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Cryptocurrency Trading for Beginners
The cryptocurrency space is growing rapidly by the day, and with it comes a lot of opportunities. One of the most sort after opportunities is #cryptotrading, which is fast becoming a great way for cryptocurrency traders to earn their fortunes from the crypto industry. Therefore, in this article, we will be helping you unlock the secrets of cryptocurrency trading for beginners by making you understand the basics of crypto trading.
Meaning of trading
Trading, in layperson’s terms, involves buying and selling assets. These can be goods and services, where the buyer pays compensation to the seller. In other cases, the transaction can involve the exchange of goods and services between the trading parties.
Meaning of Cryptocurrency Trading
Cryptocurrency Trading, in layman’s terms, means the buying and selling of cryptocurrency assets. Cryptocurrency is one of the many assets that is traded on the financial markets; therefore, it can also be called a financial instrument.
Trading is commonly used to refer to short-term trading, where traders actively enter and exit positions over relatively short time frames. However, this is a slightly misleading assumption as this type of trading is just one of the numerous trading methods. A wide range of strategies is involved in trading, such as day trading, swing trading, trend trading, and many others.
What is Cryptocurrency investing?
Investing means allocating resources/ funds with the expectation of generating a profit. This can include using money to fund and kick-start a business or buying land to resell later at a higher price. In the cryptocurrency markets, investing typically involves buying cryptocurrency assets and keeping them for an extended period of time with the hopes of selling them later at a higher price after their values have appreciated.
In cryptocurrency investing, the most important thing to the investor is the returns gotten from the investment, which is known as the Return on Investment (ROI). Unlike cryptocurrency trading, Crypto investing, or hodling, as most crypto traders typically call it, takes a longer-term approach to wealth accrual. An investor aims to build wealth over a long period (months or even years). The most common approach crypto investors use in carrying out their market research is using fundamental factors to find potentially good investment opportunities rather than using technical analysis.
Due to the long-term nature of their approach, investors usually don’t concern themselves with short-term price fluctuations. As such, they will typically stay relatively passive without worrying too much about short-term losses. Investors also allocate a more significant amount of resources to these long-term investments as compared to regular trading. This would therefore have more ROI and would be worth the time taken for the investment.
From what we have written above, we should now be able to differentiate between cryptocurrency trading and cryptocurrency investing, or hodling as people call it. This should therefore help us understand better what cryptocurrency trading really means and its difference from the regular buying, holding, and later selling of the asset.
In cryptocurrency trading, Traders strive to profit from the market’s turbulence. They are more likely to join and leave positions more often as they seek opportunities regularly on the market, and they may seek lesser profits on each trade (due to the fact that they are periodically making several transactions).
Seeking opportunities regularly from the cryptocurrency market is what cryptocurrency traders do, and the best way to do that is by carefully analyzing the market, looking and waiting for opportunities in which you can enter trades and make a profit. There are three significant ways by which cryptocurrency traders analyze the cryptocurrency market, and in this article, we will be explaining the three major types of market analysis and how they can be used by you to determine profitable opportunities in the cryptocurrency market.
Types of Market Analysis
Fundamental Analysis
Technical Analysis
Sentimental Analysis
Cryptocurrency Trading for Beginners: Fundamental Analysis
fundamental analysis involves poring over economic data reports and news headlines. (And even random tweets from a particular world leader before he was banned.)
Fundamental analysis is a way of looking at the foreign exchange & cryptocurrency market by analyzing economic, social, and political forces that may affect currency prices.
If you think about it, this makes a lot of sense! Just like in your Economics classes, it is supply and demand that determines the price, or in our case, the currency rate.
Using supply and demand as an indicator of where prices could be headed is easy. The hard part is analyzing all of the factors that affect supply and demand. In other words, you have to look at different factors to determine which cryptocurrency project, coin, or token has a higher probability of flourishing and which project has minimal potential.
You have to understand the reasons why and how certain events and information affects the general price movement of a crypto asset. Some of the information to pay attention to are; the use case scenario of the project, which is always in the crypto project’s white paper, also the community size of the crypto project users, as the increase in crypto assets usage affects the price of the asset, the problem the cryptocurrency project is likely to solve, the project Capital base, the diluted market capitalization of the crypto project and also the maximum supply of the crypto project. All these ultimately affect the level of demand for a particular cryptocurrency.
The idea behind this type of analysis is that if a cryptocurrency asset structure and project goals are reasonable and accepted by a large community of users, its value should strengthen. The value of such crypto assets also diminishes/declines if the project is not accepted by a large community of users. The better shape a Cryptocurrency project is, the more foreign businesses and investors will invest in that project. This results in the massive expansion of such projects, increasing the value of the crypto asset.
Cryptocurrency Trading for Beginners: Technical Analysis
Technical analysis is a process that traders use to examine price movement. Its theory suggests that by analyzing historical price movements, traders can determine current trading conditions and potential price movements. Individuals who use technical analysis are called technical analysts, and traders who rely on this method are referred to as technical traders.
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