Cryptocurrency has grown in popularity as an investment instrument, with many investors hoping to profit in various ways. Among the most common methods is cryptocurrency trading, which involves betting on cryptocurrency price swings using a Contract for Differences trading account or buying and selling the underlying coins through an exchange. The advantage of bitcoin trading is that it does not need to acquire vital currencies.
Technical traders may use various trading strategies depending on their objectives and inclinations. Scalping, day trading, swing trading, and position trading are the four most frequent cryptocurrency trading methods.
Yet, it’s vital to realize that cryptocurrency trading is a high-risk, high-reward endeavour, and losses may happen as rapidly as wins. Traders must be mindful of market volatility, have a solid grasp of the underlying technology, and be able to analyze charts and comprehend data. Before starting in bitcoin trading, it is advised to perform extensive study and get guidance from experienced traders.
Scalping is a fast-paced trading style where traders aim to profit quickly from small price changes. Traders execute multiple trades within a day, usually holding positions for seconds to minutes. The goal is to accumulate small gains that can increase profits over time.
Day trading is when a trader buys and sells a financial instrument within the same day. The goal is to make a profit from small price movements. Day traders usually close all positions before the market closes to avoid overnight risks. It requires a significant amount of time, discipline, and knowledge to succeed.
Swing is a style where traders hold onto their trades for days or weeks, looking for short-term price movements. This style involves analysing market trends and making trades based on technical indicators. Swing traders aim to capture profits from these price swings but must also manage risks and set stop-loss orders to avoid losses.
Position trading is when traders hold onto trades for extended periods, such as months or years, to profit from long-term price trends. It involves a less frequent buying and selling approach and requires less monitoring than other trading styles.
Choose your trading platform
Choosing a trading platform is the next step after selecting your trading style. A trading platform is a software application that allows you to purchase, sell, and track cryptocurrencies. Creating an account usually requires basic personal information, such as your name, address, phone number, and email address.
After signing up for a crypto exchange, you must link your bank account. Most businesses offer several options for bank funding, such as debit cards, wire transfers, and P2P trading. Among these options, a wire transfer is often the most cost-effective way to deposit funds into your trading account. It is important to note that different exchanges may have varying requirements and fees for each funding method, so it’s essential to research and compares options before choosing one.
Choose your crypto pair
When deciding on cryptocurrency investments, it is essential to consider which currency to invest in. While numerous options are available, Bitcoin and Ethereum remain the most popular choices among active traders due to their excellent stability and predictability, making them easier to trade using technical indicators.
In addition to investing in large-cap cryptocurrencies, many traders also invest in altcoins. Altcoins may be riskier than large-cap cryptos but have more potential for high returns. Some altcoins have grown by more than 1,000% in just a few months, making them attractive options for risk-tolerant investors.
As a beginner, limiting oneself to trading or investing in just one or two cryptocurrencies is advisable. This allows for easier tracking and identification of investment opportunities. Furthermore, it enables investment in smaller increments of money, which can help reduce overall risk.
Successful traders are only sometimes profitable in every trade. Many successful traders only profit from 50% – 60% of their transactions. However, they make more money on their winning than their losing trades. Limiting the financial risk on each call to a specific percentage of one’s account and having straightforward entry and exit strategies in place is essential.
Basic Trading Charts and Patterns
Day traders use various techniques to determine the best time to enter the cryptocurrency market. One method is to analyse candlestick chart patterns, such as engulfing candles and dojis. Technical analyses, including trendlines and triangles, are also commonly used. Additionally, volume is a crucial factor that day traders consider when making market entry decisions. Day traders can decide when to enter or exit the market by analysing these various indicators.
Reduce losses by setting restricted orders
To manage risk, you should set a daily loss limit that you can afford. If you hit that limit, close your trades and take a break. Stick to your trading plan and remember that tomorrow is a new day.
Before diving into crypto trading, learning about the different types of orders and their uses is crucial. Market orders are simple trades executed at the current price, while limit orders allow traders to buy or sell at a predetermined price in the future.
Trading strategy test
Using TradingView, you can review historical charts and identify entry points that align with your trading strategy. Keep track of any instances where your stop-loss or profit target was triggered. It’s recommended to review at least 50-100 trades to assess the viability of your approach and whether the results align with your expectations. Analysing this data can help determine if your plan is profitable and worth pursuing.
Follow your trading plan
As a crypto trader, learning how to control your emotions when dealing with the volatile crypto market is essential. Making logical decisions instead of emotional ones should be your top priority. Successful traders have a pre-planned trading strategy and only need the discipline to stick to it, which enables them to act quickly when the market moves in their favour. Rather than chasing profits, adhering strictly to your plan is crucial. Allowing emotions to take over can cause traders to abandon their strategy, leading to unfavourable outcomes.
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