The current estimation of the cryptocurrency market is in trillions of US dollars. Despite the global economic turmoil and the unpredictability of the financial market, the crypto market remains surprisingly stable. Even some of the biggest scandals in the industry did not budge flagship tokens which is a strong indication that it is an industry that deserves respect and trust.
If there is something that has been rocking many industries, it is Artificial Intelligence and many of its iterations. Some of them will surely affect retail trading and investment strategies employed by professionals. While it is not a foundational block of cryptocurrency trading skillsets, we cannot ignore the echoes of the AI march.
What is crypto trading?
The 2008 banking crisis shook the whole world and created a gaping hole in the US economy. Since it is the biggest national economy in the world, it inevitably affected many other nations and global financial institutions. The immediate answer to the crisis was to bail out banks. Governments decided to pull their resources together and keep these huge organizations afloat.
Independent thinkers and financiers had a completely different view of the situation. The arrival of the first cryptocurrency Bitcoin was a logical step for the part of the global financial community that wanted to create something that would not be controlled by governments. Bitcoin started as an exciting experiment and turned into a massive phenomenon.
Its popularity is due to multiple factors including independence, freedom from institutional control, anonymity, privacy, and more. Bitcoin allowed multiple new cryptocurrencies to exist. Ethereum, Cardano, Tether, and many others would not have existed without the initial success of the first and biggest blockchain network in the world.
Crypto trading is a process of exchanging crypto digital assets, fiat currencies, and other financial valuables in a new financial market that allows for such transactions. Millions of retail traders from across the globe engage with the crypto market and use advanced financial instruments defining the new era of finance.
Cryptocurrency trading for beginners
Newcomers to the industry often come to the market without any experience with investments in general. It means that they must first understand several key principles that allow long-term investors to stay safe in this notoriously volatile financial environment:
- You should focus on mastering money management. The first rule of investing is to never risk more than you can afford to lose. Even the best financial experts cannot predict the future. Their estimates are based on the history of the price and fundamental analysis of various assets. They can make mistakes. You will surely make a couple before starting to earn money consistently. Do not risk your livelihood!
- Diversification is the number one priority. Don’t put your eggs, apples, or veggies in the same basket. It is a saying as old as time. You need to focus on buying different types of digital assets to reduce risks and try using a variety of financial instruments and products. For example, try not only buying tokens, but also stake, copy trade, and using automation.
- Do not trust everything you hear. This advice is very specific to the crypto industry but should be applied everywhere. Social media influencers, DeFi developers, crypto enthusiasts, and many other public figures will try to lure you into their projects. However, they are only interested in attracting as many people as possible. The Crypto community has a popular motto: “Do You Own Research”.
Also, try at least several cryptocurrency trading tutorials offered by specialized companies like WunderTrading, IBKR, Binance, etc. These companies make money on commissions or selling financial services and products. It means that they are interested in making their clients successful. Take their lessons and tutorials. Most of them are free.
The best way to learn crypto trading
Practice makes perfect. You should focus on using as many opportunities to practice in the real environment as possible. We recommend using demo accounts and free stuff from companies that offer financial services. You will be able to slowly acquire the necessary experience and knowledge.
Novices should also consider using some of the novel types of cryptocurrency trading:
- Automation. Trading bots are used by professionals to extract the most value from their algorithmic analytical strategies. If you have a good system that generates reliable signals, you can make it work extremely efficiently by automating some of its parts. Bots turn any strategy into a stream of passive income.
- Copy trading is often considered the most optimal entry point for newcomers. Instead of learning and trading simultaneously, you can focus on studying the market and copying the actions of advanced experts. Companies like WunderTrading offer you access to a wide range of specialists offering their services. You will be copying trade deals of the best in the market and learning from their successes and failures.
- Specialized automated strategies. Using established systems like GRID and DCA bots, you can create a reliable income stream and focus on your other investment endeavors while a portion of your portfolio works as a money-making machine. DCA bots are great at accumulating resources while GRID bots generate profits using a time-tested system.
Basics of cryptocurrency trading
Newcomers must start somewhere and begin their long investment journey in the world of crypto. A typical obstacle that many beginners face is the lack of knowledge about the initial steps that they must make. Before you can begin trading, you need to know about different types of cryptocurrency exchanges.
- Decentralized exchanged. These are independent DeFi platforms that provide their financial services without taking your assets into custody. It means that you, generally, control all your assets and each transaction happens on the blockchain. DEX platforms may operate like traditional brokers and CEX platforms, but they will have a decentralized approach to management and decision-making.
- Centralized exchanges. CEX platforms are the most popular destinations for retail traders. Binance is the largest exchange that controls over 17% of the trading volume. CEX platforms always take your assets into custody and often execute orders instantly using their own liquidity. They are fast and reliable. However, some crypto enthusiasts do not like centralized financial institutions dealing with coins.
- Peer-to-peer exchanges. P2P platforms are essentially public forums where retail traders can search for suitable deals. Many users choose exchanges that focus on privacy and prefer conducting their business off the platform. It is not the safest option, but you may use escrow services and other financial products to offset some of the risks.
- Derivative-focused exchanges. Many CEX platforms offer their clients an opportunity to trade futures and perpetual futures on Bitcoin, Ethereum, and some other mainstream tokens. Note that such financial instruments are accessible on brokerage platforms, but many crypto enthusiasts prefer to not go outside their comfort zone.
Choosing the right exchange is important. You will most likely conduct business on only several of these online platforms.
Cryptocurrency trading basics
To start trading cryptocurrencies, you will need an account on one of the exchanges. While setting up an account on CEX platforms is not hard, you may experience some difficulties with DEX and P2P platforms. Regardless of which approach you want to take, you will need to do the following:
- Create a new crypto wallet. Meta Mask is one of the most commonly used crypto wallets integrated with a variety of DeFi platforms and exchanges. You will also need it for some applications, staking, and other forms of crypto investments.
- Consider purchasing a hardware wallet like Ledger Nano or Trezor. These devices help you store tokens off the grid and prevent unauthorized access to your funds. Buying one of these is not mandatory but it will dramatically improve security.
- Create two separate addresses for the Ethereum or Bitcoin network. This address should be connected to a different wallet (TrustWallet and Electrum are commonly chosen by users). One you will store your long-term assets. The second one is for transactions with the outside world.
Beginner Crypto Trading Strategies
Technical analysis is the most important skill for most retail traders. While some prefer acting on their instinct or using fundamental analysis, it is close to impossible to make proper predictions about the market direction without using indicators and analytical systems.
Learning some basics of technical analysis is crucial for your long-term survivability in the crypto market. While we cannot give you any advanced tips within the confines of this particular guide, we still want to give you an overview of some basic technical indicators and strategies that some beginners use successfully.
Technical Indicators for Beginners
An indicator is an algorithm that instantly analyzes the price action using various types of approaches. The vast majority of indicators only use two key metrics:
- Price action is the history of an asset and the dynamic of its price.
- Trading volume is the volume of all orders that have been conducted within a certain time frame.
These two metrics may not sound like much to a newcomer, but they tell a rich story to someone with enough experience. Technical analysis gurus believe that all the information that a retail trader needs is already in the price action.
Using technical analysis to make bold predictions is common for crypto “influencers”, but experts use it to make educated guesses about the current market situation and choose the right entry points. Experienced professionals understand that they will lose money on some orders and make on others. The main goal is to reduce the number of incorrect market decisions, not to eliminate them.
To determine when the right moment comes, experts use a variety of technical indicators and graphical instruments. You can find them on trading terminals. The most popular of them is TradingView. It is an online charting tool that allows you to view data from many exchanges and overlay a wide range of instruments on top of any chart.
Clicking “Indicators” in the top menu will open a list with hundreds of tools. While many of them are too complicated for novices, some will be easy to understand even without any prior exposure to chart reading.
Relative Strength Index — searching for reversals
RSI is a commonly used instrument that allows us to determine when an asset is overbought or oversold. It is represented by a curved line that moves between 0 and 100. If it is closer to the upper limit, it means that the asset is overbought, and vice versa.
Novices may be interested in using RSI to search for moments to “catch” the market during its correction phase. Imagine that millions of people rush to buy Bitcoin at a certain price. Sellers will increase the price according to the demand. Many late buyers will not be happy with their purchases and start selling which will force the price to “correct” or “retract”.
RSI is great to help you find these moments:
- Look for moments when RSI reaches 30 or 70.
- Create a long market position (buy) with a safe stop-loss at 30.
- Create a short market position (sell) with a safe stop-loss at 70.
- Wait until the price corrects itself and close your position to take profit.
RSI is used in many strategies. You should learn this indicator and its correlations with other analytical instruments.
Moving Average — how to identify a trend
Moving averages are visual trend indicators that allow analysts to better see the current price dynamic. MAs are usually overlaid on top of a candle chart which may not give you the right impression of the mood in the market. To see the real price change, Moving Average takes specific prices at certain periods (these are determined by users) and creates a smooth curved line that shows retail traders how the price has been changing up to the present moment.
3MA or three moving averages is an indicator that uses three different lines each representing the price change across different time frames. When these lines start diverging, it means that the trend is strengthening. When they are converging, the market is close to changing its course.
This particular approach is used by technical indicators like MACD (Moving Average Convergence/Divergence) and many others. It is a good idea to get used to looking at price charts with several moving averages.
Using the strength of TradingView and automation
Reading several crypto trading bot tutorials is also recommended since you will need to use various automation tools to stay relevant in the rapidly changing crypto market. As we mentioned previously, the market is waiting for the arrival of Nextgen AI trading tools, but you can use the latest trading tools and products right now.
TradingView is a great platform that allows retail traders to construct complicated trading systems using a wide array of technical indicators. Beginners are encouraged to explore the forums and preset strategies offered by enthusiasts and power users of the platform. Some of them are free.
This analytical charting platform is also used by many vendors of automation products such as WunderTrading. The latter is an online financial service company that offers its users a rich variety of automation products including DCA, GRID, and Arbitrage bots. Using bots is a staple for the retail trader community.
Newcomers to the crypto market should focus on studying technical analysis and various ways to apply newly discovered algorithms to their investment endeavors.
You can start using automation easily:
- Create an account on an exchange that you like.
- Create a new account on TradingView.
- Create a new account on WunderTrading.
- Choose or design a good strategy on TradingView.
- Deploy a new trading bot on WunderTrading.
- Follow the tutorial to make the bot follow signals.
- Set reasonable take-profit and stop-loss parameters.
- Launch the bot and enjoy the ride.
Note that the performance of any automated trading system depends on the quality of signal generation. If you have a good technical analysis strategy that delivers proper signals more often than not, you should try automating it.
When is the best time to trade cryptocurrency?
Answering the question broadly, now is the best moment to trade crypto. The market is established and has really good liquidity. You will find a wide range of financial instruments and assets that can be accessed right away. Additionally, the variety of scandals and issues in the industry made it easier for newcomers to enter since many assets tanked during the winter and started gaining traction only recently.
On a much lower scale, scalpers enjoy periods of high volatility while long-term investors prefer entering the market during calmer times. The highest volatility in the market happens during the daytime in the US and Canada where the vast majority of retail crypto traders reside. The next highest period of volatility is during the daytime in Asia, namely the SEA region and India.
Note that you should never limit yourself to only certain time frames. It is a good idea to develop a trading system that does not rely on volatility to work.
Should you start trading crypto?
During periods of uncertainty in the global economy, some assets start attracting attention from investors. In times before, capital holders opted to purchase real estate and gold. While the latter remains stable and reliable, real estate has not been in favor since the 2008 house bubble.
What is more important is that many experts are talking about the deflationary nature of cryptocurrencies making it a great counterpart to the US dollar and other fiat currencies. The expected inflation may not show itself on store shelves, but it may cause a massive price spike in Bitcoin and Ethereum that may start gaining value against the depreciating US dollar.
Many other fiat currencies will also experience this. Inflation is on the rise in the United Kingdom, France, Germany, Turkey, and many other countries that have large economies capable of impacting the whole world.
It is a good moment to start trading crypto or investing in various appreciating digital assets. Even if you do not plan to become a crypto millionaire, digital assets are good ways to diversify your portfolio and provide some safety net in case the global economy collapses in the nearest future!
The main takeaway
Crypto trading is the next haven for retail traders that want to make money in financial markets. It is still not too late to become one of the early adopters since Bitcoin is not even close to being fully issued. Ethereum is growing in popularity. The army of crypto users is growing. The market is full of exciting financial instruments and tools including automation and AI. Beginners should start exploring the world of cryptocurrencies as soon as possible.
However, novices in the field of investing must be careful and educate themselves about finances and managing money. The vast majority of retail traders (over 80%) do not have any experience with finances and make mistakes during their first several years of trading.