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More people are trading cryptocurrency than ever before. According to the latest market report, trading volumes for the third quarter of 2020 surged by $155 billion. At a time when the world is gripped by pandemic, traders have been busy staking, selling, farming, swapping and longing, posting $330.6 billion in volume between July and September. And that was before PayPal announced support for cryptocurrencies, causing the price of bitcoin to rally by 10%.
As traders lick their lips at the prospect of a bull market, it’s worth reflecting on the previous one. Prior to 2017, perspicacious traders who bought up cryptocurrencies early, when they were little more than obscure assets for cypherpunks and geeks, managed to grow their capital exponentially as the market exploded. Then the house of cards came tumbling down with the implosion of the ICO bubble.
The current trading landscape is characteristically distinct from the one traders had to work with during the last bull run. Infrastructure has improved along with fiat on/off-ramps, and a much wider selection of exchange platforms and supported currencies are available. Moreover, educational content in the form of blogs, instructional videos and newsletters gives novices the confidence to take the leap and get involved.
Even so, turning a profit trading isn’t easy – you don’t want to crash and burn like those self-proclaimed gurus who got rich in 2017, then lost it all in ‘18. Here are four tips to get you up and running and to help you last the course.
Copy Other Successful Traders
The best way to start your crypto trading journey is to copy trade. Copy trading essentially means programmatically tethering your transactions to those made by another, more experienced trader. In other words, when the person you choose to copy makes a certain trade, the funds you’ve allocated to copy-trade with them will be used to make the same transaction. For many traders, copy trading can be an attractive alternative to managed investing, as it typically entails no additional fees.
There are multiple platforms where you can safely engage in copy trading. One of the most prominent, which also covers a wide variety of traditional financial instruments like stocks and ETFs, is eToro. An important advantage of eToro is the fact that traders on the platform are financially incentivized to succeed and be copied. Another reputable copy trading solution is offered by crypto derivatives exchange Bingbon. Compared to eToro, it offers exposure to a larger pool of cryptocurrencies and is working on adding more. It also allows for highly leveraged trades, and expert traders can only become listed if their account profitability for the preceding three weeks is over 30%. All in all, Bingbon’s a terrific solution for beginners. Use copy trading to turn a profit, get a feel for strategy and inform your own outlook.
Learn the Ropes with Demo Trading
While you are hopefully benefiting from the judgment of seasoned traders, you can start making your own moves but without exposing yourself to real losses. Demo trading, also known as “paper trading,” is the way to go.
The aforementioned Bingbon offers demo trading in addition to copy trading. Another provider that enables users to conveniently trade in virtual mode is 3commas. As a bonus, clients can add multiple supported exchanges including Binance and FTX.
Demo trading gives you the full experience of its real-world equivalent, minus the actual exposure and exchange fees. It enables you to try out multiple strategies without fear of losing money, while following the real market prices and seeing the effects that different trades have on their virtual portfolio. Platforms offering demo trading often automatically provide newly registered users with a certain amount of virtual fiat currency, such as VST on Bingbon.
Analyze Different Trading Strategies
While engaging in copy or demo trading, it’s important to look for clear strategies that can be consistently replicated. There are two main types of analysis that are used by traders for creating strategies: technical and fundamental. Technical analysis attempts to abstract from the characteristics of the traded assets and relies only on recent market data, such as prices and volumes. Conversely, its fundamental counterpart focuses on the factors relevant to the asset that are external to the market action.
We all have to graduate sooner or later. Once you’ve developed a clearer understanding of the trading process from copy and demo trading, it’s time to put some skin in the game and trade on your own initiative. It’s vital to formulate a clear strategy rather than succumbing to temptation and trading on a whim. Before implementing a plan, it’s a good idea to back-test it on past market data. One tool that allows for easily back-testing a cryptocurrency portfolio is Shrimpy. Platforms like 3commas offer more sophisticated back-testing options, too.
Find Good On-Ramping Solutions
Finally, every trader needs to have reliable arrangements for on- and off-ramping funds to crypto platforms. There are two main types of on-ramping tools. Some cryptocurrency exchanges, including Coinbase and Binance, enable account holders to directly buy digital assets using credit cards or linked bank accounts. There are also providers such as Simplex that offer clients the option to buy cryptocurrency and transfer it to an address of their choosing without immediately depositing it on an exchange.
As for putting your profits to use, you have the option of selling the crypto for fiat or sending it to a payment provider like Crypto.com. These payment processors offer the option of automatically converting your deposited cryptocurrency to fiat each time you use their prepaid card, meaning you can, for all intents and purposes, use cryptocurrency just like cash.
Crypto trading might feel like gambling sometimes, but that’s only because you can’t know, with 100% certainty, how a trade is going to shake out. It’s the same for any form of trading, whether it’s stocks, forex, futures – the market can catch even the most experienced investors off-guard. For the most part, though, you simply need to follow a sensible strategy, keep a cool head and not overcommit. Do as the pros do and you’ll be here for the next bull market and the one after that.
