Trading for Beginners: How to Trade Bitcoin & Altcoin Step by Step!
We'd like to give you all a template for Bitcoin and Altcoin trading. This guide is the absolute beginner help you learn everything you need to know about trading. We encourage you to read the following advice and develop your own trading style to maximize your trading profits!
What are we going to discuss?
- The different ways people trade crypto
- The profit potential as a crypto trader,
- The various exchanges and their reputations, as well
- The steps it takes to become a more profitable trader
Before we start ...
Cryptocurrencies are very volatile assets that can gain or lose tremendously in value in a short period of time. Many exchanges have been hacked and quite a few have cheated on their users.
Be very careful in this industry. Trust only a select few exchanges as many do not have sufficient resources to protect your money at all costs. Use paper or ledger wallets if you want to keep your funds long-term. In this article you can find our large hardware wallet test.
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Decide on your trading style
We can distinguish between four different main categories of trading styles:
- Day trader: People who invest in cryptocurrencies and repeatedly open and close trades on the same day.
- Swing dealer:People who invest in cryptocurrencies and consider upward and downward fluctuations in a trade over a period of typically 2-6 days.
- Long-term owners: People who “hodl” (ie buy and hold) their investment in anticipation of the price increase to a much higher level in the future.
- ICO investors: People who shop into pre-token sales and are waiting for the start of the trade (often it takes months) before considering selling.
Day Trading
The 24/7/365 crypto trading promotion makes it possible to generate substantial returns through intraday trades. The constant price movements that are visible in real time make for better scalping opportunities for inexperienced traders. Day trading is not the safest, but potentially most rewarding approach to investing in cryptocurrencies.
Day traders have the advantage that they can concentrate on their account balance. You just have to worry about how much more you are making. The long-term performance of cryptos won't have much of an impact on you.
This market is very volatile and your investment could drop 25% overnight if you fail to time the market properly or use your exchange's stop loss feature (if your exchange supports it). For many, day trading is the safest way to get into today volatile cryptocurrency market to get involved.
Do you want more than 2-5% profit per day?
Not every trade will be a profit. If you watch your investment grow no more than 5%, it can be disappointing for some traders. Those who are interested in such small profits and fluctuations typically program their own trading bots. Thus, many day traders increase their profit potential. We will also inform you about leverage trading in the following paragraphs. However, be careful, especially if you have suffered from gambling problems in the past. The possibility of increasing your profits by increasing your leverage is incredibly dangerous. The riskier you get, the less variance you can tolerate and the faster your deposited collateral dwindles and you become insolvent.
Swing Trading
Some traders prefer a more passive approach and stick with the price movements of swing trading for longer periods of time. The typical holding time for a Swing store is around 2-6 days. Keeping your position open for weeks, months or years would be considered a long-term hold.
SwingTrading is profitable if you handle your stop-losses responsibly and generously at the same time. It is very profitable if you can time the market correctly. For example, if you start at the all-time low before the upswing, you can bet that the price will rise over the next few days. Thus, after only 3-6 days of holding, a gain of 20% to 50% is possible.
Trading fees increase the greater the leverage you use on a trade. Therefore, try to minimize the fees on your position. Combined with the right market timing, technical analysis and a certain level of leverage, you will achieve significant returns on your investment.
ICO investments
ICO investments are pretty easy, but the ICO market stagnated in the second half of 2018 as the crypto world continues to push for new lows.
We recommend that if you are just entering the market, you should gain some experience day trading Bitcoin and some major alts (such as Ethereum) before committing to investing in ICOs. Once you have experience, check out ours ICO-related content to find out how you can find very lucrative investment opportunities.
Now let's go over some leverage trading basics. The following information should help you decide whether "leverage" is right for you.
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Leverage Trading: Crypto Basics
1) "borrow" money
Leverage Trading is the act of opening a position with a higher capital investment (increasing profit potential). To do this, you have to invest your means as "security". This makes it possible for you to lose your entire investment. If the price drops 50% on 2: 1 leverage, your position will be liquidated, leaving you with $ 0 in your account.
This trading option gives you the opportunity to invest much more than you have. The idea is easy to visualize. Imagine buying 1 bitcoin for $ 10.000 and the value increases to $ 15.000. You made a 50% profit. However, if you use 10x leverage then your profit is not 50% but 500% and that would be $ 50.000.
2) Trading fees for leverage can vary widely
You need to be careful when using a leverage trading exchange. Many platforms come with very high fees. Especially the beginner-friendly exchanges eToro and IQ Option are known for their high fees. Even Bitmex can get expensive if you wait for a real amount of time. Bitfinex and Okcoin contracts can be cheaper if you invest in them and hold them. However, the leverage is not particularly high.
You should know that you should exceed the fees on your trade by a substantial amount before closing a position. This fact is important for beginners to get the most out of trading. Every time you open a position you are in the red because of the fees until you close your position with a sufficient profit and the fees have been paid off. High profits are harder to make and losses can add up from a few bad trades, especially those with high leverage (e.g. a leverage of 10: 1).
3) Stops are important for getting out
Crypto day trading Using leverage requires very short term price fluctuations. The profitability of leverage trading decreases the longer you hold your position and the higher the leverage you need to use. The idea of an almost entirely leveraged trade is to get in and out of your position in just a short amount of time.
For example, 50x leverage would double your investment (excluding factoring fees) if Bitcoin went from $ 8.000 to $ 8.160. Assuming Bitcoin is at $ 8.001 and you believe the market will bounce right at the $ 8.000 mark, then you can set a stop at $ 7.988,9. This tight stop offers a high risk / reward ratio as the upside potential is much greater than that Downside risk is.
Most Renowned Bitcoin and Altcoin Exchanges for Crypto Traders
Crypto traders often join forces unanimously and decide on the best and most popular cryptocurrency exchange. In 2013 everyone was trading on MtGox or BTC-e. Soon after that it was Bitstamp, then Bitfinex and Poloniex, and now it's Binance at the top. We recommend this exchange for Bitcoin and Altcoin pairings. It has other altcoin pairings as well, but we do not recommend these complex trading pairs if you are a beginner in crypto trading.
How do you get your cryptos? Start with easy-to-use exchanges like Coinbase. Pay attention to the actual fees and discrepancies in the Bitcoin rate compared to the current stock exchange rates.
Here go to the detailed Coinbase Guide!
CFD exchanges
We recommend that you trade on CFD exchanges for maximum security. CFD stands for "contract for difference" and means that you are essentially trading derivatives with an underlying value that is based on the market price (index) of a coin. CFD exchanges are safe because altcoins are not traded. It is a virtual contract that Produced by the exchange. This contract cannot be stolen and withdrawn. Additionally, Bitcoin withdrawals are usually manually approved, making it easier to identify and stop hackers before they lose all of your funds.
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How to Become a Profitable Crypto Trader
As a beginner, the chances are good that you will lose some money before you can trade and manage your funds for profit. As with any type of trade, the best way to learn is through our practical experience. Let's go over some basic factors that will help you become a successful crypto trader.
Technical analysis terminology can be scary at times. This is because it is a foreign subject. The more you get used to it, the more sense it will all make. If something is too confusing, just move on to the next point. Never give up and keep learning. Trade paper or use a testnet account (if your exchange offers it) and see how you deal with bogus money first, especially when trying out a new TA-based leverage trading strategy.
To be successful, you need to learn to read charts and be fluent in trading channels, support levels, resistance and volume-based indicators. Even if you are not acting entirely on the basis of technical analysis, these basic points will help you avoid trading at the wrong time.
WithTA you know when to get in and when to stay away from the market. If you trade 10% smarter - which means 1 in 10 trades are neutral or profitable - imagine how much more you can make after 100 or even 1.000 trades.
Risk management for high rewards
We will never tell you that 10x leverage or more is a surefire way to trade cryptocurrencies. In fact, we'll go as far as to say that this high level of leverage is more a form of gambling than a trading strategy. But we're not talking about slot machines but rather comparing it to poker. In poker, players try to line up with the most likely odds.
This process starts with setting up one Banknote managementto ensure that a bad run doesn't lead to bankruptcy. The idea is to keep growing your funds, but you have to survive the variance for this to work. That means you should keep trading at 10x leverage when you are ready. However, our suggestion is to only do this with a small part of your day trading capital. A larger allocation is possible when using a 5x leverage. The same goes for even lower levels of leverage, as your potential for loss is reduced if your "safety deposit" is lower.
Many other variables come into play when trying to be a successful trader
Ultimately, leverage trading can be done safely if you use your trading funds responsibly. Don't go all-in on 50x leverage in the hopes of becoming a millionaire overnight.
Divide your funds based on investment risk, segment some funds for riskier games, and limit your leverage exposure. You can evolve your risk management strategy over time. For example, you can invest the average cost in a larger position to further extract your liquidation price.
For example, knowing how to track and act on various news stories is critical. Capturing this information before total market prices is even more important. Be active on sub-Reddits, set up Google News notifications, etc.
How to trade altcoins profitably
Trading altcoins is a completely different pair of shoes. We are in a serious bear market and prices are falling sharply. Many coins are currently or will be dramatically undervalued. The profit potential on these trades is enormous, but you need to know how to find the right altcoin.
To show you how many altcoins fell, look at the dominance level of the bitcoin. This percentage is Bitcoin's share of the total crypto market capitalization.
As BTC has continuously declined while dominance has increased, we are currently seeing very clearly a deep surrender of most alternative cryptocurrencies. BTC lost its dominance as hard fork fears began, ICOs were introduced, and Ethereum and Ripple saw significant price increases.
As you can see, Bitcoin has moved into the bear market since the end of its all-time high in 2018. We have seen him take back the crypto market again and again, while many other coins have been forgotten, so past trading volumes do not necessarily play a role.
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How do you find altcoins with great potential?
Many methods can be used to find undervalued altcoins. It should be noted that community growth and interaction, project development and team engagement are driving factors for the speculative value of the coin.
Some traders might also look for cryptos that are very undervalued using MasterNodes. An example of such a coin is Ambrosus (AMB). Before collapsing with the rest of the market, AMB was very popular and high in trading. Now it is just another coin with MasterNode plug-in options.
Remember that investing in and running a masternode will generate you passive income that can be a long term game, but it is also potentially very lucrative. We have seen many DASH and Vechain masternode owners get well rewarded for their investments.
Other tokenomic factors can also affect the true value of a coin. Some cryptos are worth more for the utility they serve than the speculative interest they command. For example, market capitalizations could inflate without being used - so projects with a "minimally viable product" (MVP) or higher should also be analyzed for this potential.
We recommend looking into potential altcoin investments if you plan to hold your investment for months or years. For example, ElectrifyAsia (ELEC) was on the way up, launching a market cap of over $ 100 million. The coin is now trading on minimum market cap, having held $ 10 to $ 15 million before being on everyone's radar.
The community and project have grown, it serves a real purpose (P2P energy marketplace serving Asia), and tokenomics supports a wading offering as adoption grows. If BTC goes up 4x from here and you invest $ 10k in ELEC, which hypothetically goes 10x, you would see a 40x return on your investment.
Conclusion
Trading cryptocurrencies is fun, mentally demanding and often stressful. Beginners are at serious risk of losing some or all of their investment capital. We don't want you to make the same mistakes that many people made before you.
Our guide is just a rough introduction. We hope that you now know the different areas that you would like to research further - be it about leverage trading, ICOs, masternodes or something completely different.
Have fun in the crypto world BC1.