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Cryptocurrency Trading Strategy 101: An Absolute Beginner’s Guide

28 October 2018 No Comment

Are you thinking about dabbling in cryptocurrency? Learn the basics with this absolute beginner’s guide to cryptocurrency trading strategy.

Cryptocurrency’s rise in 2017 and rapid correction in 2018 was a blessing in disguise. Cryptos boom/bust cycle removed nearly 1000 projects from the list. The wipe created a semblance of stability in classics like Bitcoin and Etherium.

The 2017/2018 crypto event was much akin to the dot-com bubble.

Today, crypto is back to its niche adoption favored by tech-savvy types. Volatility plays a lesser role in exploring a cryptocurrency trading strategy. It’s no longer an all-or-nothing game, fraught with speculation.

This article shares how to trade cryptocurrency for profit using smart strategies.

Part 1: Get with a Brokerage

The common introduction to cryptocurrencies is through popular apps like Coinbase or Robinhood. The user’s interest develops shifts to cryptocurrency exchanges like Binance or BitMex.

Exchanges provide exposure to the market but limited to a user’s personal investment. Exchanges lack benefits found in cryptocurrency brokers — like:

  • Portfolio managers
  • Margin accounts
  • Social trading

…and other handy features granting tighter control of one’s investments. Explore your options, measuring the risks and rewards each present.

Part 2: Pick Your Crypto Target

New crypto projects (with currencies) launch almost daily. It’s impossible tracking them all nor should you if serious about trading effectively. This is because you’ll stretch resources too thing, missing out on prime opportunities.

Instead of a dozen+ cryptos:

  1. Pick one or two you follow religiously
  2. Find news aggregates reporting the blockchain project
  3. Follow developers and influencers within the crypto’s circle

New partnerships, deals, and “FUD” direct markets. Your limited selection refines resources to react appropriately vs emotional trades from FOMO.

Start with popular ones like BTC, ETH, LTC to learn cryptocurrency basics. Then, branch out as you refine the trading strategies.

Part 3: Practice the Strategies

The volatility of the cryptocurrency market is mindblowing. Dozens will feel the sting of a bad trade for every successful one you see touted on social. You may mitigate the “damage” of the learning curve with paper trading.

Paper trade and backtest using platforms like:

  • Whaleclub
  • TradingSim
  • BitMex Testnet

This risk-free game is a great testing ground for crypto trading strategies. You will begin developing a knack for picking winners and avoiding losers.

What beginner strategies could you learn and test?

  1. Buy and Hold. Choosing and holding a security by a reputable blockchain project. Believing in a project with real-world application and adoption.
  2. Swing Trading. Using charts to find patterns in the crypto’s movement. Then, buying low and selling high between select dates like a week or month apart.
  3. Day Trading. Using in-the-minute information and reactions to earn when a crypto pops. This requires uninterrupted attention, trading when the market moves in/against your favor.

Explore both technical and fundamental analysis with your trades.

Part 4: Go Live

Learn by doing with a real trade:

  • Invest only what you’re comfortable losing
  • Trade using strategies, not emotions

Strategies and skills solidify when real money is on-the-line. You’re more in-tune with your actions because of the risks.

Making a Cryptocurrency Trading Strategy Part of Your Financial Toolbox

Your cryptocurrency trading strategy becomes one of many in building a financial portfolio. Yet, don’t limit yourself as these strategies find use in other financial vehicles. Explore Forex, stocks, lending, and more!

Excited to add to your financial toolbox? Explore our investing archives for more ideas and tips!

 

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