How to trade cryptocurrency – best trading strategy
Cryptocurrency trading is considered to be one of the most modern issues. It started in 2009 when Bitcoin first appeared. In a short period of time, it attracted millions of investors around the world. The cryptocurrency market has rebounded in the last two years due to the large rising of its value, especially in currencies such as; Bitcoin, Ethereum, Litecoin and other. Today, the total market value of the cryptocurrencies exceeded the $500 billion barriers.
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The cryptocurrency market is very volatile, making it a great but a risky opportunity to invest. Globally, many people have been able to make a fortune by investing in Bitcoin and other cryptocurrencies.
How can we Trade the Cryptocurrencies (Buy and Sell)?
Investors’ purposes differ when it comes to trading in cryptocurrencies. Some of them think of buying and storing them, for long periods of time, away from trading and executing repeated deals. Such people take advantage of falling into the value of cryptocurrencies and buy them at significant support levels. They expect the prices to start rising and then sell them at target levels. On the Internet, there are many online wallets for cryptocurrencies, one of the most famous is Blockchain.
Where can we Buy Cryptocurrency?
There are many online sites that sell Bitcoin and other cryptocurrencies, then transfer them to the buyer’s wallet. A number of payment methods, such as credit cards and electronic banks including PayPal, are also available. The most popular sites are; Cex.io, Coinmama and Spectrocoin.
Speculation on Cryptocurrencies
There are a number of investors who trade in cryptocurrency on a daily basis, to benefit from the movements of the market in all directions, and there are a number of famous online platforms. Such platforms are specialised only in the cryptocurrencies trading and some of the most famous ones are; (Binance, Bittrex and Bitfinex). You should be aware that prices vary slightly from one platform to another due to different liquidity providers.
Today, because of the strong demand for cryptocurrencies, Forex brokers have included a number of the most popular currencies to trade through their platforms in the form of currency pairs (BTC/USD), and provided traders with the possibility of using the leverage.
What are the Most Popular and Best Cryptocurrencies that are recommended for Trading?
Around the world, there are hundreds of cryptocurrencies, but traders want a few of them for a number of reasons, including the high degree of safety and the volume of daily trading and market value. We mention five of the most important currencies as follows:
- Bitcoin (BTC): it is the most popular cryptocurrency and the largest in terms of trading volumes and market value since its first appearance in 2009. The most important feature is its widespread, recognition by many countries and its use as a safe means of payment in a number of stores and international companies. Investors are increasingly accepting it because of its fast moves, which they consider to be a significant advantage for profit in a short period of time.
- Ethereum (ETH): is the second best cryptocurrency after Bitcoin. It is characterised by its widespread and adoption by international companies such as Microsoft. Ethereum was able to attract the attention of many people around the world after it recorded great highs of $10 per unit to $400 in just three months.
- Litecoin (LTC): it was able to achieve tangible success in a short period of time depending on its distinctive technology system. This reduced treatment time and made it among the most desired currencies by traders and this is clear in the amount of daily trading, which increases strongly over time.
- Ripple (XRP): Ripple technology is now widely used to connect banks and payment services because of its speed and ease. Therefore, according to many experts, it is considered one of the best cryptocurrencies for investment and the rise of its value is a matter of time.
- Bitcoin Cash (BCH): is a branch of Bitcoin and it has emerged as a result of splitting from it and also uses the same technology. Bitcoin Cash is a strong investment opportunity, and its market value is high and has risen since its splitting more rapidly than Bitcoin itself.
How to Analyse Cryptocurrencies and Take Advantage of Market Movements?
As mentioned previously, some investors are willing to speculate daily on cryptocurrencies and benefit from the strong and fast moves. Speculators think they will achieve excellent results if they analyse the market movements very well. Trading experts use a number of ways to predict the movement of prices, including:
Technical Analysis is one of the most important and best methods of analysis to predict the movement of prices of all financial assets, by reading the chart in previous periods and trying to explain it, and use it to predict market movements at the present time or in the future. The technical analysis has its various tools and methods and the most famous are; supports and resistances, technical patterns, trend line and trading volumes. Some traders rely on one method of technical analysis while others combine a number of methods. In the technical analysis, there are many indicators that can be used as helping tools that give signals about the nature of the trend and the movement of the market.
Market Capitalisation (Market CAP)
One of the important methods used by cryptocurrency traders to predict price movements is defined as the total market value of the cryptocurrency, which can be calculated by multiplying the current price of the currency in the circulating supply. (Market Cap = Price X Circulating Supply).
Market capitalisation gives important information to traders as it is considered an important standard to define the strength of cryptocurrency. If the value of it has increased, it will be in favour of the currency as it is a sign that there is an activity for traders, which in turn leads to increasing the traders’ confidence in it and increasing its prices.
One of the most important questions that many are seeking an answer for is; why is the market cap for some major currencies high while the prices are low, specifically the Ripple? The reason is simple; it is because what is available for sale of this currency is too large. The strong acceptance for buying this currency and the low supply of it will certainly give a strong boost for the prices to rise.
The fundamental analysis in the case of cryptocurrencies is less important, as there are no clear indicators to be measured, except for some important news that is essential in this case, and which can be used to predict the future success of the currency. This is important information that traders need, such as the total number of owners, the market value and the number of important businesses that accept payment in that currency. A good trader is the one who can benefit from such news as well as technical analysis to make the best trading decisions.
Note: There is some important news that may have strong effects on cryptocurrencies such as piracy of some popular trading platforms and portfolios. Such news, as well as the nature of cryptocurrencies with their rapid movements, require traders to use profit and loss stop orders in order to avoid any significant consequences and losses as a result of sudden unexpected moves.
Is Bitcoin a Bubble?
After Bitcoin has reached high records and its prices began to fluctuate, many discussions focused on the question of the future of Bitcoin, and will it continue to rise? Or are the peaks, that are close to the $20,000 just a speculative bubble, and these figures are much higher than their real value? Trading experts believe that Bitcoin cannot be considered a bubble and that its movements are real and governed by the laws of supply and demand that govern all financial markets. They have periods of rising and falling that can be exploited in all cases to achieve good profits.
Cryptocurrency Trading Strategies
There is a lot of talk about strategies for trading cryptocurrencies, especially Bitcoin. These strategies, including short-term and long-term, as we mentioned that there are some who buy cryptocurrency for storage purposes, and others speculate on a daily basis. Speculators on a daily basis use many strategies, which are mainly based on technical analysis, its tools and its helping indicators. We can’t say that there is a strategy that is the best of all in trading, there are hundreds of them, each with strengths and weaknesses. Traders must learn well and develop their own strategy.
Note: There are many websites that offer paid strategies, including automatic and manual. Some of these strategies have already been developed by experts, but there are many who take advantage of the need of beginners and pass fake strategies, so those looking for a paid strategy must be very careful and search carefully before deciding to pay for any of these strategies.
Tips for Trading Cryptocurrencies
- Investing in cryptocurrencies should be according to the financial capabilities of the trader. It is preferred that the invested money is surplus.
- One of the most important reasons for success in trading is prudent capital management. It is best to avoid using large leverage, other than to commit to predetermined profit and loss stop orders.
- The trader must decide carefully which strategies to use. This certainly depends on the psychological factor, the availability of time and experience as well. If the experience is weak and the time available is small. In this case, it is preferable to buy and store. If the experience is good and the time is available, it will be good to speculate on a daily basis and benefit from the daily moves.
- Get the news and information about cryptocurrencies from their real sources and not be dragged behind false news, which comes mostly from those who have no experience in this area.
- The psychological factor is very important; it is preferable to trade in times of good mood so that the trader can take the right decision that leads to good results.
- Do not rely on guessing or luck, a successful trader is the one who learns well and gets the necessary experience before starting trading.
- Learn from your mistakes. Knowing your wrong is the best way to avoid it. A good trader is someone who constantly assesses himself and develops his own strategy based on the previous data and the results he achieved.