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The best trading techniques to succeed with cryptocurrencies
With the soaring prices of Bitcoin, Ethereum, Litecoin and other cryptocurrencies, more and more people are turning to cryptocurrency trading for quick profits. The cryptocurrency market is highly volatile, with dizzying price jumps within hours and even minutes, and smart traders are capitalizing on this volatility. Now, before moving on to the seven techniques for success in cryptocurrency trading, let’s first discuss the basics of trading and whether this path is something you would like to delve into.
Trading and investing in cryptocurrencies are not the same thing
These two terms, are often used in to express the same idea by many people, but they are two completely different strategies. Trading is for those who want to take advantage of short-term volatility.
This means they do a lot of technical analysis to determine when to buy and sell cryptocurrencies. These are people who know how to time the markets, so to speak. To do this requires a great deal of technical knowledge.
Otherwise, if you jump into cryptocurrency trading blindly, you could literally throw money up in the air. If you don’t know what you are doing, you could lose everything.
Instead, with investments, you don’t worry about the timing of the market. You look to the future and don’t bother looking at daily or weekly charts. Short-term price declines will not worry you because you are not going to cash in your investment anytime soon.
It is justifiably possible that in the future, when you are ready to sell your cryptocurrency and exchange it for cash, the price will not be as high compared to what you would have gotten by liquidating your investment at the “right time,” and that is just one of the risks you will have to take.
But think of how many mini-heart attacks you would have saved yourself simply because you do not allow yourself to think about daily or weekly price drops!
Now that you have your mind made up and know the pros and cons of trading and investing in cryptocurrencies, let’s move on to the seven strategies for successful cryptocurrency trading:
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Technique 1 – Buy low and sell high
Trading is all about making a quick profit. It is natural that you buy cryptocurrencies at low prices and then sell them when the price goes up. In fact, this is the main advice in this short chapter. Simply, buying at low prices and selling at high prices is, for all intents and purposes, the rule. The difference between the buying and selling price is your profit.
Now, imagine doing the opposite. If you buy at a low price and sell it at an even lower price. Do you think you are making a profit? Of course not. You will get the short end of the stick.
Now repeating and cashing in and continuing to repeat this strategy can bring you quick gains in a matter of days or weeks!
So offhand, this strategy might seem very simple. But its execution is actually much more difficult. Because of the volatile nature of cryptocurrencies, we don’t know if the price at which we buy is low enough.
W e also don’t know if the price at which we sell is high enough. But if you follow the other techniques in this guide, you should at least be able to know whether the price will go up or down.
Technique 2 – Pay attention to the news
Listening to what is happening in the cryptocurrency world is easier said than done, especially if you have only a passing interest in the technical details of how cryptocurrencies work.
You probably just want to make money, which is why you trade. You don’t need to know the news, you may be telling yourself, This kind of mindset is not the right way to succeed in cryptocurrency trading.
Do you know why?
Because cryptocurrencies are not the most stable currency or commodity in the world; they are not even centralized. Without governments, banks or other central figures backing cryptocurrencies, their value is at the mercy of the people who own them and have access to them.
Recall that cryptocurrency is all digital in nature, has no physical properties, and as such has no intrinsic value. So its value is pretty much subject to what the cryptocurrency community thinks it is worth.
So if something positive happens in the cryptocurrency world, the price appreciates because more people buy cryptocurrencies. But if something negative happens, people tend to get scared easily and sell their digital coins quickly. Because cryptocurrencies are so new, people are hesitant to put too much trust in their digital coins.
To succeed as a cryptocurrency trader, you need to keep your ear taut and listen closely. Listen to what is about to happen. Is there any breaking news? Are they good? or bad? How do you think it will affect the price? When you can answer these questions, you will be one step closer to success in cryptocurrency trading.
Technique 3 – Learn how to read charts
We won’t go into technical details, don’t worry. It will take much but much more than a short article to cover even the basics of technical analysis. But to give you an idea, you will need to read and master the most popular technical analysis methods, such as Japanese candles, Elliott wave analysis, Fibonacci levels, stochastic and relative strength index (RSI), MACD or convergence/divergence moving average, and Ichimoku clouds.
If you want to be a trader, you have to think like a trader. Professional traders live technically on the charts because that is how they understand whether the price is going to go up or down. Of course, they also know the other techniques on this list, but most of these methods have nothing to do with math. When logic and math are applied together, you can have endless success in cryptocurrency trading!
Technique 4 – Open A Demo Trading Account
This is a very important technique if you want to one day master cryptocurrency trading. No one can run without first learning to walk-this principle also applies to cryptocurrency trading. Practicing on a demo account is like taking baby steps.
It will provide you with a safe environment in which to learn and play, so you can experience the excitement of a win or profit. When you experience the loss of some demo crypto, it will teach you to be cautious. Losses will also teach you a very valuable lesson in trading: do not spend what you cannot afford to lose.
With a demo trading account, you will be able to practice how to time the market so that you can buy on the downside and sell on the upside. You can also practice doing technical analysis and reading the charts of the cryptocurrency exchange. Keep in mind that when trading in a demo environment, you will need to think as if you are trading in the real world.
Do not take the demo account for granted because then you will not learn anything. If you think as if it were a real account with your real money, you will learn faster because you will be hypersensitive to what you are doing and what you might be doing wrong.
It is normal to make mistakes the first few times you practice, but as time goes on and you learn from losses, your confidence should grow until you can leave the demo environment behind and enter the exciting world of cryptocurrency trading!
Technique 5 – Only trade what you are willing to lose
You can lose all the demo money or demo cryptocurrencies in your account and probably feel nothing. But when you are dealing with real money that you have worked hard for, things change.
Trading is a bit like gambling, but with trading you are supposed to take calculated risks, which means you can use past data and current events to try to predict what will happen next. With real money at stake, it is even more important to learn technical analysis and pay attention to the news so that you do not lose too much, if at all. In fact, it is preferable not to lose at all. But with the volatility of cryptocurrencies, no one can really predict anything, so the best and most sensible thing to do is to trade only what you can afford to lose.
Once you have finished your demo trading account, you can start investing real money in small amounts. Do not try to invest huge amounts right away unless you really have a lot of money to spend. You may not necessarily make big profits when trading small amounts, but the upside is that you do not suffer terribly even when you lose. And when trading, you always have to be prepared to lose on some trades from time to time. It’s just the nature of the game.
Technique 6 – Have a solid plan
Not having a solid plan before entering the world of crypto trading is like walking blindly through a busy intersection. You could be paralyzed, maimed or killed instantly. Cryptocurrency trading is not something just anyone can do. A trader must have special discipline and intelligence to be successful. You may be lucky, but there is a one-in-a-billion chance that this will happen.
The truth is that trading cryptocurrencies is even more difficult and challenging than trading stocks. Sure, it can be infinitely more rewarding, but the risk is also ten times or maybe even a hundred times higher. If you think you can handle this kind of risk, then you are welcome to try your hand at it. Otherwise, it would be better to invest in more stable activities that generate profits.
Having a solid plan means knowing in advance at what price to buy and at what price to sell. When your favorite cryptocurrency reaches the set price, don’t wait for it to go up or down. Instead, stick to what you have planned. Greed will only get you so far. In fact, it may make you worse off than when you started.
In trading, whether in cryptocurrencies, stocks or anything else, there will always be “what ifs” and, as we have already said, in hindsight there is no use kicking yourself if you bought a little too early or sold a little too late. Your plan is the only thing that is stable and will hold you steady during times of cryptocurrency volatility.
Technique 7 – Prepare for volatility
It is a fact that all cryptocurrencies are highly volatile. No one can predict in which direction the price will move. Take Bitcoin, for example
Many said its value would never exceed $1,000, but that was exactly the case five years after its founder, Satoshi Nakamoto, launched it to the public.
Now we are just a few years later and Bitcoin’s value is making the rounds.
Bitcoin’s skyrocketing prices are creating millionaires left and right, and this exponential growth is attracting all sorts of characters looking to take advantage of this digital gold rush. There are ordinary people trying to get “lucky” with bitcoins, smart investors looking to multiply their millions, and let’s not forget the thieves, scammers and hackers trying to get those precious bitcoins for free courtesy of their victims.
If you want to know more about how to keep your cryptocurrency safe find out in this article: How to Store and Protect Cryptocurrencies
The bottom line is that when you trade or invest in cryptocurrencies, you can either get rich or fail. Being prepared for both scenarios would be a great help, but it will not be easy. You have to be mentally strong. You simply have to be prepared for whatever may happen and hope for the best.
Conclusion
When you combine all seven techniques described here, the probability of succeeding as a cryptocurrency trader will be much higher than if you choose only a few. With discipline, knowledge and experience, you can easily take advantage of cryptocurrency volatility on a regular basis. Before you know it, you will make huge gains and your cryptocurrency portfolio will impress not only yourself, but also the people around you!
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