CISMAANE

Key Takeaways

Cryptocurrency trading involves buying and selling digital assets with the goal of making a profit.

To trade crypto, you'll need to choose a reliable exchange, create an account, and understand key trading concepts like trading pairs and order types.

Common trading strategies include day trading, swing trading, scalping, and long-term investing (HODLing).

Traders use technical and fundamental analysis to guide their decisions. Managing risk through proper planning and diversification is essential to long-term success.

Introduction

Cryptocurrency has attracted millions of traders and investors worldwide, from casual investors to financial institutions. But for beginners, the terminology, strategies, and fast-moving markets can be daunting.

Are you considering your first purchase or simply curious to learn more? This guide will walk you through the fundamentals of cryptocurrency trading — including how to get started, the basic terminology, different types of trading strategies, and how to manage risk.

What Is Cryptocurrency Trading?

Cryptocurrency trading refers to buying and selling digital assets on exchanges for the purpose of making a profit. Unlike traditional markets, crypto markets operate 24/7, giving traders more flexibility but also exposing them to constant price changes.

There are thousands of cryptocurrencies out there, but there is a good chance you have heard of some of the most popular ones, such as Bitcoin and Ethereum. In fact, these are the names of the blockchain networks. The tradable crypto-assets are called bitcoin (BTC) and ether (ETH).

How it works

Crypto traders can go “long” (buying an asset expecting its value to rise) or “short” (selling an asset expecting its price to drop). Some traders hold assets for longer periods, while others prefer to move in and out of positions quickly, depending on their strategy and risk tolerance (more on these strategies soon).

You can trade cryptocurrencies against fiat currencies (such as USD, EUR, etc.) or against other cryptocurrencies. The assets you choose and the exchange you use will affect your trading experience.

Before Trading Cryptocurrency

1. Learn the basics

Before diving into cryptocurrency trading, it's important to take some time to learn the basics. Binance Academy’s trading articles and educational courses are a good place to start.

2. Choose a crypto exchange

Choose a reliable and secure cryptocurrency exchange. Ideally, it should have a proven track record, excellent reputation, strong security protocols, and responsive customer support. If Binance is available in your region, you are off to a great start.

For newcomers, beginning with a centralized exchange is recommended. As you gain more experience in crypto trading, you can explore decentralized exchanges (DEXs) at a later stage.

3. Create your account

Once you've chosen an exchange, the next step is to create your account. This usually involves providing your email, setting a password, and agreeing to terms. 

Exchanges often require identity verification (KYC) to ensure security and comply with regulations. You would need to submit a government-issued ID, proof of residence, and any other documents to complete setting up your account.

How to Start Trading Cryptocurrency

1. Fund your trading account

After you create an account, you can deposit fiat currency into your account. Most centralized exchanges allow users to deposit fiat via bank transfers, bank wires, or other common methods. Depending on the platform and location, you may also be able to buy crypto using a credit card. 

If you happen to own some crypto already, you can deposit it into your exchange account. Remember to always send your coins to the associated address: send Bitcoin to your Bitcoin address, ether to your Ethereum address, and so on. Sending crypto to the wrong addresses may result in permanent losses.

2. Choose a trading pair

Cryptocurrencies are traded in pairs (e.g., BTC/USDT, ETH/BTC). A trading pair tells you which assets are being exchanged. For example, in the BTC/USDT pair, you're trading Bitcoin against Tether (a stablecoin pegged to the US dollar).

Crypto-to-fiat trading pairs involve a cryptocurrency and a traditional fiat currency, such as the BTC/EUR trading pair. If the current value of one BTC is 92,175 euros, the BTC/EUR trading pair chart will show the same value as the market price. 

In other words, you need 92,175 euros to buy 1 BTC, half of that to buy 0.5 BTC, and so on. Note that you can buy as little as 5 EUR worth of bitcoin.

Crypto-to-crypto trading pairs involve two different cryptocurrencies, such as the ETH/BTC trading pair. At the time of writing, ether (ETH) is being traded at 0.02285 BTC per unit of ETH.

3. Check the order book

An order book is a real-time, dynamic list of buy and sell orders placed by traders. It provides a snapshot of the supply and demand for a specific asset at different price levels.

Buy orders (bids) list the orders from traders who want to buy, organized from the highest bid price to the lowest. Sell orders (asks) display the orders from traders who want to sell, organized from the lowest ask price to the highest.

Order Book on the Binance App (BNB/USDT).

4. Choose your order type

Market order

A market order is the simplest type of order, in which you buy or sell immediately at the best available price. It’s the fastest way to buy or sell when you don’t want to wait.

Let's say the current highest bid (buy order) for one bitcoin is $100,000, while the lowest ask (sell order) is $100,100. If you place a market order to buy BTC, your order will be matched with the lowest ask, which is $100,100. If you place a market order to sell BTC, your order will be matched with the highest bid at $100,000.

Limit order

A limit order is an order to buy or sell at a specific price or better. It’s a slower way to buy or sell but allows you to set the exact price you want.

For example, if bitcoin is trading for $100,000 but you want to buy it for $98,000 or less, you can set a buy limit order at $98,000. If the price drops to $98,000 or less, your limit order will (likely) be executed, and you'll purchase bitcoin at the desired price. But if the price never drops to your limit price, your order won't be executed.

5. Develop your trading strategy

Think about your trading style and strategy. Every trader is unique, so it’s usually better to create your own trading system and improve it as you go rather than copying other traders. This will help you improve and hopefully achieve a more consistent trading performance in the long term.

Regardless of the chosen strategy, it’s important to manage risk and learn from your mistakes. A trading journal that tracks your trades (including your thought process and decisions) can be incredibly helpful.

Popular Trading Strategies

There are many crypto trading strategies that you can employ, each with its own set of risks and benefits. Let’s go through some of the most popular trading approaches.

Day trading

Day trading is a strategy that involves entering and exiting positions within the same day. In day trading, you’ll often rely on technical analysis to determine which assets to trade. This trading style can be profitable, but it’s challenging and definitely not for everyone. Day trading tends to be more stressful and time-consuming than swing trading or long-term HODLing, so it’s generally not recommended for beginners.

Swing trading

In swing trading, you’re still trying to profit off market trends, but the time horizon is longer – positions are typically held anywhere from a couple of days to a couple of months. Swing trading tends to be a more beginner-friendly strategy, mainly because it doesn’t come with the stress and time-consuming pace of day trading. 

Scalping

Of all of the trading strategies discussed so far, scalping takes place across the smallest time frames. Scalpers attempt to game small fluctuations in price, often entering and exiting positions within minutes (or even seconds). As a form of day trading, scalping is also not recommended for beginners.

In most cases, they’ll use technical analysis to try and predict price movements and exploit bid-ask spreads or other inefficiencies to make a profit. Due to the short time frames, scalping usually has thin profit margins. Scalpers generally trade bigger volumes or dozens of trades to gradually achieve sizable profits.

HODLing 

While not exactly an active trading strategy, long-term investors, also known as "HODLers," aim to benefit from the overall growth of the cryptocurrency market. They buy and hold cryptocurrencies for an extended period, often months or years.

As a “buy and forget” strategy, HODLing is among the least stressful options. It’s ideal for those who believe in the long-term potential of specific assets and are willing to weather short-term price fluctuations. While this strategy requires patience, it can provide substantial returns over time, especially for bitcoin holders.

Technical Analysis (TA)

Technical analysis is the art of interpreting price charts, recognizing patterns, and harnessing indicators to anticipate potential price movements.

Candlestick charts

A candlestick chart is a graphical representation of the price of an asset for a given timeframe. It’s made up of candlesticks, each representing the same amount of time. 

For example, a 1-hour chart shows candlesticks that each represent a period of one hour. A 1-day chart shows candlesticks that each represent a period of one day, and so on.

Daily chart of Bitcoin. Each candlestick represents one day of trading.

A candlestick is made up of four data points: the Open, High, Low, and Close (also referred to as the OHLC values). The Open (1) and Close (4) are the first and last recorded prices for the given timeframe, while the High (2) and Low (3) are the highest and lowest recorded prices, respectively.

Support and resistance levels

Support means a level where the price finds a floor—an area of significant demand where buyers tend to step in and push the price up.

Resistance means a level where the price finds a ceiling— an area of significant supply where sellers tend to step in and push the price down.

The support level (red) is tested and broken, turning into resistance.

Technical analysis indicators

Traders rely on technical indicators to better understand an asset’s price movements. These tools help reveal patterns and highlight possible opportunities to enter or exit trades based on current market conditions.

Popular examples of technical analysis indicators include trend lines, moving averages, Bollinger Bands, Ichimoku Clouds, and Fibonacci Retracement, which can also suggest potential support and resistance levels.

Fundamental Analysis (FA)

Fundamental analysis is a method used by investors and traders to determine the intrinsic value of an asset or business. In crypto trading, it often involves investigating the technology, team, adoption potential, and overall viability of a project.

In crypto trading, fundamental analysis (FA) evaluates the value of a cryptocurrency by analyzing its technology, use case, development team, tokenomics, and adoption.

In crypto trading, FA might also include things like:

On-chain data (e.g., number of active addresses, transaction volume, etc.)

Project roadmaps and news

Community and developer activity

Risk Management in Cryptocurrency Trading

Risk management refers to identifying the financial risks involved with your investments and minimizing them as much as possible. Let’s take a look at a few popular strategies.  

1. Limit your losses 

Make sure you don’t trade more than you can afford to lose. Use advanced order types to lock in profits or protect yourself from losses. For instance, stop-loss orders allow traders to limit losses when a trade goes wrong. Take-profit orders ensure that you lock in profits when a trade goes well.

2. Have an exit strategy

It’s always a good idea to plan for the worst. So, having an exit strategy is an essential way to manage your risks. It's easy to get caught up in a bull market and its euphoria, but having a plan to exit your position can help lock in gains or prevent big losses in case things go bad.

One way is to use limit orders to take profit or place a floor on maximum loss that you can stand. As a general rule of thumb, once you have your exit plan, you should stick to it. Plan your trade and trade your plan.

3. Diversification

Diversifying your portfolio is one way to reduce your overall risk. You can hold a variety of different assets, keep each position at an appropriate size, and constantly rebalance the portfolio, so you won't be too heavily invested in any one asset. This can minimize the chance of oversized losses.

4. Hedging 

Although this requires a bit more experience, you can consider hedging your open positions, which means taking a position in a related asset that is expected to move in the opposite direction of the primary position. The purpose is to offset potential losses.

For example, if you own $10,000 worth of bitcoin and want to hedge against a possible decrease in its price, you could buy a put option for a premium that gives you the right to sell your BTC at $100,000 a few weeks from now. 

If Bitcoin's price falls to $80,000, you can exercise your option and sell for $100,000, significantly reducing your losses. If the price doesn’t fall, you only lose the premium paid while still profiting from the uptrend of your long position.

Closing Thoughts 

Markets can be unpredictable, and cryptocurrency markets are particularly volatile. With continued learning, however, you should be able to become a better crypto trader.

Remember to prioritize risk management in your trading journey. Stay informed about the latest developments in the crypto space, continue refining your skills, and adapt your strategies as needed.

Further Reading

What Is Swing Trading in Crypto?

Crypto Day Trading vs. HODLing: Which Strategy Is Best for You?

A Beginner's Guide to Candlestick Charts

5 Exit Strategies for Traders

Disclaimer: This content is presented to you on an “as is” basis for general information and educational purposes only, without representation or warranty of any kind. It should not be construed as financial, legal or other professional advice, nor is it intended to recommend the purchase of any specific product or service. You should seek your own advice from appropriate professional advisors. Products mentioned in this article may not be available in your region. Where the article is contributed by a third party contributor, please note that those views expressed belong to the third party contributor, and do not necessarily reflect those of Binance Academy. Please read our full disclaimer for further details. Digital asset prices can be volatile. The value of your investment may go down or up and you may not get back the amount invested. You are solely responsible for your investment decisions and Binance Academy is not liable for any losses you may incur. This material should not be construed as financial, legal or other professional advice. For more information, see our Terms of Use and Risk Warning.

Community Submission - Author: WhoTookMyCrypto.com

2017 was a remarkable year for the cryptocurrency industry as their rapid increase in valuations propelled them into mainstream media. Unsurprisingly, this garnered them immense interest from both the general public as well as cybercriminals. The relative anonymity offered by cryptocurrencies has made them a favorite amongst criminals who often use them to bypass traditional banking systems and avoid financial surveillance from regulators.

Given that people are spending more time on their smartphones than desktops, it is thus not surprising that cybercriminals have also turned their attention to them. The following discussion highlights how scammers have been targeting cryptocurrency users through their mobile devices, along with a few steps that users can take to protect themselves.


Fake cryptocurrency apps

Fake cryptocurrency exchange apps

The most well-known example of a fake cryptocurrency exchange app is probably the one of Poloniex. Prior to the launch of their official mobile trading app in July 2018, Google Play was already listing several fake Poloniex exchange apps, which were intentionally designed to be functional. Many users that downloaded those fraudulent apps had their Poloniex login credentials compromised, and their cryptocurrencies were stolen. Some apps even went a step further requesting the login credentials of users Gmail accounts. It is important to highlight that only accounts without two-factor authentication (2FA) were compromised.

The following steps can help protect you against such scams.

Check the exchange’s official website to verify if they indeed offer a mobile trading app. If so, use the link provided on their website.

Read the reviews and ratings. Fraudulent apps often have many bad reviews with people complaining about getting scammed, so make sure to check them before you download. However, you should also be skeptical of apps that present perfect ratings and comments. Any legitimate app has its fair share of negative reviews.

Check the app developer information. Look for whether a legitimate company, email address, and website are provided. You should also perform an online search on the information provided to see if they are really related to the official exchange.

Check the number of downloads. The download count should also be considered. It is unlikely that a highly popular cryptocurrency exchange would have a small number of downloads.

Activate 2FA on your accounts. Although not 100% secure, 2FA is much harder to bypass and can make a huge difference in protecting your funds, even if your login credentials are phished.


Fake cryptocurrency wallet apps

There are many different types of fake apps. One variation seeks to obtain personal information from users such as their wallet passwords and private keys.

In some cases, fake apps provide previously generated public addresses to users. So they assume funds are to be deposited into these addresses. However, they do not gain access to the private keys and thus do not have access to any funds that are sent to them.

Such fake wallets have been created for popular cryptocurrencies such as Ethereum and Neo and, unfortunately, many users lost their funds. Here are some preventive steps that can be taken to avoid becoming a victim:

The precautions highlighted in the exchange app segment above are equally applicable. However, an additional precaution you can take when dealing with wallet apps is to make sure brand new addresses are generated when you first open the app, and that you are in possession of the private keys (or mnemonic seeds). A legitimate wallet app allows you to export the private keys, but it is also important to ensure the generation of new key pairs is not compromised. So you should use a reputable software (preferably open source).

Even if the app provides you a private key (or seed), you should verify whether the public addresses can be derived and accessed from them. For example, some Bitcoin wallets allow users to import their private keys or seeds to visualize the addresses and access the funds. To minimize the risks of keys and seeds being compromised, you may perform this on an air-gapped computer (disconnected from the internet).


Cryptojacking apps

Cryptojacking has been a hot favorite amongst cybercriminals due to the low barriers to entry and low overheads required. Furthermore, it offers them the potential for long-term recurring income. Despite their lower processing power when compared to PCs, mobile devices are increasingly becoming a target of cryptojacking.

Apart from web-browser cryptojacking, cybercriminals are also developing programs that appear to be legitimate gaming, utility or educational apps. However, many of these apps are designed to secretly run crypto-mining scripts in the background.

There are also cryptojacking apps that are advertised as legitimate third-party miners, but the rewards are delivered to the app developer instead of the users.

To make things worse, cybercriminals have become increasingly sophisticated, deploying lightweight mining algorithms to avoid detection.

Cryptojacking is incredibly harmful to your mobile devices as they degrade performance and accelerates wear and tear. Even worse, they could potentially act as Trojan horses for more nefarious malware. 

The following steps can be taken to guard against them.

Only download apps from official stores, such as Google Play. Pirated apps are not pre-scanned and are more likely to contain cryptojacking scripts.

Monitor your phone for excessive battery draining or overheating. Once detected, terminate apps that are causing this.

Keep your device and apps updated so that security vulnerabilities get patched.

Use a web browser that guards against cryptojacking or install reputable browser plug-ins, such as MinerBlock, NoCoin, and Adblock.

If possible, install mobile antivirus software and keep it updated.


Free giveaway and fake crypto-miner apps

These are apps that pretend to mine cryptocurrencies for their users but don’t actually do anything apart from displaying ads. They incentivize users to keep the apps open by reflecting an increase in the user’s rewards over time. Some apps even incentivize users to leave 5-star ratings in order to get rewards. Of course, none of these apps were actually mining, and their users never received any rewards.

To guard against this scam, understand that for the majority of cryptocurrencies, mining requires highly specialized hardware (ASICs), meaning it is not feasible to mine on a mobile device. Whatever amounts you mine would be trivial at best. Stay away from any such apps.


Clipper apps

Such apps alter the cryptocurrency addresses you copy and replace them with those of the attacker. Thus, while a victim may copy the correct recipient address, the one they paste to process the transaction is replaced by those of the attacker.

To avoid falling victim to such apps, here are some precautions you can take when processing transactions.

Always double and triple check the address you are pasting into the recipient field. Blockchain transactions are irreversible so you should always be careful.

It is best to verify the entire address instead of just portions of it. Some apps are intelligent enough to paste addresses that look similar to your intended address.


SIM swapping

In a SIM swapping scam, a cybercriminal gains access to the phone number of a user. They do this by employing social engineering techniques to trick mobile phone operators into issuing a new SIM card to them. The most well-known SIM swapping scam involved cryptocurrency entrepreneur Michael Terpin. He alleged that AT&T was negligent in their handling of his mobile phone credentials resulting in him losing tokens valued at more than 20 million US dollars.

Once cybercriminals have gained access to your phone number, they can use it to bypass any 2FA that relies on that. From there, they can work their way into your cryptocurrency wallets and exchanges.

Another method cybercriminals can employ is to monitor your SMS communications. Flaws in communications networks can allow criminals to intercept your messages which can include the second-factor pin messaged to you.

What makes this attack particularly concerning is that users are not required to undertake any action, such as downloading a fake software or clicking a malicious link.

To prevent falling prey to such scams, here are some steps to consider.

Do not use your mobile phone number for SMS 2FA. Instead, use apps like Google Authenticator or Authy to secure your accounts. Cybercriminals are unable to gain access to these apps even if they possess your phone number. Alternatively, you may use hardware 2FA such as YubiKey or Google's Titan Security Key.

Do not reveal personal identifying information on social media, such as your mobile phone number. Cybercriminals can pick up such information and use them to impersonate you elsewhere. 

You should never announce on social media that you own cryptocurrencies as this would make you a target. Or if you are in a position where everyone already knows you own them, then avoid disclosing personal information including the exchanges or wallets you use.

Make arrangements with your mobile phone providers to protect your account. This could mean attaching a pin or password to your account and dictating that only users with knowledge of the pin can make changes to the account. Alternatively, you can require such changes to be made in person and disallow them over the phone.


WiFi

Cybercriminals are constantly seeking entry points into mobile devices, especially the ones of cryptocurrency users. One such entry point is that of WiFi access. Public WiFi is insecure and users should take precautions before connecting to them. If not, they risk cybercriminals gaining access to the data on their mobile devices. These precautions have been covered in the article on public WiFi.


Closing thoughts

Mobile phones have become an essential part of our lives. In fact, they are so intertwined with your digital identity that they can become your greatest vulnerability. Cybercriminals are aware of this and will continue to find ways to exploit this. Securing your mobile devices is no longer optional. It has become a necessity. Stay safe.

Key Takeaways

Spot trading is among the simplest and most traditional ways of buying and selling financial assets.

Binance Spot trading platform offers a user-friendly interface with low fees and high liquidity. It’s suitable for all kinds of traders.

The guide covers the basics of spot trading and shows you how to use Binance Spot so you can easily buy or sell cryptocurrencies anytime.

Introduction

When people first begin their journey into cryptocurrency trading and investing, they often start with spot trading, which is among the simplest ways of buying and selling financial assets. 

Binance Spot is a spot trading platform that offers a user-friendly interface, allowing users to easily buy and sell assets with low fees and high liquidity, making it ideal for both beginners and experienced traders.

In this article, we will cover the basics of spot trading, how it differs from other forms of trading, and some of its advantages. After that, we will learn how to do spot trading on Binance.

What Is Spot Trading?

Spot trading is a direct and immediate form of trading, with transactions settling instantly and without any kind of leverage. It’s one of the most basic forms of trading and can be done with a variety of asset classes, such as cryptocurrencies, stocks, commodities, forex, bonds, and more.

Although spot trading may occur directly between traders, transactions are usually facilitated by an exchange like Binance.

What’s the Difference Between Spot Markets and Futures Markets?

Spot markets execute instant or short-term trades with immediate delivery, while futures markets involve contracts that set delivery for a future date. Spot trading relies on the current market price based on supply and demand. Futures contracts, on the other hand, are based on agreements between buyers and sellers.

What’s the Difference Between Spot Trading and Margin Trading?

Spot trading requires full asset purchase and immediate delivery, while margin trading allows borrowing funds to enter larger positions. Margin trading amplifies both potential profits and losses, offering increased risk and reward.

Advantages of Spot Trading

Lower risk: Spot markets rely solely on buy and sell orders without concerns of liquidation or margin calls. It’s ideal for users who want to buy and hold.

Simplicity: Spot trading is straightforward, making it accessible for everyone and ideal for beginners.

Immediate entry and exit: Traders can enter or exit a trade at any time.

How to Spot Trade on Binance?

In this example, we will go through the Binance Spot interface. Then, we will illustrate how to buy BTC with USDT using a limit order, followed by an example of how to sell BTC for USDT using a market order.

How to access the Binance Spot interface

1. Log in to your Binance account and find [Trade] → [Spot].

2. You will be redirected to the Binance trading interface.

3. On the left side is the order book. Sell orders (asks) are in red, while buy orders (bids) are in green.

4. The trading chart at the center is an interactive chart of the selected trading pair. In this example, BTC/USDT.

5. The trading pair list is on the right side. It contains all available trading pairs on Binance. You can use the Search function to find specific pairs.

6. Below the chart is where you can create buying and selling orders. But to do so, you need to fund your Spot Wallet.

7. For example, if you are buying BTC with USDT, you need to first add USDT to your Spot Wallet. Click the [+] icon to fund your account and choose your preferred method.

How to buy BTC with USDT

1. The first step is to choose an order type. A limit order allows you to set a specific price for your order (not necessarily the current price). A market order will try to fulfill your order as soon as possible at the current available price.

2. If you are using a limit order, specify the price and amount you want to buy and click [Buy BTC] to create the order.

3. You will get a notification at the top right corner of your screen. 

Note that you can track your open orders at the bottom of your trading interface.

4. If BTC reaches your order price, your order will be filled.

How to sell BTC for USDT

The process for creating selling orders is very similar. Let’s see how you can sell your BTC for USDT. In this example, we will use a market order.

1. Choose your order type, set the amount, and click [Sell BTC].

2. Since we are using a market order, the selling order will be created and filled immediately at market price.

How to view my order details

You can view your order history, trade history, and other details at the bottom of your trading interface.

You can also edit open orders by clicking the edit button near Price and Amount.

On the right side, you can click the bin icon to cancel orders individually or the [Cancel All] button to cancel all open orders.

Closing Thoughts

Embarking on the exciting journey of cryptocurrency trading often starts with the simplicity and accessibility of spot trading. Binance Spot, with its user-friendly interface, low fees, and high liquidity, is the ideal platform for both novice and seasoned traders.

Further Reading

Your Guide to Binance Launchpad and Launchpool

An Introduction to BNB Smart Chain (BSC)

What Are Bitcoin Layer 2 Networks?

Disclaimer: This content is presented to you on an “as is” basis for general information and educational purposes only, without representation or warranty of any kind. It should not be construed as financial, legal or other professional advice, nor is it intended to recommend the purchase of any specific product or service. You should seek your own advice from appropriate professional advisors. Where the article is contributed by a third party contributor, please note that those views expressed belong to the third party contributor, and do not necessarily reflect those of Binance Academy. Please read our full disclaimer here for further details. Digital asset prices can be volatile. The value of your investment may go down or up and you may not get back the amount invested. You are solely responsible for your investment decisions and Binance Academy is not liable for any losses you may incur. This material should not be construed as financial, legal or other professional advice. For more information, see our Terms of Use and Risk Warning.

Introduction

As a newcomer to trading or investing, reading charts can be a daunting task. Some rely on their gut feeling and make their investments based on their intuition. While this strategy might temporarily work in a bullish market environment, it most likely won’t in the long run. 

Essentially, trading and investing are games of probabilities and risk management. So, being able to read candlestick charts is vital to almost any investment style. This article will explain what candlestick charts are and how to read them.


What is a candlestick chart?

A candlestick chart is a type of financial chart that graphically represents the price moves of an asset for a given timeframe. As the name suggests, it’s made up of candlesticks, each representing the same amount of time. The candlesticks can represent virtually any period, from seconds to years. 

Candlestick charts date back to about the 17th century. Their creation as a charting tool is often credited to a Japanese rice trader called Homma. His ideas were likely what provided the foundation for what is now used as the modern candlestick chart. Homma’s findings were refined by many, most notably by Charles Dow, one of the fathers of modern technical analysis.

While candlestick charts could be used to analyze any other types of data, they are mostly employed to facilitate the analysis of financial markets. Used correctly, they’re tools that can help traders gauge the probability of outcomes in the price movement. They can be useful as they enable traders and investors to form their own ideas based on their analysis of the market.


How do candlestick charts work?

The following price points are needed to create each candlestick:

Open — The first recorded trading price of the asset within that particular timeframe.

High — The highest recorded trading price of the asset within that particular timeframe.

Low — The lowest recorded trading price of the asset within that particular timeframe.

Close — The last recorded trading price of the asset within that particular timeframe.



Collectively, this data set is often referred to as the OHLC values. The relationship between the open, high, low, and close determines how the candlestick looks.

The distance between the open and close is referred to as the body, while the distance between the body and the high/low is referred to as the wick or shadow. The distance between the high and low of the candle is called the range of the candlestick. 


How to read candlestick charts

Many traders consider candlestick charts easier to read than the more conventional bar and line charts, even though they provide similar information. Candlestick charts can be read at a glance, offering a simple representation of price action. 

In practice, a candlestick shows the battle between bulls and bears for a certain period. Generally, the longer the body is, the more intense the buying or selling pressure was during the measured timeframe. If the wicks on the candle are short, it means that the high (or the low) of the measured timeframe was near the closing price.

The color and settings may vary with different charting tools, but generally, if the body is green, it means that the asset closed higher than it opened. Red means that the price moved down during the measured timeframe, so the close was lower than the open. 

Some chartists prefer to use black-and-white representations. So instead of using green and red, the charts represent up movements with hollow candles and down moves with black candles.


What candlestick charts don’t tell you

While candlesticks are useful in giving you a general idea of price action, they may not provide all you need for a comprehensive analysis. For instance, candlesticks don’t show in detail what happened in the interval between the open and close, only the distance between the two points (along with the highest and lowest prices).

For example, while the wicks of a candlestick do tell us the high and low of the period, they can't tell us which one happened first. Still, in most charting tools, the timeframe can be changed, allowing traders to zoom into lower timeframes for more details.


Candlestick charts can also contain a lot of market noise, especially when charting lower timeframes. The candles can change very quickly, which can make them challenging to interpret.


Heikin-Ashi candlesticks

So far, we have discussed what is sometimes referred to as the Japanese candlestick chart. But, there are other ways to calculate candlesticks. The Heikin-Ashi Technique is one of them.

Heikin-Ashi stands for “average bar” in Japanese. Such candlestick charts rely on a modified formula that uses average price data. The main goal is to smooth out price action and filter out market noise. As such, Heikin-Ashi candles can make it easier to spot market trends, price patterns, and possible reversals.

Traders often use Heikin-Ashi candles in combination with Japanese candlesticks to avoid false signals and increase the chances of spotting market trends. Green Heikin-Ashi candles with no lower wicks generally indicate a strong uptrend, while red candles with no upper wicks may point to a strong downtrend.

While Heikin-Ashi candlesticks can be a powerful tool, like any other technical analysis technique, they do have their limitations. Since these candles use averaged price data, patterns may take longer to develop. Also, they don’t show price gaps and may obscure other price data.


Closing thoughts

Candlestick charts are one of the most fundamental tools for any trader or investor. They not only provide a visual representation of the price action for a given asset, but also offer the flexibility to analyze data in different timeframes.

An extensive study of candlestick charts and patterns, combined with an analytical mindset and enough practice may eventually provide traders with an edge over the market. Still, most traders and investors agree that it’s also important to consider other methods, such as fundamental analysis.

Key Takeaways

Bitcoin may be one of the most popular coins to invest in, but it’s not the only one. Altcoins provide a great alternative when buying crypto that can increase the diversity of your portfolio.

Your choice of crypto should also take into account whether you are investing or trading, as well as your risk profile and the type of analysis you want to make. You could choose fundamental or technical analysis or even a mixture of both. With all this in mind, you’ll be ready to start investing or trading on Binance.

Introduction

Investing in Bitcoin and other cryptocurrencies is a great way to diversify your investments, but it also involves high risk. So before you jump in, it’s essential to understand some basic concepts and principles. There’s more to it than just buying some crypto and hoping for the best. 

An informed investment decision involves careful research and analysis. Ideally, you should have a strategy based on your risk profile, and you should never invest more than you can afford to lose.

Bitcoin or altcoins?

For newcomers to crypto, Bitcoin is usually the first stop when it comes to investing. It’s the most famous blockchain project and the largest cryptocurrency by market capitalization.

However, there are thousands of different cryptocurrencies (altcoins) out there. Some altcoins have their own blockchain, while others use a pre-existing network (such as BNB Smart Chain or Ethereum). Every project has a different proposal, each with its own potential risks and benefits. 

Whether you want to invest in BTC only or multiple cryptoassets is totally up to you. Some prefer to stick to BTC; others prefer to diversify their holdings with altcoins.

On the one hand, asset diversification removes the risks of investing in only one project. If you have multiple assets, you are less likely to lose significant amounts if one of them fails. On the other hand, altcoin investments can be risky and, unfortunately, there are many scams around. So it’s very important to do your own research before taking risks.

Should I trade or invest?

A decision on what to buy also needs to take into account if you are investing or trading. The two are easily confused, but there’s a difference. Put simply, investing involves picking assets that you believe in and holding over a longer time. Such a strategy involves a less active time commitment and usually carries much less risk.

In contrast, trading aims to make short or medium-term gains through regular buying and selling. Becoming a good trader takes a lot of time and practice. A trader needs to develop more complex strategies, dedicate more time to analyzing markets and trading platforms, and handle more risk. They also need to consider the money spent on trading and transaction fees.

Keep in mind that cryptocurrency markets tend to present more volatility than traditional ones. While traders need volatility to make profits, high levels of volatility may also bring high risk.

For beginners, investing is by far the easiest and safest option. Investors are usually thinking in terms of years, so short-term price changes aren’t that important. A decision to invest is based more on the fundamentals of a coin (how solid is the project and how likely it is to succeed in the long run).

Some prefer to invest and not worry about short-term fluctuations. Others prefer to trade often in an attempt to maximize profits. Some even do both at the same time. It all depends on your strategy, profile, and risk tolerance. Again, the decision is yours, but you should never invest or trade with funds that you cannot afford to lose.

With all that said, if you want to learn more about crypto day trading and swing trading, you can find more information in our Complete Guide to Cryptocurrency Trading for Beginners.

Fundamental analysis vs. technical analysis

Deciding on what will make a good investment needs some analysis work. The type of analysis will depend primarily on investing or trading, but both fundamental and technical analyses can be useful.

As mentioned, short to medium-term price changes aren’t so important when investing (or HODLing). In general, long-term investment is more concerned with the intrinsic value of a coin or project, which relates to fundamental analysis (FA).

Fundamental analysis involves assessing the potential of an asset based on the project as a whole, including its utility, team, whitepaper, development, marketing, management, reputation, long-term goals, and other factors.

In contrast, technical analysis (TA) considers previous price action and volume data to try and predict future price movements. The technique usually involves candlestick charts and TA indicators, such as moving averages and trend lines.

Buying your first bitcoin on Binance

You can easily buy bitcoin and altcoins on the Binance crypto exchange.

1. Create an account by heading to the Binance homepage and clicking [Register] at the top right corner.

2. Next, you will have to verify your Binance account. This KYC process helps us make sure you are who you claim to be and fulfill our legal requirements.

3. The easiest method to buy some crypto is to use your credit card or debit card with the Buy Crypto feature. Log in to your Binance app, and go to Binance Pro. Tap [Add Funds], then [Buy with]. Here, we use EUR as an example. You can change the fiat currency using the menu at the top right corner.

4. Set the amount and payment method, then click [Buy] to confirm. 

You can also transfer fiat currency from your bank account to buy digital assets with the Binance Spot trading interface. See the Binance Beginner's Guide for more information.

Binance P2P

Alternatively, you can use Binance P2P, an industry-leading peer-to-peer marketplace. Trade with freedom to choose the best price, payment method, and trading partners, all secured by Binance's escrow service.

1. For App users, start by clicking [Add funds] on the homepage, select [P2P Trading], choose your currency and payment method from over 700 options.

2. For speed and simplicity, use the Express version, and we'll recommend a verified counterparty. For detailed instructions, check out our P2P guide or refer to the FAQ page.

Buying your first altcoin on Binance

You can begin diversifying your portfolio by buying an altcoin like BNB, which is a utility token with many use cases. 

1. Log in to your Binance app, and go to Binance Pro. Tap [Add Funds] - [Buy with]. Here, we use EUR as an example. You can change the fiat currency using the menu at the top right.

2. Next, you’ll be able to choose from a variety of cryptocurrencies. Make sure to select the correct fiat currency as well. In this example, we chose to buy BNB with EUR.

3. Fill in your card details to finalize the purchase and wait for the crypto to be credited to your account.

You can also buy altcoins with various payment methods using your local currency on Binance P2P or the Buy Crypto page.

What should I do with my cryptocurrency?

Buying, selling, and holding crypto are some of the strategies you can use when investing or trading crypto. When it comes to long-term holding, you can choose to keep your cryptocurrencies in your Binance account or transfer them to an external cryptocurrency wallet. 

If you opt to keep your crypto in your Binance account, you may consider exploring the many options provided by Binance Earn. You can think of it as a savings account that allows you to earn passive income while holding your crypto.

Closing thoughts

It takes some time to learn how to invest or trade cryptocurrencies. Improving your knowledge is a good way of reducing your overall investment risk, leading to more informed decisions. It's easy to panic-sell an asset based on emotion, but the chances of this happening are much lower when you study up on investment and trading. For more on this, check out The Psychology of Market Cycles.