Learn how you can start making real money online by taking advantage of crypto trading.
The fundamental information any new crypto trader should know about.
There’s no doubt you’ve probably heard about cryptocurrencies a couple of times over. So, at this point, you are probably thinking about how to make a buck or two with it…
What is this cost-effective way to make money called crypto trading?
Cryptocurrency trading used to be taboo and, sadly, has been used as a way to scam people into putting their money into something they don’t understand. The common misconception about crypto trading is that it is overly complicated and that only a few “gifted” traders are the only ones who make a living.
Although it really is complicated, this does not mean it is impossible to understand.
Generally, when people put their minds to something and follow a process, they will still get to their destination no matter how fast or slow it might take. Crypto trading has been romanticized as of late as some young millionaires make loads of money working “when they want to.” However, this isn’t really the case.
When it comes to trading, knowledge should trump emotion. Many things could get in the way of your trading strategies, like excitement, fear, and general anxiety, and that’s ok, but know this…
When it comes to cryptocurrency trading, the one making the decisions should have a winner’s mindset.
You need to understand that not everyone makes money in cryptocurrency trading. In fact, there have been thousands of people who sold their assets for capital to try crypto trading and lost big time.
But you should also understand this simple concept:
When someone loses, someone else wins. When someone sells, someone buys.
I know it may sound cheesy, but the point here is to set your positive mindset and use it to gain understanding to join the winner’s circle.
With a fine-tuned trading strategy and a good knowledge of cryptocurrency trading, you will be able to increase wins and minimize the effect of your losses.
And that’s what I’m trying to help you with, keep reading…
What is Trading in General
Trading basically involves buying and selling assets. It is a fundamental economic concept that relies deeply on the trader’s understanding of supply and demand.
While trading is much easier to understand when done with tangible assets, intangible assets like cryptocurrency share the same concept.
Everything in business is about supply and demand, just like in crypto trading. When demand for something is high, the price usually goes up, and when a demand for something is low, the price usually goes down.
The key is to know when the price should go up and when it is expected to go down. This is done by reading and understanding trends.
Trading basically involves playing along the lines of supply and demand.
Let’s say in 2020; there was a regular demand for smartphones. When the pandemic happened, everyone got stuck at home, and when this happened, people started buying new devices.
This then resulted in the stock prices of technology companies going up.
There are several different markets, and cryptocurrency is just one of them. These markets include bonds, stocks, and currency in general. Delving deeper into the trading world would unlock more complicated markets like Forex, margin products, futures, options, and a lot of others.
For the sake of this article, and to help you absorb more info fast, I will keep it simple with the most basic terms I believe beginner crypto traders should learn first…
While trading is generally buying and selling, there are two different trading approaches: Short-Term trading and Long-Term trading.
Here’s the first concept you’ll have to understand to learn about crypto trading.
Crypto Trading Short-term
As the name itself reveals, short-term trading deals in shorter time periods. Short-term traders usually enter and exit riding trends instead of looking towards the long-term growth of their assets. Like everything, there are pros and cons to short-term trading, and the trader really has to decide for themselves if they are capable of doing so.
- Short Term Trading Pros
Quicker turnaround. Since short-term traders are not thinking about their assets’ long-term value, they could generally buy low and sell high depending on their assets’ volatility.
When we say volatility, this means how much the price of the asset fluctuates. The more an asset fluctuates, the more beneficial for short-term traders since they can buy low and sell high despite the stock’s general performance.
- Short Term Trading Cons
More research is required to see when the price is meager and when the price is really high. Short-term trading can also be dangerous in cryptocurrency trading, especially for those with insufficient capital to sustain the loss itself.
It would be hard for those trading on the minimum to go into short-term trading, especially in extreme volatility.
Short-term trading styles include different preferences like day trading, swing trading, scalping, and of course, automated trading; the common denominator here is that your trading decisions will be based purely on Technical Analysis.
Crypto Trading Long-term
Long-term trading is usually fit for the classic investor. Whether a cryptocurrency will go up or not, long-term trading usually puts a significant sum of money in the cryptocurrency with the trust and belief that it will go up one day.
Last March 15, 2020, Bitcoin was around $5K, but on the 13th of March this 2021, Bitcoin went up to over $60K. For those that were long-term traders, owning a single Bitcoin would make them extremely profitable.
- Long Term Trading Pros
Long-term traders aren’t affected by market volatility and generally won’t need to panic when it goes up or down in a week. Long-term traders, depending on how long they trade, can reap a hefty profit, especially if the price does go up.
Of course, it is also important to note that the price does not always go up 100% of the time, and depending on the timeline of the long-term trader, there is still risk involved.
- Long Term Trading Cons
The disadvantage of long-term trading is that the investor has to put in a large amount of capital for the whole investment to be worth it.
Putting a small capital might not be worth the time and could also be risky since their investment could be eaten up when the price goes lower than what was initially bought.
A long-term trader is basically an investor, or in crypto, you may be hearing the term HODLER :); the most valuable piece of information an investor need is the asset’s fundamental analysis case would include research information about the chosen coin.
Crypto Trading Technical Analysis
The technical analysis revolves around the idea that historical data could predict how the stock would perform in the future. The interesting thing about technical analysis is that it does not look at the asset’s intrinsic value but rather how its price will perform.
When it comes to crypto trading, this is very important since no tangible object or company is attached to the asset. While the term might seem extremely complicated, learning the different theories, charts, and other patterns one by one could be a potent tool in cryptocurrency trading.
Your main focus here is to analyze how the market is moving, mostly based on the price and volume information you can read from the charts; that’s how you will identify a trading opportunity.
Unlike an investor, as a crypto trader, you will be focused on the price of the crypto asset and assume it already reflects all the information accessible to the public.
Here are the 3 main assumptions of a Technical Analyst:
- The market discounts everything.
- Price moves in trends.
- History tends to repeat itself.
You can learn more later if you want to, but don’t get “information-overloaded,” anyways, here’s a good article on Technical Analysis, in case you want to learn more.
Technical Analysis is not perfect. It definitely can not tell you the future, but you don’t need that to make money; all you need is a strategy with a high probability of winning and consistency.
More on that later. Let me show you 2 key components you should learn how to identify in a chart…
Crypto Trading Support and Resistance
This is a fundamental concept that deals with whether the asset is going up or going down. The support refers to the minimum price that the asset drops to in a certain time period.
The trading charts show patterns, and you can see the “support” when you look at how low the price generally goes for a period of time.
On the other hand, resistance refers to how high the price usually goes to before it goes down again.
Basically, identifying the patterns and when the patterns are changing is an example of technical analysis in play. When the asset goes above the resistance, it could either go up or down depending on the data.
Here’s an example of the Support and Resistance levels calculated by Gunbot and applied to the trading chart.
Notice that in Gunbot, support and resistance are not fixed targets.
Support and resistance are just an example of a technical analysis concept. This could also be considered one of the simplest concepts, and as a new crypto trader, you should slowly move up the ladder to the more complicated ones as you learn.
Crypto Trading Market Trends
This is generally the way that an asset is going, whether up or down. In technical analysis, it is important to understand how the trend is going and where it leads.
The trend will guide your buying and selling decisions.
Secondary trends give you insights into the market trend and leading, but the important thing to understand is the dominant trends.
- Bull Market: This means that the asset price is going up.
- Bear Market: This means that the asset price is going down.
- Sideways Market: AKA Horizontal Trend. There isn’t a clear direction for the trend.
The best way for you to check the primary trend of a particular pair is by looking at higher time frames in a chart.
Example of BTC-USD up-trending based on a 1 Day Time Frame chart on Tradingview.
So, regardless of what time frame you choose to trade BTC, you got confirmation that Bitcoin is trending up based on the above pic.
Now you need to check on what market you will be trading…
Crypto Trading on the Spot Market
A spot market basically means a market that makes exchanges on the spot. While this is something most people might think of as common sense, it is important to specify what market is being traded since other markets are also in play.
A future, for example, delivers the assets later on when the contract would expire. Since the trade is being made in real-time, the trades’ price is also valued in real-time.
When we’re talking about the spot price, this means the real-time market price.
There two main kinds of spot markets, the Over-the-Counter (OTC) and organized market exchange; these are usually centralized crypto exchanges like Coinbase, Binance, Beaxy, etc.
For the most part, especially if you live in the USA, you should only focus on the spot market; most crypto traders started their trading career anyway.
I’m not saying you could not learn about margin or futures, and certainly, you could make more money because you would be using leverage and be aware that you can get liquidated in a split second if you don’t know what you’re doing.
Learn more about Gunbot Margin and Futures Trading.
The only drawback of trading on the spot market is that you can only trade with your capital, but it is better this way, especially when you’re learning.
The good news is, you can start with low capital and trade on most crypto exchanges.
So, let’s create a trading plan now…
Making a Crypto Trading Strategy.
If you fail to plan, you plan to fail. A trading strategy is basically a plan based on data regarding when to buy, when to sell, and when to hold, and possibly for how long before making a decision.
There are numerous trading strategies you can use, and they revolve around trading indicators.
An indicator represents data showing you what the data means in terms of a particular theory used.
An example of this is the Moving Average. This indicator basically follows where the general average moves either up or down despite the dips or spikes in prices.
In crypto trading, you do not have to learn all of the strategies or the indicators, but rather which strategy works better for you.
So, whether you’re a day trader, doing swing trading, or scalping, you need a solid plan with an edge that will help you win most of the times, that plan is your strategy, and you will base your decisions on the data you see printed on a chart.
Since we already talked about Support and Resistance, let me use that as an example strategy.
This is a simple example; you will enter the trade (BUY) at the support level and exit (SELL) at the resistance level.
If you’re using a crypto trading bot, all you have to do is define those values on your strategy, and the bot will execute those commands for you.
That is just an example of one out of many different strategies you could be using; keep in mind “there’s not the best strategy” is what works better for you based on your trading preferences and your risk tolerance.
And obviously, a sound money management approach is critical, so here we go…
Why is Risk Management Important for Crypto Trading?
Risk management, from the name itself, is the process of managing risk. Risk management differs from trader to trader as different types of traders have different appetites for risk.
While bearish prices don’t easily shake some traders, others are more easily swayed and sometimes tempted to sell at a loss.
Of course, depending on whether or not the technical analysis or trading strategies were correct, there is also a time when a cut loss should be executed.
Some people ride the risks, and when they lose, they lose everything; that’s why making a trading strategy on when to cut losses and when to sell is very important.
Think of it this way, let’s say you bought an asset at a certain price and let it ride. It performed extremely well, and you didn’t sell despite the technical analysis pointing towards selling.
After you decided not to sell, the price drastically dropped, plummeting into the ground, leaving you with a bag of coins and a meager price value.
This often happens in crypto trading, so you got to be ready before you even BUY.
Learning when to take profits and cut your losses is very important because, in cryptocurrency trading, the prices are very volatile.
Stay away from Pumps and Dumps, and do not allow the Fear Of Missing Out to cloud your decisions because it will cost you.
Crypto Trading – Scalping
You can do scalping with the smallest timeframes as these short-term traders aim to gain small profits with every movement.
Although the profits might not even amount to 1% at times, these trades’ repetitiveness still amounts to a significant profit.
While it seems simple, scalping is never a beginner’s strategy and requires an intense understanding of how crypto trading works.
Technical analysis is critical to scalpers’ success, and they usually function within a very calculated timeframe.
The easiest way for a new crypto trader to experience scalping is through automated crypto trading; yes, I recommend Gunbot for scalping if you don’t have the skills yet.
A human is no match for a bot when it comes to repetitive tasks and timely execution.
Besides, you will be learning and using strategies developed specifically to get in and get out fast for a profit.
But let me explain to you a few more basic trading concepts…
The Cryptocurrency Trading Process
When you place an order, and it doesn’t get filled, an “order book” is then used to store the orders organized by “price” until it is fulfilled.
Let’s say you put an order at a certain price and there is no one wanting to buy at that price; the exchange’s trading engine will then place that order in the order book until it matches another order or gets canceled by you.
When it comes to crypto exchanges, a matching engine system is used to match the order book’s orders. The system is responsible for making sure that the trades are carried out.
Here are a few other crypto trading terms you need to understand:
This is what the buying or selling process is called. Basically, putting a market order means putting an action to buy or to sell instantly.
As the word suggests, limits refer to a limit or a price point that the order won’t go beyond.
Limit buy orders will be executed when the price reaches the limit price or lower, and a limit sell order will be executed when the price reaches the limit price or higher.
This is a decision about risk management. Putting a stop-loss means selling when the price reaches a certain level to avoid further losses.
While the dreams of bullish prices are enough to entice most traders, the thought of handling losses might be something that you should avoid by all means.
A stop-loss puts a limit on how much you can lose in one order.
Maker and taker: What’s the Difference?
A trader will become a maker when they place an order that does not get fulfilled immediately and instead added to the order book. Since the order contributes to the order book’s liquidity, the person putting the order will then be called a “maker” of liquidity.
A trader will become a taker when they place an order that does get fulfilled immediately and takes off an existing order from the order book. Since the trader is taking out order book liquidity, the trader is considered a “taker.”
This refers to the difference between the highest bid or buy order and the lowest bid or sell order.
Basically, a trader would want to trade within the spaces in between. Setting the boundaries depends on how high a buyer is willing to buy and how low a seller is willing to sell.
Orders within this spread indicate the supply and demand of the cryptocurrency and attest to the market’s liquidity. In general, the smaller the market liquidity is, the more liquid the cryptocurrency is.
How to Make Money Crypto Trading
Making money through crypto trading in general means buying low and selling high.
The gap between your buying price and your selling price is basically what you’ll earn.
Since there are many players in the cryptocurrency trading space, their buying prices and prices could differ.
What’s low for one might be high for others, which is essential to know when understanding market psychology.
While cryptocurrency trading can be dangerous, it is also very profitable due to the massive differences in the highs and lows or, rather, great volatility.
When traders become more familiar with cryptocurrency trading, they will assess when the price is most likely to go up and when the price is most likely to go down.
Trading is oftentimes mistaken for gambling. However, successful traders show that it is not gambling at all and that it takes a massive amount of research and strategy building to make a profit out of crypto trading.
Read How Much Money Can You Make Trading with GUNBOT for more details.
It is also important to understand yourself, be sure of your goals, whether you are a long-term trader or a short-term trader, take crypto trading seriously, dedicate enough time to learn this new trade, and I promise you, it will be worth it.
Rooky traders think about making money. Professional traders think about managing risks.
Capitalize on Gunbot Now, so you can cut your learning curve, gain access to an immense wealth of information, and start trading crypto like a pro.
Start thinking like a professional, make your decisions based on data, not on your emotions, and most importantly, keep coming back for more Crypto Trading Articles…