With a total market capitalization of over half a trillion dollars and a daily trading volume higher than some of the prominent national stock exchanges, cryptocurrency promoters are betting high stakes. A new trader is often left intrigued when it comes to trading cryptocurrencies. While there are several opinions on the ideal method for trading cryptocurrencies, an average trader relies on conventional financial wisdom and comparisons. Despite the crypto wave being on a high tide, only a small portion of the population is involved in crypto trading.
In order to trade crypto the following elements are necessary-
- A cryptocurrency wallet
- A cryptocurrency exchange
A few things to consider before trading cryptocurrencies are-
- A cryptocurrency exchange is not a part of the regular stock exchange.
- It is advisable for a beginner to trade cryptocurrency stocks on the stock market. For instance, GBTC owns Bitcoin and sells shares of it, trading this helps the beginner avoid trading cryptocurrency directly. Moreover, cryptocurrency trading is a 24-hour market, unlike the traditional stock market.
- The cryptocurrency market is high on volatility in 2018. There are high chances of amassing a fortune and also losing all your crypto assets. If one trades only top listed coins on CoinMarket Cap, then chances of losing all assets in one go are slim. Altcoins offer a riskier proposition but can offer sound profits on a good day. It is advisable to hedge funds and not “ go long” with all the investable funds.
- A beginner should choose an exchange with a good reputation which offers an exchange and wallet. For example. GDAX, Binance, Bitmex etc. Trading “crypto pairs” can reap huge profits, but it is more complex and risky than investing in a single cryptocurrency.
- It is highly advisable to avoid “margin trading”, unless one is an expert. It is imperative to completely understand the tax implications of trading cryptocurrency as coins are not necessarily considered ”like-kind” assets.
- A new crypto trader is also subject to behaviour patterns of others which give rise to biases in crypto trading.
How to buy cryptocurrency?
The easiest way to buy cryptocurrency is with a debit card on a centralized exchange.
Coinbase is a popular interface to buy crypto with fiat. The users first need to create an account on Coinbase and verify their identity. After this the users can buy cryptocurrencies with their debit card. The rules for verification of identity can be different for each exchange/country.
Another popular place to buy crypto assets with fiat is Robinhood. The trading app on Robinhood lets users buy Bitcoin and Ethereum without any trading fee.
Bitcoin ATMs are also an ideal option to buy Bitcoin using fiat currency and also to send it to Bitcoin wallet. These devices are extremely convenient and allow traders to do transactions without having to deal with “trading” part of the crypto.
How to sell cryptocurrency?
In case a trader wants to sell cryptocurrency to collect profits or to stop losses, the following options are available-
- On Bitfalls any cryptocurrency can be sold without having to convert it into BTC first.
- The currency being sold should be exchangeable with another currency in the market.
- Bitfalls supports direct payments to bank accounts (EUR, USD, HRK), or PayPal.
- It is a mobile app for buying and selling Bitcoin
- Abra supports withdrawing cash and bank transfers
- It is the best option when trading large amounts
- It supports only Bitcoin
- It is similar to Abra but without an app
- The arrangements are made through the website and then a live meet happens.
- It supports payouts via direct bank account deposits, via a debit card and in gold.
- The debit card option is practical as it works on local ATMs for cash withdrawal.
- It supports direct sales and bank account deposits of several cryptocurrencies.
- A Euro bank account is needed for using Litebit else a high conversion fees would be required.
Note: It is important to note that there are risks involved with buying/selling cryptocurrencies, one should be very careful with large amounts of crypto assets.
How to Day Trade Cryptocurrency?
Day trading simply means holding an asset for a few seconds to couple of hours. The idea behind day trading is to make a small but quick profit.
For instance, Mark buys some NEO after studying the charts and it looks like the price is going to keep going up. He buys 100 NEO at a price of $17. The price continues to rise and reaches $24 in just a few hours, however, it then begins to go back down. Mark sells his NEO at a price of $21. Mark makes a profit of just over 23%, which amounts to just over $390.
Although it is not necessary that profits are made daily, there could be losses to. There are different methods people use to day trade, the main two are based on chart analysis on either speculation. When a trader believes that a price will go up due to a certain event, it is known as speculation. There is no guarantee that the prices will go up and it is the trader’s own opinion. However, when a trader studies the price movement of a particular cryptocurrency and analyses it based on historical price movements, it is known as chart analysis. Price moves can be tracked every few seconds, minutes or hours.
Things to consider before Day Trading
- In February 2018, a cryptocurrency called E-coin increased by 4000% in just 24 hours, only to fall back to where is started.The traders who bought it at the lowest price must have amassed a huge fortune, but those who bought it at the highest price lost faced huge losses.
- Taking the case of E-coin, it is important to note that day trading may not go as planned. A trader must never try to “chase” losses. Chasing losses is when a trader experiences a bad loss and attempts to regain it by taking really high risks. Consequently, majority of day traders fail. It is necessary to accept losses at some point.
- It is very important to practice trading even before depositing funds into your trading account. The major cryptocurrency exchanges offer a demo account. An ideal place to start is Coins2Learn. It offers a trading simulator which allows you to trade using fake money.
- It is advisable to start with low amounts, the amounts must not be larger than you can afford to lose.
- Day traders seek to make quick, short term gains which can be lower than 1% per trade. The traders will be having a large ‘bankroll’, which means that they can make good money if the percentage gains are small. Experienced traders will rarely risk more than 1% of their total bank roll.
- Another important aspect to day trading cryptocurrency is to set a stop loss. A stop loss is when a trader enters a price to exit the trade. For example, if someone bought Ethereum at $500, he could set himself for a stop loss of 10%. If the price of Ethereum goes down to $450, the system would automatically sell the investment. This protects the user from a sudden decline in price.
One can also do a “limit sell order” , which means that the trade can be automatically closed when the coin hits a certain higher price.
After all the facts have been considered, the first step is to find a good exchange. If one is looking to day trade full time, it is worth choosing an exchange that has different pairs listed on it.
A pairing refers to the two coins that are being traded. For instance, if one believes that the price of Ethereum would increase against the price of Bitcoin, then he would need to find a BTC/ETH pairing.
It is very important to find an exchange having lots of liquidity. This ensures that one will always be matched with a buyer or seller. Else, it would not be possible to close the trade when the price is falling.
Most of the cryptocurrency exchanges do not allow for deposits using a debit/credit card. It is necessary that after purchasing features of the trading screen are well understood.
The green bars signify that the price has gone up while red bars indicate that the price has gone down. However, there is no guarantee that prediction will be right, so it is advisable to exit a trade if things go bad.
How to trade cryptocurrency on Binance platform?
Binance is the best trading platform available for cryptocurrencies, but one cannot trade traditional currencies on it (i.e) US Dollars/ Sterling Pound/Euros cannot be transferred to the Binance Exchange account.
Setting up an Account on Binance
1.Logon to www.binance.com and the Binance homepage opens.
2. In the top right-hand corner, locate “Register”
3.Click “register” in the top right hand corner to get to the Binance Exchange Login. The page for setting up the account opens.
4.Put in the user credentials and set a strong password. After clicking register, a quick verification puzzle is presented. This is for safety purposes and to ensure that the account creator is a human being.
5.Slide the slider over the puzzle piece. After this has been done, an email verification needs to be carried out.
6.Confirm the registration and click” Verify Email”.
7. After this the following page appears.
9.Once the account has been logged on, fit the puzzle and drag the slider to verify.
10. Click the “ Google Auth” button on the left side. It is a crucial step in Binance verification.
11.2FA or two factor authentication enables Binance to ensure that the account is not hacked. Download the “Google Authenticator” from the Android Play Store or on your iPhone App Store.
12.Open the app and go back to Binance.There are two essential elements-
- The Barcode
- The Secret key
Barcode will sync the Binance account with Google 2FA. Once the app has been downloaded, scan the barcode. This will sync the Binance account with the user’s Google account.
Security Key is recommended to keep the security key saved in minimum three places. It is the only means to access your Binance account.
The Google App will provide a code which expires every ninety seconds. Open the app and apply the six-digit code provided by Google.
A secure account has been created on Binance and money can be deposited now.
Depositing Money in the Binance Account
In order to trade on Binance, Bitcoins or other cryptocurrencies are required. Once they have been purchased sending it the Binance account is easy.
- Navigate to the top right hand corner on the Binance homepage.
- Click “Funds” then click “Deposits & Withdrawals”.
3. A list of of Altcoins which can be traded on Binance appears. Choose a cryptocurrency from the list.
4.The desired currency can also be chosen from the search box.
5.After the currency has been chosen, click on the “Deposit” tab.
6.Let us suppose Ethereum is chosen. This will open the Ethereum Deposit Address.
Each cryptocurrency on Binance will have its own separate wallet which is 100% unique to the user.
Trading on Binance
To start trading, navigate to the top left and click on “Exchange”.
Click on the “Basic” tab. A page like this opens.
The upper right corner contains a list of coins for trade.
Identify the coin to be traded. Investors can diversify their crypto portfolio by investing Bitcoins into new coins. For instance, if you want to trade Ripple, type in XRP into the box under “Favorites” in the top right hand corner.
Click on it.
Click on 25%, 50%, 75% or 100%. Suppose 100% is selected.
In case 100% is bought, 21 XRPs can be purchased.
Binance Exchange Fees
Binance charges an exchange fee of 0.1% on the value of a trade. It is free to deposit coins in Binance and the trading fees can be reduced to half if it is paid in BNB token (Binance’s own coin).
How to trade cryptocurrency on Bittrex platform ?
Bittrex is one of the most popular Bitcoin exchanges. In order to trade on Bittrex Bitcoin or other cryptocurrencies are required. Once it has been done, the Bittrex account can be set up.
To open a Bittrex account, follow these steps-
Logon to www.bittrex.com. Scroll down and there is a box called “Get Started Now”. Click on it and it will redirect to the account registration page. Register the email address and password. After this, click on the activation link in the mail. Once signed-in, fill in the personal details. Verify your phone number for ensuring safety of the account. After this process, activate 2FA. This ensures only the user can open the account.Only after the authenticator code has been set up the account can be used.
Creating a Wallet on Bittrex-
On the top right corner, there is an option called “Wallets”. Click on it. A large list of cryptocurrencies will be available. Find Bitcoin “BTC” and click on the plus button next to it. The plus button is for making deposits and the minus button is for withdrawals.
Note: Ensure that only Bitcoins are deposited in a Bitcoin wallet.
Click on the “Plus” sign next to Bitcoins. It will show options to generate a new wallet. This will generate a string of characters which would be the wallet address. This is the public wallet address and anyone who wished to deposit Bitcoins to your Bittrex wallet can do so with the help of this wallet address.There is a QR code as well, scanning it will result in other Bitcoin wallets knowing the wallet address.
Note: Once the wallet address has been generated, do not generate a new wallet till absolutely necessary. In case the password is changed mid-transaction, the transaction would be deemed invalid which can invariably lead to losing all Bitcoins.
Bitcoins can now be deposited in the wallet. Transfer from the pre-existing services you are on.
If Bitcoins are stored in Zebpay, scan the QR code provided by the Bittrex wallet and transfer the number of Bitcoins.
Note: Before transferring ensure that you are using the code of only your Bittrex BTC wallet an not a wallet of any other cryptocurrency. Double check the wallet address just to make sure that Bitcoins don’t end up reaching someone else.
It may take a minimum of 5 minutes and also as many as 48 hours to appear on your Bittrex wallet. It depends on the number of transactions happening at the moment. Four verifications are needed for the amount to finally reflect in the Bittrex wallet. The progress of the transaction can be tracked here. You can check the progress of your transaction here.
The Bittrex Bitcoin Wallet has the following sections:
Account Balances – It depicts the amount held in each cryptocurrency.
Pending Withdrawals – After the money has been withdrawn, it appears here in the interim period between the moment of withdrawal and the moment it is deposited to other wallets.
Pending Deposits – Deposits made to your wallet which have an incomplete verification procedure.These deposits won’t reflect in the account balance, but can be seen here.
Trading on Bittrex
One the top left corner there are two markets. Click on the one with the Bitcoin symbol. There is an option to search for other cryptocurrencies. Key in the code of your cryptocurrency and select it from the list.
Various statistics will be available related to the chosen cryptocurrency. Below the graphs there will be an option for “Trading”.
You would see many boxes here. However the one that is of primary concern is the Bid box. Tapping on Price would show you three options.
There will be many boxes, but the important one is the Bid Box. Click on the “Price” and it will show you three options:
Bid Price is the highest price at which the currency is being offered at the moment.
Last Price is the last price at which someone purchased this currency.
Ask Price is when you wish to buy the currency at a rate lower than the existing market rate, you can set an Ask Price and the transaction will only take place when there’s a seller offering a coin at that rate or lower than that.
If someone wished to purchase the currency at a rate lower than the existing market rate. He can set an Ask Price and the transaction will take place only if a seller is offering a coin at a rate lower than that.
In case a user buys it at the “Last Price”, enter the no. of ETH you want to buy in ‘Units’. Once decided, press” Buy Ethereum” to make the purchase. The purchase will reflect in the wallet and a new Ethereum wallet will be formed. Thus, this is how a trade will be carried out on Bittrex.
How to trade Cryptocurrencies without fees?
Different cryptocurrency exchanges have several measures to drastically reduce the transaction fees involved in trade-
- Binance has a low transaction fee of 0.1% per trade, to reduce fee to half pay using BNB tokens(Binance’s own token)
- When trading on GDAX, one must only buy limit orders and avoid selling close to the current price.
- Platforms like Robinhood have offer fee-free trade. Trading can be done here to avoid large transaction fees.
It is very important to remember that only a few tech-oriented people can fully grasp the technology and it is extremely difficult for a non-techie newcomer to understand the nitty gritties and invest in the market. An investor may be fortunate if there are profits, but the possibility of a crash cannot be completely overruled.
In the ever-evolving crypto market, an investor can diversify his holdings in several crypto assets rather than betting high stakes on a single cryptocurrency. A careful and strategic analysis combined with a risk-taking ability is called for to reap profits in the long run.