There is no easier path to understanding crypto trading than just trading. The problem is, it's easier said than done.
Still, if you know how, it’s something that can earn you good, consistent money.
To start with, trading with some understanding of the market including the basics of it, market movements, the reason behind the different market trends, and when to enter and exit a trade, puts you on the forefront of things. The best bet is always to put money into something you understand and understand well.
Many people don't like day trading but instead prefer long term holding of their coins (hodling) or investing in ICOs or similar opportunities. That may be partly because it requires a lot of work to day-trade: you are going to need to keep an eye on the markets throughout, you will need to do your own analyses to determine which coins are the best buys and which are best sells, and then to base your analyses on current affairs and even rumors and pumps and dumps.
Furthermore, crypto trading is much more unpredictable because of volatility (the fact that prices can swing by huge ranges at a short time), which means prices are affected by way too many factors including pumps and dumps, regulation, politics, market sentiments which are, in turn, affected by all kinds of things including FUD and fake news as well as announcements from projects. This is notwithstanding the normal forces of supply and demand.
There is no single perfect way of knowing whether a cryptocurrency price or coin price will go up or down in future and especially by how much and for how long; therefore the decisions about when to buy or sell and when to cannot be not perfect. On top of this, crypto trading is not a perfecting game: you are going to have to expect losses, only to not let them be more than your profits.
Therefore, what we are actually talking about is the ability to make a near-correct judgement about when to buy or sell cryptocurrencies or when to not, increasing the chances that the judgement is made at the right time, and to take advantage of those judgements, especially when signals are clear in markets about when to sell or buy or just hold…since signals are sometimes clear about the direction of the movement of the price but are not in other times.
Buying/selling crypto because there is news about it or because others are buying/selling it may be helpful when there are long term effects of these primary actions causing people to buy or sell, but it is basically not an advisable approach because it may be too late to make a move. Rather, it is more advisable to build your trading strategy little by little and have a long term approach to trading crypto based on the knowledge and skills and trading experience you build over time instead of relying on rumors and announcements from projects on media sites. Always remember to buy the rumor and sell the news.
When an event appears in the news, it may be time to exit a position about that crypto if it is too late. Finally, it is crucial to set long term and short term trading goals as a blanket guideline for your day to day trading actions.
Buy the dips sell the rips
Many people already know that the best time to buy a cryptocurrency is when its price has dropped. However, every drop in price is not always a dip or an opportunity to buy. Dips must be predefined and have a reference point. A dip is always connected to the underlying value of an asset. The concept of dips is based on the theory of price waves where an investor buys when the price is low or has gone down and hopes or estimates that the price will go up so that they will sell the asset at a higher price for a profit. However, a drop can happen for many reasons and the drop may not necessarily reflect a true fall in the underlying value of an asset.
Therefore, it may be rewarding to understand the reason for a significant drop or rise in price before buying a cryptocurrency. For instance, a significant drop in price due to a significant fall in the underlying value or utility of an asset may mean the asset will either take some time before recovery or that it will go down completely. Therefore it may be a bad decision to buy crypto at this time if you are aiming for short term profits. On the other hand, a quick recovery in price would be expected if there is no significant fall in the underlying value of the asset that precedes it. In such a case, most people will advise buying said asset in increments or in smaller bits as its price reaches certain levels. In that case, you will make some profit at whichever level it recovers and if it goes down further, you can still buy more at a lower price.
If a significant decrease in price occurs as a result of a significant dent in an asset's underlying value, then the most prudent thing would be to sell and prevent further losses. So selling can also happen when there is a drop in price for those people wanting to cut down losses down the price road, but there is one sure thing for most cryptocurrencies: that the price will come back up if the project is not dying.
On the same note, a rise in price which is caused by reasons other than an increase in the underlying value of a cryptocurrency (for instance by pumps and dumps) is certainly going to be unsustainable in the long run and will definitely cause a fall in price in the short run. Therefore, it may still be a bad decision to buy if you are aiming for long term gains. Nevertheless, it will be a good decision to sell (all or a given amount) if your goal was to get profits in the short term. Buying can also happen when the price is going up, but a correction (whether its short-term or long-term) is always expected in this situation, with most cryptocurrencies. Just as we have seen with Bitcoin in the last year or so, a correction in the price (which means prices going down) may be prolonged if a huge upswing or rise in price is unexplained and does not reflect corresponding growth in the underlying value of a coin.
Therefore two factors are going to determine the medium-to-long term buying decisions; the underlying value of a cryptocurrency (which is judged by a number of factors discussed here) and the reasons for decrease or increase in prices as you hold the coin. While the assessment of underlying value may be made when first investing in the coin, it is also a continuous process as will be the reasons for a decrease in price. In most cases, short term buyers and sellers will need to rely on an adequate understanding of pumps and dumps and ongoing social sentiments to establish any sort of long term success in crypto trading and HODLing.
If, however, you're a short distance runner, there are a host of ways through which you can maximize profits and cut down losses in a short term such as using different types of orders.
Generally, buying dips works best when the price is trending upwards overall. Otherwise, in other situations, it is not usually advisable to buy cryptocurrencies.
When there is a buy signal and when there is a sell signal
In the cryptocurrency industry, there are trading charts that help traders and analysts to interpret the movement of prices and to predict the near and future movement of prices. Many analysts and traders alike use them to make sense of what is happening in the markets and thus what could be expected -- for instance reaction of buyers and sellers to announcements, volumes, and many other things. Analyses based on these technical charts, as they are called, are never as perfect as you would expect but can help to better estimate what to expect in the market. In addition, they also usually help to determine when one can be on the safer side buying and selling given cryptocurrencies. These are called buying and selling signals and some are easy to determine although there are others that are based on advanced economic indicators and theories that may be hard to interpret.
So most or all crypto trading apps and crypto exchanges provide charts for almost every other trading pair today. These charts are drawn based on different factors or what is known as indicators. These indicators include long term and short term indicators. For instance, some of these indicators are priced by their averages on a yearly, 30 day, 7 days, 1 day, or hourly basis. In simplicity, they could be used to interpret the movement of price over time but they are more complicated than that because they can be based on many other advanced economic indicators and theories.
Some of the common signals used to identify buying and selling opportunity in a price trend chart are the resistances and supports. As an asset's price moves up, it reaches a level at which it may not be able to sustain an upward movement (the price is said to have reached some imaginary resistance or roof) because of such factors as a decrease in demand of the certain cryptocurrency in question, which causes a selling pressure. This is known as the resistance and many who bought at lower prices will decide to sell at this point in order to take profits. In other words, it is an adequate selling signal for many traders. On the other hand, as the price moves down, it reaches a level where the downward trend is unsustainable because demand is rising and everyone wants to buy the cryptocurrency in question. This level or point is called support (because the price is said to have found imaginary support) and many traders will buy at this point because the price is likely to move up in the near future.
Depending on whether you are in it for the long or the short term, supports and resistances can be found for different durations on the chart. In other words, you can always find support levels when you interpret candle charts in the long-term or in the short term depending on what you want. In general, you can use these guides to decide whether to buy or sell in the short or long term. While doing so, you should think about whether you are expecting long term or short term profits depending on your trading strategy. Short term resistance can be helpful for traders who are aiming for short term gains and short term supports can also be helpful in the same situation, depending on the price movements the asset is experiencing.
To understand further how all of these indicators are used by crypto traders, you can read this article as well as another about algorithmic strategies that you can apply today to trade crypto.
Buy during ICOs, CEOs and token sales
Initial Coin Offerings, Security Tokens, and Initial Exchange Offerings are sales of tokens to the public when crypto projects are starting or launching and the projects provide opportunities for early investors to buy, not a share into the project, but assets that the buyer can expect to increase in value later on. Some projects also have other investment opportunities such as masternodes and staking. If a project has some good idea of some value like these examples or others that are similar, there is usually a higher chance that its asset's price will increase when its token sale is over. Here, it's also important to remember that price increases also often occur when a project has kicked off its development, its token has been listed on crypto exchanges, or publicity has started to increase for the project in general. Above all, however, price increases tend to happen when a project starts to release actual products.
For many ICOs, research shows that their return on investment of 10x is uncommon. Sometimes, those returns can be in hundreds of times of the initially invested amount. However, not all projects turn out to be worthy of investment during an ICO because a good number also turn out to be complete scams and have led to losses. For those who want to invest in ICOS, almost all ICOs and IEOs are periodically announced on ICO listing websites and many ICOs, STOs, and IEOs have proved to be good options for long-term investment. With all of these options, most investors just buy a token and hold it to sell it when the price goes up. In doing so, however, it's importance to understand market changes as well as other technical indicators.
Buy during bear markets
A bear market is when market prices are depress and those who bought when prices were high are looking to sell. On the other hand, it is also one of the best times to buy because you get to buy at significantly low prices and can make significant amount of money by holding the coin out of the bear market to recovery.
Lessons learned from Bitcoin is in the last 6 months is that the coin was trading low at $3000 but those who bought during then are now enjoying prices as high as $10,000 after holding for several months. Besides, you can short cryptocurrencies which means hedging on their decreasing prices. When you follow this strategy, you expect the prices to decrease and you sell the crypto at the current price using a contract to later buy it through the contract at lower bet prices.
In the end, remember, you make a profit from the difference even though the price is going lower.