Trading for beginners: How to trade Bitcoin & Altcoin step by step!
We would like to give you all a template for the Bitcoin and Altcoin trade. This guide will help the absolute beginner to learn everything necessary for trading. We suggest that you read the following guidelines and work on your own trading style to maximize your trading profits!
What are we gonna talk about?
- The different ways in which people deal with crypto,
- The profit potential as a crypto dealer,
- The various stock exchanges and their reputation, and
- The steps necessary to become a more profitable trader.
Before we start...
Crypto-currencies are very volatile assets that can gain or lose enormously in value in a short time. Many stock exchanges have been hacked and quite a few have cheated their users.
Be very careful in this business. Trust only a few selected 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 for the long term. In this article you will find our big hardware wallet test.
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Decide on your trading style
We can distinguish between four main categories of trading styles:
- Day trader: People who invest in crypto currencies and open or close trades repeatedly on the same day.
- Swing traders:People who invest in crypto currencies and consider up and down fluctuations in a trade over a period of typically 2-6 days.
- Long-term holders: people who "hodl" (i.e. buy and hold their investment in anticipation of the price increase to a much higher level in the future).
- ICO Investors: People who buy into pre-token sales and wait for the start of trading (often it takes months) before they consider selling.
The 24/7/365 crypto trading action allows considerable returns to be achieved through intraday trades. The constant price movements, which are visible in real time, provide better scalping opportunities for inexperienced traders. Day trading is not the most secure, but potentially the most rewarding approach to investing in crypto currencies.
Day traders have the advantage that they can concentrate on their account balance. You only have to worry about how much more you earn. The long-term performance of Kryptos will not have a big impact on you.
This market is very volatile and your investment could drop 25% overnight if you fail to time the market correctly or use the stop loss feature of your stock exchange (if your stock exchange supports this). For many, day trading is the safest way to get involved in today's volatile crypto currency market .
You want more than 2-5% profit per day?
Not every trade will be a gain. Watching your investment increase by no more than 5% can be disappointing for some traders. Those 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. 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 become, the less variance you can tolerate and the quicker your securities disappear and you become insolvent.
Some traders prefer a more passive approach and stay with the price movements of swing trading for longer periods of time. The typical holding period for a swing trade is around 2-6 days. If you keep your position open for weeks, months or years, this would be considered a long term hold.
SwingTrading is profitable if you are both responsible and generous with your stop losses. It is very profitable if you can time the market correctly. For example, if you start at the absolute low before the upswing, you can bet that the price will rise during the next few days. Thus, after only 3-6 days of holding, a profit of 20% to 50% is possible.
Trading fees increase the greater the leverage you use for a trade. Combined with the right market timing, technical analysis and a certain amount of leverage, you can achieve significant returns on your investment.
ICO investment is fairly easy, but the ICO market stagnated in the second half of 2018 as the crypto world continues to push to new lows.
If you are just entering the market, we recommend that you gain experience with day trading Bitcoin and some major legacy products (such as Ethereum) before you consider investing in ICOs. Once you have gained experience, take a look at our ICO-related content to find out how you can find very lucrative investment opportunities.
Let us now go through some of the basics of leverage trading. The following information should help you decide whether "leverage trading" is right for you.
Trading with leverage: basics in cryptos
1) "Borrow" money
Leverage trading is the act of opening a position with a higher capital commitment (increase in profit potential). To do this, you must invest your funds as "security". This makes it possible to lose your entire investment. If the price falls by 50% with a 2:1 leverage, your position will be liquidated and you will be left 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 you buy 1 Bitcoin for $10,000 and the value goes up to $15,000 and you have made a 50% profit. But if you use 10 times the leverage, your profit is not 50%, but 500% and that would be $50,000.
2) Trading fees for leverage can vary widely
You must be careful when using a leveraged trading exchange. Many platforms are associated with very high fees. Especially the beginner-friendly exchanges eToro and IQ Option are known for their high fees. Even Bitmex can be expensive if you wait for a real period of time. Bitfinex and Okcoin contracts can be cheaper if you invest in them and keep them. However, the leverage is not very high.
You should know that you should exceed the fees on your trade by a significant amount before closing a position. This fact is important for beginners to use the trade properly. Every time you open a position, the fees will keep you in the red until you close your position with a sufficient profit and the fees are paid. High profits are harder to make and losses can accumulate due to a few bad trades, especially with high leverage (e.g. a leverage of 10:1).
3) Stops are important for getting out
Crypto day trading with leverage requires very short-term price fluctuations. The profitability of leveraged trading declines the longer you hold your position and the higher the leverage you use must be. The idea of almost exclusively leveraged trading is to enter and exit your position in a short period of time.
For example, 50x leverage means doubling your investment (excluding factoring fees) if Bitcoin were to rise from $8,000 to $8,160. Assuming the Bitcoin is $8,001 and you believe the market will hit directly at the $8,000 level, you can set a stop at $7,988.9. This tight stop offers a high risk-return ratio, as the upside potential is much greater than the downside risk.
Most renowned Bitcoin and Altcoin exchanges for crypto traders
Crypto dealers often join forces unanimously and decide on the best and most popular crypto exchange. In 2013, everyone traded at MtGox or BTC-e.Soon after, it was Bitstamp, then Bitfinex and Poloniex and nowBinance is at the top. We recommend this exchange for Bitcoin and Altcoin pairs. It also has other Altcoin pairs, but we do not recommend these complex trading pairs if you are a beginner in crypto trading.
How do you actually get your cryptos? Start with user-friendly exchanges like Coinbase. Pay attention to the actual fees and to deviations of the Bitcoin price compared to the current stock exchange prices.
Click here for the detailed Coinbase Guide!
We recommend trading on CFD exchanges for maximum security. CFD stands for "contract for difference" and means that you essentially trade derivatives with an underlying that is based on the market price (index) of a coin. CFD exchanges are so secure because you do not trade with Altcoins. It is a virtual contract produced by the exchange. This contract cannot be stolen and withdrawn. In addition, Bitcoin payouts are usually approved manually, which makes it easier to identify and stop hackers before you lose all your funds.
How to become a profitable crypto dealer
As a beginner, chances are good that you will lose some money before you can trade and manage your money profitably. As with all types of trading, we learn best through our practical experience. Let's go through some basic factors that will help you become a successful crypto trader.
The terminology of technical analysis can sometimes be frightening. This is because it is a foreign subject. The more you become familiar with it, the more sense everything will make. If something is too confusing, just move on to the next item. Never give up and continue learning. Trade paper or use a test net account (if your exchange offers one) and see how you handle fake money first, especially if you are trying out a new TA-based leverage trading strategy.
For your success it is essential that you learn to read charts and to be fluent in charting trading channels, support levels, resistance and volume-based indicators. Even if you are not trading 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 off the market. If you trade 10% smarter - meaning that 1 in 10 trades is neutral or profitable - imagine how much more you can earn after 100 or even 1,000 trades.
Risk management for high rewards
We will never tell you that 10x leverage or more is a safe way to trade crypto currencies. We will even go so far as to say that this high degree of leverage is more a form of gambling than a trading strategy. But we're not talking about slot machines, we're comparing it more to poker. In poker, players try to position themselves with the most likely odds.
This process begins with the establishment of a banknote management system to ensure that a bad run does not lead to bankruptcy. The idea is to continuously expand your funds, but you must survive the variance for this to work. This means that you should continue to trade with 10x leverage when you are ready. However, our proposal is to do this with only a small portion of your day trading capital. When using 5x leverage, a larger allocation is possible. The same applies to even lower leverage levels, as your potential loss is reduced if your "security payment" is lower.
Many other variables come into play when you try to be a successful trader
Ultimately, leverage trading can be carried out safely if you deal with your trading funds in a responsible manner. Don't go all in at 50x leverage in the hope of becoming a millionaire overnight.
Divide your funds according to investment risk, segment some funds for riskier games and limit your leverage exposure. You can develop your risk management strategy over time. For example, you can invest the average cost into a larger position to further pull out your liquidation price.
For example, it is crucial to know how to follow and act on different news stories. Capturing this information ahead of overall market prices is even more important. Be active in sub-redits, set up Google News notifications, etc.
How to trade Altcoins profitably
The Handelmit Altcoins is a completely different pair of shoes. We find ourselves in a serious bear market and prices are falling sharply. Many coins are already or will be dramatically undervalued. The profit potential in these trades is enormous, but you need to know how to find the right Altcoin.
To show you how many Altcoins have fallen, take a look at the dominaz level from Bitcoin. This percentage is Bitcoin's share of the total crypto market capitalization.
As the BTC has continuously declined while the dominance has increased, we currently see very clearly a deep capitulation of most alternative crypto currencies. BTC lost its dominance when fears over the hard fork began, ICOs were introduced and Ethereum and Ripple saw significant price increases.
As you can see, Bitcoin has been in a bear market since the end of the all-time high in 2018. We have always seen it re-conquering the crypto-market, while many other coins have been forgotten, so past trading volumes do not necessarily play a role.
How do you find Altcoins with great potential?
Many methods can be used to find undervalued altcoins. Note that community growth and interaction, project development and team engagement are driving factors for the speculative value of the coin.
Some merchants might also look for cryptos, which are very undervalued, with MasterNodes. An example of such a coin is Ambrosus (AMB). Before it collapsed with the rest of the market, AMB was very popular and highly traded. Now it's just another coin with MasterNode connectors.
Keep in mind that investing in and holding a master node will generate you a passive income that can be a long term game, but it is also potentially very lucrative. We have seen how many DASH and Vechain Masternode owners have been well rewarded for their investment.
Other tokenomic factors can also influence the true value of a coin. Some cryptos are worth more for the benefit they serve than the speculative interest they command. For example, market capitalizations could inflate to a purely unused level - therefore, projects with a "minimal viable product" (MVP) or higher should also be analyzed for this potential.
We recommend that you consider potential Altcoin investments if you plan to hold your investment for months or years. For example, ElectrifyAsia (ELEC) was on its way to the top and started a market capitalization of over $100 million. The coin is now trading at a minimum market capitalization, having held $10 to $15 million before it was on everyone's radar.
The community and the project have grown, it serves a real purpose (P2P energy marketplace serving Asia), and the tokenomics supports a wafer offering as acceptance 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.
Trading crypto currencies is fun, mentally demanding and often stressful. Beginners are at serious risk of losing some or all of their investment capital. We do not want you to make the same mistakes as many before you.
Our guide is only a rough introduction. We hope that you are now familiar with the various areas in which you would like to do further research - whether it be on leverage trading, ICOs, master nodes or something completely different.
Have fun in the crypto world wishes BC1.