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A trader always looks for a substantial investment opportunity and what could be better than crypto coin investment. If you are a trader but have no idea about crypto trading, this article is going to give you a detailed view of the trading of cryptocurrencies.
Here is a beginner’s guide to cryptocurrency trading for all budding crypto traders which includes-
1. Intro of Cryptocurrency & jargon(s) used for Crypto Trading.
2. What is Blockchain?
3. What can affect the price of Cryptocurrency? (Including Case Studies)
- Exchange Listing
- Software Upgrades
- Regulations
- Public Hype
4. Technical Analysis (Feature-wise)
5. Conclusion
What is Cryptocurrency?
Cryptocurrency is decentralized and immutable digital money leveraging Blockchain technology. It is used for transparent online peer-to-peer transactions.
Decentralization means only the two parties (sender and receiver) are authorized to monitor and track the transaction, not any third party, like RBI in the Indian banking system and Federal Bank in the USA.
Popular examples of cryptocurrency are Bitcoin, Ripple, EOS, Litecoin, Binance, and Tether.
To make cryptocurrency more understandable to you, here is a list of jargon or better say specific terms (market sentiments) used in the industry-
- Bagholder– A person who holds a specific cryptocurrency which decreases in value until it is worthless.
- Bear/Bearish– Downward price movement or Negative sentiment.
- Bear Trap– It’s a kind of a trap where a general upward price trend turns around downwards temporarily and will continue upward.
- BTD– Buy The Dip. It’s an indication to buy a coin when the price is substantially decreased.
- Bull/Bullish– Upward price movement or Positive sentiment.
- Bull Trap– it’s a kind of a trap where a general decreasing price movement quashes upwards fleetingly and will continue downward.
- Dead Cat Bounce– A temporary price recovery after a huge decrease.
- Dump/Dumping– Selling away your coins.
- ELI5– Explain to me Like I’m 5.
- Faucet– Website that gives you rewards with small amounts of cryptos for accomplishing a particular task.
- FA– Fundamental Analysis.
- FOMO– Fear Of Missing Out. This is a rookie mistake where a coin is quickly going high and you have a gut feeling it’s gonna increase more, so you buy at the peak.
- Fork– Splitting of the Blockchain because of competing protocol upgrades.
- FUD– Fear, Uncertainty & Doubt. Describes the time of panic where negative sentiments are inflated.
- HODL– Act of holding on to coins even in disastrous market condtions, defying the urge to sell.
- JOMO– Joy Of Missing Out.
- Long– A positive view on the market or the coin in general, usually with an essential investment in the coin in mind.
- MCAP– Market capitalization of the coin, an indicator of the cryptocurrency market size.
- Moon– Expected upward movement or burst of price, towards the moon.
- Pump– Upward price movement
- Pump & Dump– Price manipulation by whales or collectives
- Shitcoin– A coin without any potential value. Also, comprises worthless currencies like fiat money.
- Short– Selling coins on margin, expecting the price to go upward.
- TA– Technical Analysis or better say the price analysis based on historical price movements and fancy indicators.
- Rekt– A jargon that refers to “wrecked”.
- Reverse Indicator– An individual who always wrongly predicts price movements.
- RSI– Relative Strength Index, a popular trading indicator utilized in technical analysis.
- Vaporware– A project never actually created or executed, synonymous with shitcoin.
- Whale– An individual who owns a huge number of coins that can influence the prices of coins.
What is Blockchain?
At its most basic level, Blockchain is the chain of blocks, where these blocks keep essential information about the transaction like date, time, amount and name of the participants.
These blocks store unique information so that every block can be distinguished from each other in real-time. They include a unique code called “hash” that distinguishes one block from another.
For example, you’ve made a splurge purchase on an e-commerce site, say Amazon, but while the transaction was in transit, you decided to make a second purchase. Even though the details of your second transaction would look nearly similar to the first one, the blocks will still be apart due to their unique codes.
What can affect the price of Cryptocurrency?
While trading, many things can influence the price of the cryptocurrency and many times very quickly.
Here are 4 points where you need not only to be aware but also full of knowledge about them while cryptocurrency trading.
Exchange Listing
You’ve to particularly watch cryptocurrency list.
When Coinbase included Litecoin in their limited listing of crypto coins that can be purchased, the platform made sure that an average person can access it.
Coinbase has one of the best interfaces among crypto exchange listers. It is enormously user-friendly that a non-technical person can also buy Litecoin in no time.
Soon after the crypto listing platform launched, the price of Litecoin, started skyrocketing and now it’s one of the most preferred coins.
You would be thinking, this all happened coincidently, and it might be.
But, currently, adding Litecoin to Coinbase’s user base helped increase the price.
So, if you find a large exchange listing a crypto coin that you’re trading, take a note.
Software Upgrades
In the last few years, the Bitcoin community has heard a lot about upgrading the core software features of the Bitcoin exchange script. The key discussion has been about Bitcoin’s transaction speed.
This information would be quite valuable for those who have ever funded their trading account with Bitcoin or used it for buying purposes. For a digital currency, the transaction time remains a little slow, say 30 minutes or more for a single transaction.
The speed upgrade has become a hot debate and led to the manufacturing of Bitcoin Cash. With the creation of Bitcoin Cash, the crypto coin has reached new highs.
Over the next few years, there will be numerous software changes throughout all cryptocurrencies, so ensure you should understand the inferences of those changes.
Public Hype
The example of public hype affecting the price of cryptocurrencies was seen with Chinese and South Korean exchanges which led to another fall down of bitcoin and Altcoins, while NEO continued to grow against the circumstances of positive news from China.
Media and news can also cause a rise or fall in cryptocurrencies, so you should also be aware of public hype.
Government Regulation
Finally, who regulates cryptocurrency, then it’s the regional Government Regulation authorities who perform such activities.
Venezuela renders one example for this, where the police have been arresting miners of Bitcoin on made-up charges. This made miners hide in a shell or start mining another crypto coin like Ether.
This was just a case of Venezuela; in fact, it can happen in any country. Any decision taken by SEC or NFA can impact the price of certain cryptocurrencies.
The SEC has already imposed a ban on Initial Coin Offerings (ICOs) due to their pump and dump situation.
So, you should be watching trending news and keep your eyes on government regulation and have a clear knowledge of updates.
Technical Analysis-
Technical analysis involves indicators which are tools used by investors and traders to measure and assess market behavior (trade timing and alerts of new trends and others).
The above example includes the best indicators for crypto trading– Moving Average Convergence Divergence (MACD) and Relative Strength Index (RSI). Crypto RSI alert helps identify the relation between the price of currency and the real offer. It is not compulsory to understand the mathematics behind them, but you should know how it works and how it doesn’t.
Why Should We Use Indicators
Indicators represent an important part of technical analysis. The functions of technical indicators are as follows-
Indicators used in a technical analysis helps to-
- Predict– direction of future prices
- Confirm– a particular trend or price movement.
- Alert– investors/traders of the momentum of the market.
Types of Technical Indicators
There are 2 common types of technical indicators:
Overlays– These indicators are displayed or superimposed over the main price chart.
Oscillators- As the name suggests, they “oscillate” between an upper and lower limit, separated by a midpoint. Its value determines the momentum and strength of the trend.
Which Indicators Should Traders Use?
To choose the right indicators for your technical analysis, you should know how the different indicators work and match your strategy. You can read their features and properties in detail to have a better understanding of them.
Conclusion–
If you want to invest in crypto coins and become a trader, you should start with a beginner’s guide. You should evaluate every suggestion mentioned here and start patiently.
This is a beginner’s guide to cryptocurrency trading that contains all the imperative facts about cryptocurrency trading, and it would help you in accomplishing your investment goals.
