always the option of buying and selling digital currencies. Additionally, supply & demand will always be in close proximity to the market rate.
Liquidity is the property of assets to be quickly sold at a price close to the market. For cryptocurrencies, liquidity is the ability of a coin to be easily converted into cash or other digital assets.
If you do not have enough experience, then do not choose volatile coins with insufficient liquidity. It will be much more difficult to make any trading operations with them, and it is necessary to adjust the trading volume for the available liquidity.
Crypto buying and selling on exchanges is also possible with just a few dollars. Moreover, the same initial deposit of $10 is absolutely normal for scalping. With 10 dollars, you have nothing to do in the stock market.
It is vital to note that cryptocurrency exchanges operate 24/7. On the other hand, Traditional brokers offer clients access to traditional markets only at certain working hours, as a rule, from Monday to Friday.
All these features of the cryptocurrency market can be turned to your advantage. After all, volatility and liquidity allow traders to earn good fortune. They are the basic indicators for the scalping method in the cryptocurrency market.
Trading experts advise mastering this profession with one of the simplest strategies from a technical point of view – scalping.
It implies that transactions are made within one trading day. Scalpers in the cryptocurrency market are great at playing on small price fluctuations. To do this, they filter out coins with the desired volatility and other specified parameters. The purpose of operations is to take a small profit in each trade.
But, unlike the conventional stock market, a slight price fluctuation in the cryptocurrency market can turn into a real price rally within a short period – by tens and sometimes hundreds of percent. And that is exactly what every scalper looks forward to.
In cryptocurrency trading, just like in traditional exchange trading, traders use such popular scalping strategies as breakdown and rebound. Let’s talk about each of them:
- Breakdown- breaking the local levels of the price range, in which the price has been kept for a certain time, with a further short-term acceleration of the price movement in the direction of the trend and, possibly, with a subsequent rebound in the opposite direction again to the levels of the price range.
- Rebound- price retreat from the levels of the price range or from local price highs/lows, in which the price has been for a certain time due to insufficient sellers’ or buyers’ activity (depending on the direction of the local trend).
Also, the absence of fundamental analysis as such should be attributed to the number of features of cryptocurrency trading. Technical analysis is applicable, but it only works for top cryptocurrencies since these coins have sufficient liquidity.
As a rule, technical analysis does not work when it comes to low-liquidity coins. You can rather make money on the strategy of following other traders’ price manipulations, which, as a rule, go according to the pump and dump scheme, or follow trading bots.
How Does Crypto Trading Work? Technical and Fundamental Analysis
Technical research is the analysis of price changes (or volumes) in the past in an attempt to predict the price in the near future. Its tools can vary: levels, candlestick patterns, graphical models, indicators, and trends.
In simple terms, fundamental analysis is a research of internal and external factors that helps determine whether the asset or business is overvalued or, vice versa, undervalued. Main tools: earnings per share, price-to-earnings ratio, book value, analysis of sales volumes, market share, and so on.
Pump&dump is a scheme of manipulative increase in the markets of securities, cryptocurrencies, or other similar assets, followed by their strong collapse. This scheme is prohibited by law. Organizers of such manipulations can be sued, up to criminal liability.
Scalping as a procedure of exchange trading is fully revealed in crypto trading – it allows determining the best entry or exit points from a position, using all the benefits of the “depth of market”. Together, these factors make it possible to earn money on cryptocurrency trading while bartering both top and low-liquid coins.
Features of Short-Term Trades in Cryptocurrency Trading
As you know, scalping involves completing short-term transactions – trades made within a day and last from several seconds to several minutes. In sporadic cases, they can last several hours. The profitability of scalping transactions in the cryptocurrency market is achieved through local price movements.
To get a tangible income, you either need sufficient capital or use a margin. At the same time, when making scalping transactions, that is, when a trader enters a large trading volume for a short period, it is imperative to consider a trading instrument’s liquidity factor.
Liquidity is the limiting factor. In gaining a trading position, a trader must predict liquidity in advance to close it successfully in the future. It often happens that the market’s depth gets empty by the end of a sharp local price movement, and the trader is left alone in the market’s depth with purchased coins. There is no one to buy them.
If in the traditional market, this problem can be solved by staying in a position, waiting for a buyer for your trading tool to come sooner or later, then in the cryptocurrency market, it will not help – the buyer may simply never appear again. Therefore, when entering a trade, each scalper must be aware of what liquidity will be in this market when the position is closed.
Where to Trade Cryptocurrency?
Another fundamental factor in trading is the choice of platform. It must be reliable, secure, and liquid. The largest crypto exchange in Europe, WhiteBIT, complies with all these parameters.
Cryptocurrency trading is suitable for experienced, psychologically stable people who already have experience trading on the traditional stock market, understand how everything works, and, most importantly, know how to manage risks.
Beginners have two options here. First, learn and trade on the traditional market and then come to the cryptocurrency.
Or you can go another way – find a team of like-minded people, cryptocurrency traders, a community to communicate and ask questions, get the basic knowledge about the crypto market, learn the intricacies, immerse yourself in the atmosphere, and recharge with the energy of success from top traders.
These will increase your chances of success and save you from losing deposits.