As this site is to primarily educate complete novices on the basics of the crypto world we won’t go into too much detail with regard to trading bitcoin or other cryptocurrencies. If you want to progress to this area of cryptocurrency you should research your own material before you get started, there are many resources available to you online and on Youtube.
Is it the same as trading Forex?
Trading bitcoin and cryptocurrencies is no different in principle to trading regular Forex currency, which is the worlds largest and most liquid market accounting for approximately $4 trillion per day (estimates vary and this is another story – let’s just agree it’s a lot!). This is where there is a big difference between the Forex market and the cryptocurrency market – estimates for daily traded cryptos are around $50 million (Source – Business insider Dec 2017).
Another difference is volatility. The Forex market is relatively stable compared to the crypto market, the supply of fiat currency is highly regulated by Governments and central banks and is influenced by factors such as inflation, political stability GDP (Gross Domestic Product) etc.
As with Forex trades, crypto trades are based on pairs of coins, the most obvious being Bitcoin. So you would trade Bitcoin as a pair with say Ethereum, on the trading platform, or exchange, it would look like this:
You have the option to go long (buy) or short (sell) depending on whether you felt Ethereum would strengthen against bitcoin or weaken. Again, this is not the place to explain fully these terms and their meanings, we suggest you open a Forex trading demo account and practice with ‘play’ money. There are hundreds of platforms which will allow you to do this such as www.easymarkets.com and they also offer the option of cryptocurrency trading too.
Technical Analysis and Charts
You may want to learn about technical analysis and begin to get familiar with charts, a great platform for this is TradingView which now caters for cryptocurrency analysis too. There are a number of platforms online which offer access to charting software and exchanges are now beginning to improve on their own offerings that are integrated into their trading platforms. An example of this is EXMO exchange who have recently integrated TradingView into their own platform.
A snapshot of BTC/USD is shown below.
In addition, there are plenty of free resources online which will educate the beginner into the world of technical analysis. Please research yourself as there are too many to list here.
Why are candle charts referred to as Japanese?
Simply because they were developed by the Japanese as early as the seventeen century to track and study the price of rice. They are a separate topic of which to study and try to master in themselves. Steve Nison studied the art of reading candlesticks and their associated patterns in Japan and translated his findings into English, his site is candlecharts.com. There are many other resources available to assist in the study of candlestick charting and technical analysis.
Some good starting points are:
Anywhere and everywhere someone will tell you they have a foolproof system on how to trade the markets, whether it’s stocks and shares, indices, Forex or cryptocurrency. Often it’s all too easy to be lured by the promise of easy money.
Just consider this, if you found a foolproof system to trade the markets would you then place a huge amount of time and effort to try to sell your system to someone else for a few dollars? The answer is most likely no! You would use your time to apply your system and get rich, not spend hours and hours emailing, advertising, posting to forums, and creating videos in the hope of reaching a few buyers who want to pay $99 with a 30-day money back guarantee!
Of course, traders have their own systems to assist in the decision-making process before they place a trade. Once you become involved in the world of Technical Analysis you will see there are hundreds of indicators available to help predict price movements. These indicators are only a guide, they are certainly not foolproof methods. Most avid traders will tell you they lose more trades than they win, and most people who set out to trade fail.
Don’t be fooled by adverts or emails offering such systems, they probably don’t work (unless they are created by Carlsberg – they probably would make the best bitcoin trading system in the world!)
So, you still want to trade
If you still feel you want to trade bitcoin and cryptocurrency then be aware it takes patience, learning, and complete 100% focus. Below are some tips collected from personal experience and the experience of others.
- Do your research and have a defined reason before entering into a trade. Place the trade only when you know why you’re placing it and have a strategy in place to manage the trade. Because trading is known as a ‘Zero Sum Gain’ for every winner there has to be a loser. If you aspire to trade every single day this is not good, some days when the markets don’t seem right then don’t trade for sake of it – you could get caught out.
- Manage your trade. Set stop and profit limits. Decide at what level you want to take profit and at what level, if the trade goes against you, that you want to cut your losses. Setting stop losses in the world of crypto’s though is difficult because of the volatility. Setting a stop loss too tight could result in you being closed out of the trade (at a loss) only to then see the market come back to you and continue in the direction you anticipated.
- Remember the exchanges charge fees when you trade. A huge number of trades equals large fees.
- Don’t feel you have to trade, remember point 1. FOMO (The Fear of Missing Out) can affect our decision-making process and it’s all too easy to hit that mouse button and then regret the trade minutes later.
There is an old trading adage –
‘buy the rumour, sell the news’
When major news sites publish articles it is usually exactly the right time to actually get out of the trade.