Investing in Cryptocurrency: A Beginner’s Guide
Are you ready to get started in investing in cryptocurrency, but you don’t have a clue as to how to get started? Lots of online resources are heavy on complex financial jargon that is difficult to understand. It can all appear pretty intimidating. Fortunately, trading cryptocurrencies isn’t as complicated as it seems. The key is finding one good strategy and sticking with it – and we’ve got your guide to doing just that.
Most of the trading strategies applicable to cryptocurrencies have been tried and tested in traditional finance, in investments like stocks and forex. To pick the best strategy for your needs, let’s go through three main methods below.
1. Buy and Hold Cryptocurrency
Buying and holding is the simplest trading strategy. You’ll buy an asset and hold it for the long run. That’s all. Traders that do this don’t sweat the day-to-day market fluctuations that characterize the crypto markets. When applying this strategy to cryptocurrencies, find coins that pique your interest, and carefully evaluate their long term prospects. If you believe they’ll flourish in the long-run, invest. Let’s take Bitcoin for an example.
A few years back, Bitcoin was trading at under $500. A buy and hold trader would’ve bought it believing in the long-term potential. Fluctuations in the markets, such as the 2013 collapse when it went to less than $200, would not have induced a sell. Today, that Bitcoin would be worth around $6,000. That’s a nice return on investment.
What’s the trick to success with a buy and hold strategy?
To be successful with this strategy, you need to control your emotions. The market will go up, and the market will come down. You need to be patient and think long term. Don’t panic sell.
2. Swing Trading Cryptocurrency
Swing trading is making a trade with a shorter-term time window: typically a few days or weeks. To make money doing this, you need to guess which way a coin will move in in the near future. This can be done through a mix of fundamental and technical analyses.
Tips for Swing Trading Cryptos
The best way to make a good swing trade is by anticipating major news events in the markets. For instance, in November 2017, there was the anticipation of a hard fork on the Bitcoin network. The hard fork was projected to push up Bitcoin prices. A swing trader would’ve bought before the news came out officially, and sold as the prices rose after. “Buy the rumor, sell the news,” is a common saying among swing traders.
3. Day Trading Cryptocurrency
Day traders buy and hold an asset for a day or less. No trades continue overnight. A day trader enters the market in the morning and exits in the evening, regardless of market performance.
Tips for Making the Most with Day Trading
A key to day trading is finding a highly liquid cryptocurrency exchange. You’ll be able to make trades rapidly as markets roll up and down.
Get Started Trading
Regardless of which strategy you pick, the first step is creating an account with at a cryptocurrency exchange. From there, pick a strategy that fits your personality, personal situation, and goals.
- Don’t try day trading if you’re an anxious person
- Don’t buy and hold if you don’t believe in a project long-term.
A perfect example is Bitcoin in December 2017. Up until Mid-December 2017, Bitcoin prices were rocketing up, peaking at over $20,000 for a single coin. However, after futures trading started, the price fell to as low as $11,000. What followed was the bear market of Q1 and Q2 2018, sending BTC to as low as $6000. That kind of swing is irrelevant to a long-term holder, but someone buying and selling in the short term might have panic sold, ensuring a loss.
How to Spot Cryptocurrency Trading Opportunities
One of the best ways to spot a prospective cryptocurrency investment is to peruse crypto forums. Websites like Reddit and BitcoinTalk cover a lot of new releases and news in the space. You can research new coins or take a look at established coins, and even check out coins on the rise.
Pick a coin, pick a strategy, and you’ll be well on your way to trading cryptos on the dex. Visit Trudex.io to learn more about how to research and evaluate ICOs or download our free ebook, “ICO Research Made Easy.”