Cryptocurrency has opened up many new ways to earn money as well as take complete control of your finances. You can either set up a passive income opportunity, or several in fact, for yourself in the crypto ecosystem, or you can work in the crypto ecosystem to generate an active income for yourself, or even both.
One of the best active income opportunities in the crypto space is day trading the crypto markets, which entails attempting to identify a crypto price’s low and purchasing at that price only to sell it at a lower price and making a profit.
Given the crypto markets high level of volatility, there are many opportunities in a day for traders to make an income in the crypto space. This article will take a look at how you can get started trading crypto and some tips to make your trading experience better.
How To Trade Crypto
Open A Cryptocurrency Brokerage Account
The first step in your crypto trading journey is to select a brokerage platform to use for your trading operations and open an account with the platform. Some of the most well-known crypto broker platforms in the market are Coinbase, Crypto.com and eToro. All three of these platforms employ a simple user interface and a variety of altcoins to choose from.
To create an account on the broker platform, you will need to provide the brokerage platform with some personal identification information, sort of like what you would do when opening an account with a stock brokerage. Some common information that you will need to provide includes your Social Security number, address, date of birth, and email address.
Fund Your Account
Once you have created your account with the crypto brokerage platform, the next step will be to connect your bank account to your brokerage account. Most crypto brokerages offer bank funding through debit cards and wire transfers. Wire transfer is typically your cheapest option to fund your account.
Select Which Cryptos You Want To Invest In
Most active crypto traders will allocate most of their capital to Bitcoin and Ethereum, since these cryptos move more predictably than the smaller altcoins in the market. Therefore, trading with technical indicators can be easier.
A number of crypto traders will allocate a portion of their capital to smaller altcoins. Despite the small to mid-market cap cryptos being riskier and less unpredictable than the large cap cryptos, they do offer a higher upside potential.
For instance, many smaller altcoins have risen by more than 1,000% in a matter of just a few months. This makes them an attractive investment prospect for risk-tolerant investors.
Choose Your Trading Strategy
There are a multitude of trading indicators that you can choose from, and most traders will take multiple factors into consideration when buying and selling cryptocurrency. If you are new to investing, you may want to look into purchasing a crypto trading course.
If you are a veteran trader then you may already have a strategy to use to trade stocks. Stock trading strategies are commonly used for crypto trading as well. One of the best trading strategies to use is the Elliott Wave Theory, which focuses on the psychology behind the market sentiment. Therefore, it works particularly well for speculative assets such as cryptos.
Consider Automated Trading
When you seek out a crypto trading strategy, you may want to try an automated crypto trading platform such as Coinrule. Basically, trading bots carry out a strategy that is intended to give you the best results given your investment goals.
Since automated trading can provide you with either a conservative, neutral, or aggressive method, you can make money quickly, HODL your coins, or diversify your portfolio.
Store Your Cryptocurrency
If you are actively trading your cryptocurrency, you will need to then store your funds on the exchange platform to access them. If you are purchasing crypto to hold for the medium to long term, then it is advisable to get a crypto wallet that stores your funds off of the exchange.
Crypto wallets can come in two forms: hardware wallets and software wallets. Both of these types of wallets are secure. However, hardware wallets offer the best security, as they store your crypto on a physical device, offline.
Ledger is the market leader when it comes to hardware wallets and is the hardware wallet brand of choice for the majority of crypto holders and investors that want to store their assets offline. When it comes to software wallets, there are several options available for on iOS, Google Chrome and Android that are free to use.
One of the best software wallets available for crypto traders is ZenGo. This mobile wallet uses secure 2-factor authentication to protect your digital assets. At the same time, ZenGo offers comparable security to other wallets currently in the market.
Why Do You Need A Trading Strategy?
It would be incorrect to assume that the daily happenings in the crypto market are random. Trades executed based on a gut feeling can indeed result in a large profit. However, if this does work out the first time, then it is most likely a result of chance, and such results will not be able to be replicated.
Expert traders rely on well-thought methods for their success. They know that despite the crypto price fluctuations, the market tends to follow predictable patterns. As a result, it is best to have a strategic approach to trading.
What Is A Crypto Trading Strategy?
A crypto trading strategy is an established method of planning and executing trades that you follow. These trading strategies normally set out specifications for which trades to make, when to make them, when to exit them, as well as how much capital you should risk on each position.
Your crypto trading strategy is a fixed plan that you design with the aim of achieving profitable returns when buying or selling in the crypto markets. These plans comprise a suite of analytical tools that can be used to identify predefined market conditions and price levels. This includes important support and resistance levels.
5 Types Of Crypto Trading Strategies
Some of the most popular crypto trading methods include scalping, day trading, swing trading, arbitrage, and buy and hold.
Scalping
Scalping is arguably the most popular trading method in the crypto market, and allows traders to profit from little price movement at regular,frequent intervals. The goal s to add up small profits each day to generate a substantial amount over time.
Scalp traders often make use of leverage to open more trades and tight stop losses to manage risk. They trade using the smaller time frames such as the 1 minute, 15 minute, and 30 minute time frames. Their trades usually last a couple of seconds or minutes but are usually less than 1 hour.
Day Trading
Day trading is when you enter into and exit out of positions on the same day, taking it day by day. With this strategy, day traders look to capitalize on intraday price movements.
Day traders operate on timeframes that are higher than the ones used by scalp traders but still close their positions within a day. The main point of day trading crypto is to profit from tiny market movements, as well as volatile bear and bull market activities.
Day trading strategies utilize technical analysis. However, day trading is a time-consuming and risky strategy that is better suited for veteran traders.
Swing Trading
Trades that are executed using this strategy usually span over multiple days, but are usually not open for longer than a few weeks or months. As a result, some people refer to this strategy as a medium-term trading strategy since it sits between day trading and position trading strategies – giving traders more time to consider their directions.
You won’t get to make spontaneous decisions as you would in a shorter-term strategy—you can make trading decisions with less emotion or rationality, which is why this trading style is usually recommended for beginner traders.
Buy And Hold (Position Trading)
Position trading allows traders to maintain certain trading positions for a long time, which could be from several months to a couple of years. Traders who use this strategy usually ignore short-term price movements and focus more on the longer-term trends.
To execute this type of trade, traders will usually take a look at the daily, weekly, and monthly time frames. Position traders also make use of another type of analysis called fundamental analysis to evaluate potential market price trends and consider other factors such as market trends and historical patterns.
Arbitrage Trading
Arbitrage trading is the practice of purchasing cryptos from one market and selling them in another market to profit from price differences. The trader makes money by taking advantage of the low price correlation among crypto assets offered on two or more exchanges.
For example, if the price of BTC on Binance is $43,000 but $43,400 on Coinbase, then you can choose to buy BTC on Binance and transfer the newly-purchased BTC to Coinbase to sell it at a higher rate.
Crypto arbitrage opportunities are practically limitless because there are hundreds of spot market exchanges. As a result, traders look for more efficient ways to identify and capitalize on the varying prices across different platforms – a trend that is expected to continue.
Choosing The Best Crypto Strategy For You
Your trading preferences and the time horizon that you want to focus on will determine your trading style.
Scalping may be a good option if you are comfortable spending the entire day seated in front of a trading shart and entering into and out of several trades at regular interval. On the other hand, you may find that a longer trading strategy, like swing trading, is better suited to your needs if you intend on trading part-time while also carrying out other activities.
When putting together a trading strategy, the amount of time that you intend on devoting to trading is very important to take into consideration. Scalpers seek profits from only a few pip increments on each trade, and trade high volumes each day – repeatedly entering and exiting the market.
On the other hand swing traders will leave their trades open for a period of time which can range from a few days to several weeks, even months sometimes.
There is no “best” trading strategy that can be generalized to work for everyone because this is something that relies heavily on the individual trader. Rather, the “best” trading style is the one that works for you.
Pros And Cons Of Investing In Crypto
There are a lot of significant advantages and disadvantages to consider when looking to invest and trade in cryptos.
Pros
Personal Information Privacy
If you want to purchase anything from a merchant and pay with a credit card, then you have to offer the retailer your credit card. You will also need to present the merchant with your pin code to make the payment. When it comes to cryptos, this is not needed, and you will not need to disclose your wallet’s private key to anyone.
Furthermore, the money you make will also be encrypted, and no one will be able to view your payment details. There will also never be an information leak. As a result, cryptos are the best method to make anonymous payments.
Instant And Secure Transfer
If you hold cryptos in your digital wallet, then you have a valuable asset in your grasp. Cryptos are simple to transfer to anyone without having to obtain permission to do so first. You will just need the other person’s public key to complete the transaction.
There is also no price for transferring ownership. No stressful circumstances will affect you, and no documentation is required. When compared to other transfer scenarios such as a property transfer or bank account closing, you will need to go through the extensive paperwork as well as pay the commission cost.
Anti-Inflation Characteristics
As a result of inflation, the value of several currencies has decreased over time. When it comes to cryptos, a lot of the cryptos in the market are introduced with a predetermined quantity at the moment of its inception. The number of every crypto is specified in its source code.
For instance, there are only ever going to be 21 million Bitcoins (BTC) that will be introduced to the world. As a result of this, when demand grows its value will rise – keeping pace with the market. In the long term, this also prevents inflation.
Cons
Chance of Performing Illegal Activities
Given the high level of security and anonymity associated with Bitcoin’s transactions, it is difficult for authorities to track down any user by their wallet address or even keep track of their data. This is why BItcoin has been used to conduct a range of illicit operations such as purchasing narcotics on the dark web.
In addition, some people utilize cryptos to convert their illegally obtained money through a trustworthy mediator. Thus, concealing its source.
Higher Risk of Loss
With cryptos, there is no resource available if something goes wrong. So, you cannot safeguard your bitcoin against loss due to a technical issue in the wallet. You also cannot claim since there is no single entity that controls this money.
With this in mind, anytime you choose a crypto wallet, make sure that it has good reviews and that it can be trusted. Another thing to consider when investing in cryptos is to be aware of your country’s current crypto regulations.
Highly Volatile Market
The crypto markets are extremely volatile. Estimating the trading chart for a crypto is really challenging, and it is impossible to anticipate when values will rise or fall. You must be a competent analyst and researcher, as well as be up to speed on crypto market news and trends. Lastly, you must also be prepared for any circumstance while investing in the crypto space.
To Recap
Cryptocurrency has opened up many new ways to earn money as well as take complete control of your finances. One of the best active income opportunities in the crypto space is day trading the crypto markets, which entails attempting to identify a crypto price’s low and purchasing at that price only to sell it at a lower price and making a profit.
To start trading, you will need to develop a trading strategy. A crypto trading strategy is an established method of planning and executing trades that you follow. These trading strategies normally set out specifications for which trades to make, when to make them, when to exit them, as well as how much capital you should risk on each position.
When putting together a trading strategy, the amount of time that you intend on devoting to trading is very important to take into consideration.
Expert traders rely on well-thought methods for their success. They know that despite the crypto price fluctuations, the market tends to follow predictable patterns.
There are a couple of pros and cons to investing in crypto which were covered in this article.
