What is Crypto Trading? What does a Trader do?
A crypto trader seeks to buy crypto assets to sell later at a higher price or borrow an asset to sell high and then repurchase it for profit at a lower price, building wealth in the process.
This sounds pretty simple, right? Well, it entirely isn’t. Active crypto trading is incredibly daunting, but don’t get scared; it’s something you can do if you’re willing to take a shot with money you could lose but also gain considerable returns from when you develop the right skills to manage that capital. If taking that risk is okay with you, put on your Aquaman suit; let’s dive in further to explore the essential trading principles you should be familiar with as a new trader.
The cryptocurrency market is very volatile, as it’s driven by several factors like economic data, news about the currency, technical developments, company metrics, and government regulations.
Unless you can take a peak at the future, there are no assurances or smooth sailing to success, irrespective of your effort. It’s a sea full of risks.
How Can I Trade Crypto?
To trade crypto, you’ll need to do the following: Firstly, research the best crypto exchanges to trade. Binance, Coinbase, and Kraken are some of the top trading platforms.
Once you’ve settled for an exchange,
- Open an account.
- Verify your identity—all the KYC stuff.
- Deposit money into your account
- Open your first position on the exchange (i.e., long—buy or short—sell)
Okay, let’s slow down a bit. The last point above has probably gotten you lost.
I’ll discuss the different trading strategies you can choose before opening a position.
Day Trading
This method allows traders to profit from short-term market movements by conducting multiple daily trades. If you’ve got a lot of time to spare staring at your computer screens, this could work for you. Day traders usually open and close all of their trades within 24 hours.
Scalping
The purpose of scalping is to repeatedly make small profits by taking advantage of small price changes in the market. Picking up pennies here and there throughout the day would result in considerable profit. Scalping limits risk and enables traders to make hundreds of trades daily.
Swing Trading
As a swing trader, you wouldn’t need to stay glued to your computer screen all day—you only need to spot the beginning of a price movement, open and hold on to a position until you reach your desired result, then take the profit. Swing trading can span from weeks to months.
Are Crypto Prices Predictable? How can I do That?
Well, no one can predict what will happen for sure, but specific patterns, methods, and rules allow traders to make a profit in the long run, even though some losses may have been suffered in the process.
There are two principal methodologies that can help.
- Fundamental Analysis
This method is used to predict price by evaluating the asset’s value, user base, potential for the future, and relevant external factors such as government regulation and industry news. Traders can ascertain whether an asset is undervalued or overvalued, irrespective of the current price.
- Technical Analysis
Studying trading volumes and past price movements to identify particular patterns or trends can be helpful in future price prediction. That’s the crux of technical analysis.
Some Trading Terms you need to be familiar with as a Beginner
What are Bull and Bear markets?
These terms indicate whether a trend is going up or down. A bull market signifies an upward trend as bulls thrust their horns upward in attack, while a bear market indicates a downward trend just as bears swipe their paws downward when attacking.
What are Japanese Candlesticks?
Each candle depicts an asset’s opening, highest, lowest, and closing prices over a given period. (Also called OHLC charts). A green candle means the closing price was higher than the opening price, and conversely, a red candle means that the closing price was lower than the opening price. The candlesticks will usually be green in a bull market and red when the market is bearish.
What is Stop-loss?
A stop-loss is an order telling the exchange to instantly sell your crypto once the set stop price is reached to avoid further loss.
What is Position Sizing?
This is the amount of crypto you will buy or sell and is determined by the maximum value you are willing to lose if the trade goes wrong. It helps earn maximum returns at minimal risk.
For beginners, you should not risk more than 1% of your assets on a single trade, so you only lose 1% of your asset when trading goes south.
What is a Limit Order?
A limit order allows you to attempt to buy or sell your asset at a specific price that you set. The order is fulfilled when your requirement is met.
I know you’ve learned quite a bit and can’t wait to start trading. But before you set out for that, remember cryptocurrencies are volatile, and trading involves many risks that cost money. Here’s a list of things to avoid to help lower the risks.
- Trading beyond your max risk—more than you can afford to lose
- Not deciding clear profit goals and stop-losses before entering a trade.
- Leaving money on an exchange you’re not trading with—you could lose it when the exchange gets hacked or goes out of business.
- Giving in to fear or greed
- Not learning the lesson— lessons help you trade better next time.
- Using leverage—can lead to huge losses.
Conclusion
Even the most advanced traders can blow up their portfolios and suffer huge losses due to a few bad trades. It would be best to begin trading only when you have researched the best cryptos to trade, have a considerable understanding of the markets, and are up to date with the latest happenings in the crypto space. Always consult a financial adviser when in doubt.
Personal Note From MEXC Team
Check out our MEXC trading page and find out what we have to offer! You can learn more about cryptocurrency industry news. There are also a ton of interesting articles to get you up to speed with the crypto world. Lastly, join our MEXC Creators project and share your opinion about everything crypto! Happy trading!
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