Cryptocurrency trading (digital assets) is quickly becoming one of the most frequently and
actively traded markets in the world due to its unifying factors. Cryptocurrency market trading
possesses the following qualities that make it attractive to traders and investors alike:
Unlike the U.S. Stock markets which run off of NYSE times and such, Cryptocurrencies run 24/7
and are active at all times. Being a global market, they can be seen as a form of the forex
market, however to an even greater freedom-based extent in the way that they are active at all
times of day, unlike forex markets which are 5-6 days a week.
A big blockade that those trading the stock market face is the pattern day trading rule (PDT),
which states that if a trader’s account is less than $25,000, they are limited to only 3 trades per
week. Cryptocurrencies do not have any minimum and can be traded with as low as $1.
A Global Market basically means that you can engage in market trading with all others around
the globe. This furthers communication methods and knowledge in trades. People all around the
globe can communicate with one another to better profits; this comes at a cost however, as not
everyone is on the same side.
Exchanges such as http://www.simplefx.com/ allow for 100% anonymous trading in which all
that is required is Bitcoin to make an initial deposit. Although later down the line KYC and other
factors will come into play and may restrict one from withdrawing fiat currencies, exchanges
have limited requirements for simple crypto trading due to the lack of current regulation. This is
always subject to change, however.
Although each of these factors make the market attractive and enticing to begin work upon, as
all markets all, one should proceed with caution and the correct knowledge before trading. Many
people have lost all of their funds due to negligence in trading. Entering a trade with a certain
mindset prior to purchasing or selling an asset is essential.
Strategies/Tips for Trading the Crypto Market
Know What You’re Getting Into
Crypto markets are considered by the SEC to be “highly volatile” digital intangible assets. In the
sense of asset properties, they are nothing like stocks, and if you trade stocks, there are only a
few mindsets you should carry over to crypto. Before you initiate a trade set a target price goal,
target stop loss, and carry on. If it hits that price, either get your profit, or get out. In crypto there
is no room for anything other than precise price points. Take your profit, set a stop loss and
ignore the noise. Each trader is different, if you listen to the entire community and what they are
thinking all at once, your mind will get foggy with FUD, and you won’t be able to make your own
inferences. Every trader has made bad trades. Not every trader can say they’ve made a good
Identify Key Areas of Support and Resistance
When placing orders, buyers and sellers will typically set a price point at which their order will
execute, and therefore either buy or sell a crypto. The market, in terms of functionality, works
parallel to basic markets such as the stock market. Areas of price where a large number of
buyers want to buy will typically be labeled as “support”, if said area is below the current market
price. Areas of price where sellers want to sell are labeled as “resistance” if said area is above
current market price. Each crypto will have changing fluctuating levels of support and
resistance, much more different than the stock market. People within the cryptocurrency market
are constantly changing their mind, which allows for this frequent price shift to occur. Plus, the
fact that the market capitalization is still very small comparatively to other markets, doesn’t help
Identifying areas of support are essential when placing an order. If you’re able to squeeze an
order in right before a key level of support, you stand a better chance of attaining profit, as there
is support beneath your price. With cryptos, finding areas of support that have limited resistance
will get you better chances of profit; of course, no one can predict how the market will react and
whether these statistics will stand, however this does increase your chances of making profit.
Sell walls within cryptocurrency are definitely deceiving as well. During a bearish phase, cryptos
will drop off up to 50% of value, if not more, within mere hours. Sell walls wreak havoc upon the
markets in these times. However within bullish phases, small news pieces and releases can
break through the biggest of sell walls. This is, as stated, because of the relatively small market
(Pictured is a sell wall shifting lower within minutes as more buy orders are fulfilled, equaling
Obtaining a good position in terms of support and resistance is essential for a good
trade. Each trader’s methodology is different, however, many will identify key areas of support
and resistance before deciding a good entry point.
Utilizing Margin; and Covering When Necessary
If you are a long term holder, margin can be equivalent to your worst nightmare. In the wake of
a flash crash, all your long term positions that were building up profit for months may be wiped
out within seconds. For traders, margin can be an effective tool, if used wisely.
Margin allows you a larger position than you possess in your account in exchange for typically,
a fee. Utilizing margin in the wake of a flash crash for quick profits is an effective method of
hedging to some. While you shouldn’t put your life savings on margin, using margin for small
gains in different areas can be an effective strategy.
Trading is, at its core, risk taking, no matter which way you might look at it. In each and every
trade you are going to, at an extent, be risking something. Let’s say your current portfolio is 80%
in 2 cryptos at the moment. You have 20% remaining for a trade. 20% of a portfolio isn’t a huge
deal to work with, however, if utilizing margin, you can put a trade on a 2:1 margin which will
give you double the funds to allocate for a trade. This is risky, because you will lose or gain
money twice as fast. Let’s say 3:1 margin – 3 times as fast, and so on.
Let’s say you’re in danger of losing that initial investment, you can deposit more funds to cover
the initial margin trade. Margin, in the long run is risky, and comes at a price. It is not
recommended if you are just starting out with trading to utilize margin. In areas where you are
covered with a lot of support and at a sufficient entry point, it can be utilized to gain profits
faster, if used wisely.
Spotting High Volume Activity with Limited Price Reaction
Although an entire separate article can be created spotting technical analysis patterns, this
particular pattern has been efficient in spotting “whales” within the crypto market, which are
easier to initiate in the scheme of things.
A major advantage (and disadvantage) to the crypto markets is that sometimes large volume
limit orders will cause spikes in volume prior to a price explosion. While this is speculative, some
whales create limit orders of large quantity in hopes of persuading the market a certain way. All
before cancelling the order, and fooling the entire market. However, with the volatility of the
crypto market, these orders are sometimes executed at large amounts. They are indicative early
on. Take the following graphs for example:
Chart for $POE
Chart for $THC
Chart for $PND
This is speculative, as said already. High volume not reflective of price does not always and
definitely mean a price jump, however, they are signs of a possibility within low market cap
One of the most overlooked techniques for trading the crypto market is to utilize news
aggregators. These sites compile sources from major crypto news outlets and message boards
and select the most important ones based on user input. Keeping an eye on these is essential
when looking for real time news. Trading outbreaks and finding news in real time is priceless.
Many times, these sources will also output somewhat viable rumors and message board inputs
from others. Although these shouldn’t be 100% trusted, some of these rumors have in fact
turned out to be true. These rumors that have turned “news” have led to some altcoins to rise in
over 300% within days. Spotting these sources and releases prior to the mass media is
News aggregation sites will also help keep up to date to any real time news updates. Let’s say a
law comes out that bans cryptocurrency trading in Europe; you’re guaranteed to get an update
the second that news hits any major news outlet. It assists in making judgements of when to
buy, and sometimes even when to sell when things get to steep.
Some news aggregation sites for crypto:
Entirely, there’s lots of preparation that’s needed in order to trade successfully. Small strategies
are built overtime, and there is no 100% correct formula for a profitable portfolio. Skills within the
markets are learned overtime and are allocated accordingly. Enter accordingly, look for what
works for you as an individual trader. Ignore the noise, and try to learn from your own mistakes.
Take each tip and strategy with a grain of salt and move through the markets cautiously.