The Internet has provided a lot of opportunities to make money online, and with the advent of blockchain, the list of possible sources of income has expanded even more. Cryptocurrencies and related transactions account for a large share of remote earnings.
Digital cash, or in simple terms, cryptocurrency, is attracting more and more new investors who are willing to invest in it. Anyone can trade in cryptocurrency today. Despite the increased risks of investing in cryptocurrency, more and more people are ready to overcome their fears, because there are incredible prospects for profit on the other side. However, don’t get your hopes up for a quick profit: to successfully make money from digital cash trading, you need to have enough knowledge.
What is cryptocurrency trading
Crypto trading is one of the main ways to make money from cryptocurrency. Trading cryptocurrency tokens is not significantly different from trading precious metals, currencies, and stocks. The main objective remains the same: buy as cheaply as possible, sell at a higher price – and make a profit. The main difference between trading cryptocurrencies and the stock market is the high volatility of the exchange rate. Many traders dream about a return of thousands of percent on a trade, but on the stock market, you have to wait years for such a deal, buying stocks of little-known companies, waiting for their capitalization to grow. At the same time, fast deals with high yields are not uncommon for crypto-trading.
Cryptocurrency trading: where to start?
It is impossible to start successful cryptocurrency trading from scratch. Deciding to invest free funds in cryptocurrency trading, you should, first, prepare a knowledge base. In order to trade successfully, a crypto trader must learn the basic skills:
- To analyze cryptocurrency and its trading volume;
- to use charts and coding;
- how to make sales and purchase deals;
- track trading history.
When evaluating a cryptocurrency’s prospects, you should pay attention to the following aspects:
- what idea the cryptocurrency was created for and how much demand it may have;
- the speed of transactions and the convenience of working with tokens;
- the professionalism of the development team;
- demand and popularity.
The combination of these factors increases the capitalization of the cryptocurrency and, consequently, its value. Charts show the history of the growth of the token against another cryptocurrency or fiat money. Charts can be made using the interface of exchanges, specifying different time intervals and selecting different trading pairs. With its help, one can conclude how reasonable the current price is and give a preliminary forecast for further value changes.
The trading history and volumes are used to track the cryptocurrency’s overall liquidity, how interesting it is to users, and whether demand for it is growing or waning.
Based on this knowledge, it is possible to draw a conclusion about the profitability of the cryptocurrency, predict its movement and make a profitable deal.
To make a transaction, the trader must place an order by selecting the trading pair to be exchanged and specifying the number of coins he wishes to sell and their value. Orders can be placed and closed non-stop, but American and Asian time is considered the most preferable. It is during this period there is especially high activity, which provides an opportunity to forecast the rate more clearly and make a quick transaction.
Peculiarities of investing in cryptocurrency
The most popular cryptocurrency bitcoin crossed the $20,000 mark in December 2017. Its main advantage is its limited capitalization of 21 million tokens. This means that each new bitcoin acquired reduces the number of remaining coins. This trend allows the bitcoin exchange rate to grow exponentially. Thanks to active investment in bitcoin, the entire cryptocurrency market begins to flourish, including altcoins, which are characterized by good volatility and liquidity.
Due to bitcoin’s phenomenal growth during 2017, more and more investors are willing to risk their money. Cryptocurrency trading is attracting more and more new speculators, both beginners and experienced.
The high liquidity of digital cash encourages the creation of new cryptocurrencies. At the moment, there are more than a thousand tokens on the market. However, most cryptocurrencies are not in demand due to their huge capitalization numbers. But there are 10 most popular cryptocurrencies that are highly volatile, and smart investments in them can bring excellent dividends. In order to make money from cryptocurrency trading, you need to be able to correctly predict future price movements.
How to earn on cryptocurrency
To date, there are several types of earnings from cryptocurrency – mining, investment and trading. We will not consider the first two in this review, but trading cryptocurrencies implies the opening of speculative positions to buy or sell a token of particular digital cash. When investing through an exchange, you can earn solely on the growth of the cryptocurrency. By trading through a broker, you can increase your financial investment by both buying and selling.
Cryptocurrency trading strategies
Initially, buying a cryptocurrency is done if the trader, based on the analysis, considers its current value to below. The next task is to sell it when the value rises. In order to choose the best moment to place an order, it is necessary to revisit the analysis and decide whether the coin is worth more. If not, then it’s a good time to sell it and reinvest your money.
Coming into the world of trading, you should say goodbye to greed. You should not wait long for a profitable value. It is better to make several trades with a hundred percent chance of profit than to miss the moment while waiting for the value to fall or rise as much as possible.
Most traders use a strategy based on the analysis of the market order book. The order book is a table of all orders placed on an exchange for one type of cryptocurrency. It will help even for dummies to understand what demand the cryptocurrency has and what value they are willing to give for it.
Based on large-volume orders, it is possible to unmistakably determine in which direction the further token rate will go, because it is the traders who trade large volumes who determine the value trends and make large-scale changes in the rate, which small traders cannot influence. They can only detect upcoming changes in time and use them to make a profit.
There are also special tools to simplify the work of the trader. For example, the terminal for making money on cryptocurrency TraderBox includes 27 different tools for profitable trading in one interface. The service combines useful features such as signals, analysis indicators, smart charts, and the largest exchanges for trading – all working in one window, without the need to constantly switch tabs.
Where is the best place to trade?
Below we look at the options where a novice trader can get started.
The most common way is to trade on a cryptocurrency exchange. They contain all the tools a trader needs, allow you to track the rate and history of transactions, place and redeem orders, deposit and withdraw capital. When choosing a cryptocurrency exchange, you should pay attention to the following factors:
- Exchange trading volumes. For fast transactions, it is recommended to choose exchanges with high trading volumes.
- Language support and interface. A cryptocurrency exchange is the main tool of a trader. It should be clear and easy to work with.
- Methods of deposit and withdrawal of funds must be accessible to the trader.
- Trading pairs. Not all cryptocurrencies are traded on exchanges, and even trading pairs of popular altcoins may differ. Some platforms provide the ability to trade between fiat currencies and cryptocurrencies, some are limited to digital trades only. When choosing an exchange, be sure to research the cryptocurrency pair trading presented on it.
Choose only trusted sites with high user protection. If not all pairs of interest are represented on the trading exchange, you can use a few of the most suitable options. And then transfer funds between exchanges through transactions to internal wallets. For example, to exchange cryptocurrencies for fiat money, CEX.IO, which was created to solve this problem, is the best option. It allows exchanging popular altcoins and bitcoins for rubles, dollars, euros, and British pounds.
If cryptocurrency mining requires a lot of special knowledge, and trading on the exchange requires experience, then trading through a broker only requires opening an account with a brokerage company. The international broker AMarkets provides favorable trading conditions both for beginners and for traders who have many years of experience in trading in financial markets.
The main advantage of cryptocurrency trading at AMarkets is that the broker provides a wide range of financial instruments – 15 cryptocurrency pairs and 8 major cryptocurrencies. Financial experts often express their opinion about the increased risks due to the high volatility of digital cash, but proper money management and a trading strategy can turn trading into a profitable activity. You should always remember about money management and not risk more than 2-3% of your entire deposit per trade. By following these rules, you will be able to earn in the long run.
Advantages and disadvantages of crypto-trading
- High volatility of the cryptocurrency market, which provides a high rate of return on transactions
- opportunity to start with insignificant investments
- decentralized and secure trading system
- wide choice of trading pairs
- Possibility to make transactions online at any time
- Promptly developing sphere of cryptocurrencies gives the opportunity to make high yield by investing into new projects.
- successful trading is impossible from scratch without studying additional knowledge
- Regular monitoring of news reports and market analysis is needed.
- Relatively stable trading pairs (bitcoin-dollar) bring a modest income
- Traders use professional terminology, which is not easy for a beginner to master
Cryptocurrency trading offers a wide range of opportunities to make money. You can start trading on the exchange with minimal investments, but for profitable trading, you will have to put a lot of effort and spend time on in-depth analysis of cryptocurrency and the market.