There are not so many ways to make easy money, and the number of people who know them and wish to share their knowledge with the public is even smaller. But the recent ‘golden rush’ in the cryptocurrency industry has shown a truly explicit and easy way of increasing your wealth which led to increased interest in this area.
If you’ve decided to join this rush, too, and become a successful cryptocurrency trader you’ve come to the right place. In this article, we are going to provide you with an ultimate guide on where to start, share the links to some useful services and give you some advice on the best trading and investment strategies.
Define your strategy
The trading strategies can be classified according to how long you plan to hold this or that coin in your cryptocurrency portfolio. Each strategy has both its pros and cons, so you should select the one that suits your lifestyle most.
- Long-term holder: Simply buy cryptocurrencies and hold (or HODL!) them for a year or longer until their price grows up. Such an approach works best for those who don’t want to devote their lives to daily graphs’ monitoring and studying the best practices for traders. All you need to do is to make thorough research in order to identify the best option for investment, be it Bitcoin or some other digital currency with huge potential.
- Mid-term investor: With this strategy, you will need to spend some time on research just the same and also you will need to refresh your portfolio once in a month or so.
- Short-term trader: This strategy comes with the highest level of risk and works only for advanced traders. It requires to have the skills in reading candle graphs and seeing the signs to buy or sell the selected coin. This is a much more time-consuming strategy and is recommended only for those who want to bind their lives with Bitcoin trading.
How to choose altcoins for investment
In order to make the fundamental analysis of a selected cryptocurrency, you should investigate the following aspects.
Check the technology that stands behind the project. Does it offer any radical improvements to the market? For example, Zcash (ZEC) offers its users privacy that they cannot achieve with Bitcoin and Ripple (XRP) focuses on providing banks with instant international transactions.
The cryptocurrency market develops in cycles. During the uptrend, all the cryptocurrencies grow together with the overall market capitalization. But when the bubble bursts the projects that are mere clones of Bitcoin or Ethereum are the first to drown and never go up again. Only the cryptos that come with some additional useful functionality stay afloat.
Check the historical snapshot of CoinMarketCap in December 2013 during the previous huge bull run. How many of these names do you recognize and how many of these cryptocurrencies have lived to see these days?
MVP (Minimum Viable Product)
Next, check if the crypto project has already developed some viable product or if it has simply raised funds via ICO for a brilliant idea and now sits idly on the money bags doing nothing.
During the ICO boom that peaked on December 17, there were too many projects with genius ideas and no real product to offer to the audience. Most of these projects are now lost in history together with investors’ money. But those who had a product before launching an ICO continue to diligently work on it despite the overall downtrend.
The size of the market
Identify what problem the project aims to solve and the size of the audience that seeks a solution to this problem.
If this is specialized geeky stuff that only troubles a small group of IT people it has low chances of getting mass outreach. But if the audience is huge, if it is aware of the problem and is consciously looking for a tool to resolve it, the possibilities are way higher.
Since most of the crypto projects are open-source you can easily track their progress on GitHub. The service OnchainFX is very useful for such purposes. Check the options for Github commits and Github lines added over the last 90 days and see which projects are being developed at the greatest pace.
The team and advisors
Check who stands behind the selected coin, who are these people, what experience they have and in what successful projects they have participated before. Usually, this information can be found in the white paper. Also, make your own research on Linkedin.
Advisors are also important. It’s good if the project has managed to attract a person who is a recognized blockchain expert in the crypto world.
Note: if you see Vitalik Buterin in the list of advisors most likely this is not true. He was included into white papers of so many projects in 2017 that he even had to place the statement on his Twitter profile: “For inquiries about me advising your ICO, please email: [email protected]”
Useful tools for analysis
Blockchain provides its users with transparency and makes it possible to track all the indices that you may be interested in. The point is that, usually, only technical experts have enough skills to read these indices. But don’t despair as there are many useful tools and services that make life easier for non-geeky people. Add the following websites to your bookmarks:
- CoinMarketCap for the overall crypto market analysis.
- Tradingview for technical analysis of selected coins.
- CryptoCompare to track investing portfolios of public people.
- Blockfolio to manage your crypto portfolio with convenience on a mobile device.
- OnchainFX for tracking the project’s activity.
- Cryptopanic for monitoring hot news of the industry.
Now that you are equipped with all that is needed, let’s start.
Step 1. Buy your first cryptocurrency
Typically, cryptocurrencies can be purchased online via specialized services. Most of them require from the end-users to pass verification and confirm their identity by uploading scans of documents. The following services offer the most convenient interface and easy onboarding for new users:
Coinbase is a US-based service with a good reputation that has been working since 2012. It has a user-friendly interface and comparatively low fees. You can exchange fiat currency such as USD, EUR and GBP to Bitcoin, Litecoin, Ethereum, Ethereum Classic and Bitcoin Cash. The downside is limited geography since the service works mostly in the US and Europe.
This service is also quite user-friendly, it works in almost all the countries and offers a wide variety of cryptocurrencies to buy. You can buy cryptocurrencies with a card or a bank transfer with reasonable fees.
This is a peer-to-peer cryptocurrency market where you can buy Bitcoin directly from people in your own city. Simply find the offer that suits you best, send a message and set an agreement on the means of payment.
The easiest way for a newbie to buy Bitcoin is to use a special cryptocurrency ATM. Simply upload the fiat money and receive bitcoins instantly to your BTC wallet address. There are already thousands of them all around the world and you can even find some in your own city using the service CoinATMradar.
Once you are ready to move on to the next level you can start with Binance. This is the most popular trading platform with the highest trading volumes that ensure the liquidity. The verification procedure is relatively easy and the platform works in almost all countries.
Step 2. Learn to navigate the crypto exchange interface
If you purchase cryptocurrencies on Binance you can stay there and learn to navigate its interface or create an account somewhere else and move your funds there.
There are many cryptocurrency exchanges with different level of customer support and the set of available features. A newbie may literally get lost in the variety of opportunities. When you take a first glance at all these graphs and candles you may feel confused. But don’t worry, it’s not as hard as it may seem. And the more time you spend on a trading platform, the more familiar you will get with its interface and the easier the whole procedure will be.
Typically, you can see the following items in your trading account regardless of what exchange you are using:
- Market: This is where you can find the list of available trading pairs, such as BTC/USD, ETH/USDT, etc. with the current rate, 24-hour volume and the change in price.
- Trading controls: These include the controls to make deposits and withdrawals, specify stop-losses, make buy and sell orders, etc.
- Order book: This is the list of all current orders for a selected cryptocurrency trading pair. Each order displays the price, the amount of currency sold and the amount of currency purchased.
- Candlestick charts: This is the historical graph of all the exchanges made for a specific pair. You can scroll back to any moment in time and see the price at which the cryptocurrency was traded. Professional traders learn to analyze these graphs to see specific buy and sell signals.
- Market depth: This is the same order book represented visually. It may be a good assistant for analyzing the current state of the market.
- Trade history: The list of the recent trades made by other users.
Step 3. Find the right time to step in and to step out
“Buy low, sell high”. This is the main motto that you should stick to when trading cryptocurrencies in order to make profits. But how to identify the best time to do this?
The cryptocurrency market is all about emotions. The psychology of active traders works as follows. You see that the price of a certain coin grows and you give way to FOMO or fear-of-missing-out. You wait till the price stops growing and gets to the correction stage, but it doesn’t. The price grows exponentially, you lose your nerves and buy practically at the highest point.
And this is exactly when the price starts falling down. Such a pattern can be observed both on the large and on the small scale.
Don’t give in to the emotions of the crowd and make your decisions with the cool head. Don’t look at the price charts, but monitor the news instead.
There is another good rule for traders: buy at rumors, sell at news. If you constantly monitor the news and see the rumors that developers of a certain project have started working on an awesome feature, this is a good signal that the price is going to grow in the nearest days or weeks. It reaches its local maximum by the time the feature is finally released and then it falls down.
Even if you don’t plan to become a professional trader learning the basics of trading cryptocurrency can give you great benefits.
There’s no guarantee that you will get any profits since the crypto market volatility is too high. In fact, you are most likely to lose money in the beginning, especially now as the market is in the downtrend.
But the more you learn and trade, the more experience you get. So if you are persistent enough you may significantly improve your skills and make a fortune when the next ‘bull run’ begins.