More and more people are joining the cryptocurrency industry with an aim of making quick money. As with every trading, cryptocurrency trading requires a thorough analysis of the market trends, proper research of what crypto to trade and when, patience to hold when the situation calls for it, and a high intuition instinct which can be in-born or acquired through appropriate continuous analysis of past and present events to form the basis of a predictable future trend.
Cryptocurrency trading comes with its fair share of risks with potential for great gains or huge losses. However, this can be minimized by treating this trade as one would any other profession.
Understanding the business
Today’s current lot of traders occupying this space are either the early adopters, the miners, the developers cum programmers or some very alert businessmen who had their ear to the ground on matters trade. It is this space that the professional hopes to occupy and make a heavy presence in.
Cryptocurrency came with its own language and vernacular which can be quite intimidating to any crypto newbie irrespective of how market savvy they might be. This is the first step – learn the language with its jargon. Trading involves buying and selling so an understanding of your wares is mandatory, in this case the crypto and trading platforms.
Crypto trading involves two processes. These are:-
- Acquisition of base crypto currency which in this case is bitcoin by converting your fiat currency and if need be, converting bitcoin to alternative coins commonly referred to as altcoins.
- Undertaking fundamental analysis and technical analysis. Fundamental analysis involves having timely information and its impact on the market so as to accurately predict the coin’s trend and make an apt decision. Technical analysis is finding certain patterns by studying charts which will provide crucial predictive information on the direction the coin is likely to take.
Trading is made viable by the forces of supply and demand. While miners endeavor to do their bit to ensure there is continuous supply of crypto coins, the demand is created by consumers who have to put value in a product by way of trust and confidence in the product. Fortunately, the processes of creating bitcoins through the solving of complex mathematical puzzles and the hard-to-track-and-alter transactions have done just that – create a demand that supersedes supply.
The professional’s role in as far as consumer demands is concerned is to have a marked grasp about what triggers the pumps and dumps and how to take advantage of the situation.
Cryptocurrency is very prone to competition with innovative ideas popping up too frequently. A professional should be keen to follow these new developments which may cause consumers trends to shift.
- To the professional, a monitoring of gains or losses made is crucial. This is done by valuing your crypto against the dollar. Secondly, to make a decision on increasing the coinage held, alternative coins should be valued against bitcoins and not dollars. A direct effect of crypto fluctuations is due to lack of enough market capitalization which is just a 0.00052 fraction of the world’s capitalization. This is quite negligible and causes prices to remain volatile.
- Buying a dumped coin is feasible and cashing out as soon it is rises is prudent but the professional should determine when to do that. This is the concept of “buy low, sell high”.
Learn from others’ mistakes
It would be naïve to learn on your own time when we have so many examples of successful businessmen who have made it after fluking. Speculating should, however, be treated as a learning process to avoid falling into any pitfalls and unwarranted losses in the future. As Warren Buffet advises, learn from other people’s mistakes and you will minimize your losses. The saying that experience is the best teacher should not necessarily be your guiding phrase when dealing with cryptocurrency trading. Save time and money by avoiding what others did wrong.
Because this is possible, it is advisable to start off trading using a trading simulator in all its aspects instead of doing so with actual money and standing the risk of losing it. This way you can detect all the loopholes that you would be likely to encounter in a real transaction and effectually learn how to avoid them during the actual trading. All the mistakes you make during simulation would translate into dollars in the actual trading thus the necessity to pass through this route.
Keeping a journal
It is not possible to be a master on all aspects of cryptocurrency. Keeping a journal on your trading activities for some time will give you an indicator of where your strengths lie and you can capitalize on these aspects to launch your trading career.
One thing you will have to contend with when you launch out into a crypto trading career is the insinuation that if you can’t hold it, then you don’t own it. The fact is that crypto is a concept that is just gaining acceptance and not physical cash as we are used to having. A complete change of mindset has to take place to fully accept the currency as money like we do fiat currency.
It is also important to shut down emotions especially those of being a bit greedy. It is possible that we get into this trading out of a desire to get-rich-quick. It is however prudent to hoard expectations of losing not once but repeatedly even if not in succession. Losing is part of trading.
Fear is another psychological factor that can influence the way trading is conducted. This is especially true when there is a wave of some hyped up euphoria of a price pump. This fear is referred to as FOMO or Fear of Missing Out. Conversely, when the price plummets, fear may cause one to dispose before incurring more loses but that might just be ill advised as holding would be the sane way to operate.
In summary, it is no secret that many people are making cryptocurrency trading a profession just like many have on stock trading through stock exchange platforms. The basics to having an edge over the rest involves investing in education of this trading, developing the right mental attitude and being willing to take risks.