- Cryptos are valued based on the level of involvement of community such as supply and demand or token’s utility.
- Crypto trading strategy is the plan traders follow while executing trades and is dependent on the preferences of each individual trader.
- Cryptocurrency trading requires research, practice and patience in order to be worthwhile.
Crypto Trading and Investing
Simply put, investing is a strategy that considers fundamentals and trends in the long-term instead of the short-term price movements. Investors need to build positions carefully over time in order to avoid price fluctuations. Trading aims to capitalize on short term market trends and involves buying and selling of stock frequently when prices are low or high respectively. Both of these techniques require patience and practice, but can be really rewarding if done the right way.
How is Cryptocurrency valued
Just like any other currency, cryptos are valued based on the level of involvement of the community such as supply and demand or token’s utility. Moreover, since cryptocurrencies are issued by private blockchain companies, the efficiency and reputation of these corporations affects the project’s perceived value and hence, the value of the token on the market.
If the crypto solves a certain problem, or provides a new avenue within a blockchain ecosystem, it becomes valuable. Similarly, a finite supply of crypto or greater demand than supply will increase the coin’s value. Moreover, this value depends on the overall feasibility and growth of the project. Crypto projects that keep evolving, accomplishing new milestones, or launching user-friendly addons develop a positive market sentiment and become valuable in the eyes of the public.
Fundamental Analysis and Technical Analysis
Fundamental analysis refers to the study of anything that affects a crypto’s intrinsic value, including economic, social and political factors. Traders relying on this generic analysis base their reasoning of change in pricing on supply and demand
On the other hand, technical analysis looks at statistical trends like fluctuations in token’s volume and price. These analysts look at charts to find trends and patterns that give an idea of how a token will behave in future
Market trends and cycles
A market trend indicates the overall direction of price of any given crypto. Largely, there are two types of these trends. A ‘bull market trend’ signals an uptrend where prices are constantly going up. A ‘bear market trend’ is a downtrend, where prices are constantly going down.
Every market is cyclical by nature. A market cycle is a pattern that occurs at different times, and can result in certain cryptos outperforming others due to varied market conditions
Crypto margin trading is quite straightforward, at least in theory; traders borrow capital in an attempt to have increased buying power and access open positions that are fairly larger than their actual account balance
Crypto derivatives are financial contracts whose value is based on an underlying crypto. The most well-known crypto derivatives include crypto futures, crypto options, and perpetual contracts.
A Crypto future is simply an agreement between two parties to buy or sell a specified token at a predetermined price at a given future date
Crypto options are those derivative products that follow the price of an underlying coin. However, these do not essentially have to be settled at their expiration date, which is the reason they are called options. They provide traders the option to buy or sell only if they want to. Only the premium paid has to be forgone
Crypto perpetual contracts are contracts that do not have a predetermined expiration date like future or option contracts. Traders can keep their positions open (subject to certain conditions) for as long as they want to
Crypto trading strategy is the plan traders follow while executing trades and is dependent on the preferences of each individual trader. It majorly includes ‘what, how and when’. Making money in the financial markets has more than one way, and hence traders need to choose the most suitable one based on their financial goals, capital to be invested, time and effort. There is no ‘correct approach’ when it comes to crypto trading – or any trading for that purpose. Traders just need to establish a plan and outline clear goals that can prevent them from going off course due to emotional overreactions
How do I start trading cryptocurrency?
Crypto trading can be very rewarding financially if done the right way. There are a few simple steps you need to follow. First of all, pick an exchange you can trade coins on. You will need to register on the exchange, add some funds to your account, and you can start selling and buying crypto. After that, you need to select a cryptocurrency wallet that allows you to store your funds, or transfer them between exchanges if needed
Since crypto are highly volatile and their prices can fluctuate significantly within hours, you need to find sources that can provide you updated market information constantly. Lastly, to be a successful crypto trader, you will need to eliminate emotions. One way to be safe is to start with demo accounts or small amounts for practicing and learning.
Initially, trading with cryptocurrency can be a risky task since there are so many techniques to learn. But you can make it less risky with research, practice and patience. Look for reliable sources of information, do your research, pick the strategy that suits your needs, choose tools for your portfolio management and you’re good to go!