Basics of Crypto Trading

Legendary investor Late Mr Rakesh Jhunjhunwala went on record to say that 90% of the people lose money in the market. We have hypothesized a rationale behind this. Trading is not just a side gig. It is a goddamn art. And not everyone is an artist. Understanding trends and macro, mixed with a tinge of hunch and context, money is definitely up for grabs.

Oh. Did we scare you? Well, let‘s call it FOMO. Either way, today we plan to bring out the artist in you. If you are someone who wants to hone their trading skills and make some moolah while having fun, stay with us till the end. We are going to share a step-by-step guide on how to kickstart your trading journey. Let’s get started.

What is Crypto Trading?

First things first. What is crypto trading after all? Let us take it from the top. What is trading? In crude, conventional form, trading is buying a product at a lower price in the hope of selling it at a higher price. In the financial market, the product involved is stocks, bonds, crypto etc.

Cryptocurrency trading involves buying and selling crypto assets on an exchange like WeTrade.

Please bear in mind that at a fundamental level, trading is quite different from investing. Let us find out how.

Difference Between Trading and Investing:

Investing generally involves a long-term viewpoint. This long term is subjective and varies from person to person. The idea is to ignore short-term market fluctuations based on news and noise and focus on long-term gains (hopefully).

Investing involves fundamental crypto analysis, such as understanding token supply, utility, industry overview, unique features, the team behind a project, etc.

Trading on the other hand is often short-term. Short-term trading relies on predicting market fluctuations for betting and profiting from them.

Here, the traders would analyse history, trends, moving patterns and volumes to predict the short-term direction of the asset. Once that is done, they would take time and range-bound punt at these assets for profit.

For example, a typical technical analysis of crypto could reveal if the BTC would go up or down for the next couple of days with a potential upside of $21,000 (say) and a downside of $19,200 (say). Here $21,000 would act as resistance (a level which would be difficult to cross, so a potential area to book profits) and support (a level which is difficult to breach, so a potential buying area).

Different Trading Strategies:

A trading strategy is defined as a series of steps taken to leverage short-term trends in the market to generate a profit. These strategies vary in the duration of trade, potential gain and volatility conditions.

There are a total of four such strategies. Let us talk about them in detail.

1. Scalping:

Scalping has the shortest trade duration of all four strategies. It involves buying and selling crypto in a very short duration, typically a few seconds or minutes to accumulate profits. If you look at an individual trade, the profits might be minimal, but one can make decent returns by aggregating the small profits throughout the day.

The best time to deploy a scalping strategy is during the peak busy hours of the market so that you can make the most of the volatility during those times.

2. Day Trading:

Day trading, also known as intraday trading, is used by traders when they plan to hold an asset for a single day. In day trading, assets are bought and sold within the same day. Day traders rely on technical indicators like moving averages, volume, general market trend etc. to determine the direction of the crypto they are after.

3. Swing Trading:

Swing trading is a trade which is usually taken for a short to the intermediate period from 1–30 days. This strategy is suitable for traders who cannot give sufficient time to the market on a daily basis. This is because you do not have to keep a close eye on daily movement. With that being said, it is important to check on your assets regularly to optimize maximum profits.

4. Position Trading:

Position trading requires holding an asset for the longest duration out of the four strategies that we have discussed. Position traders evaluate long-term trends by analyzing weekly and monthly charts of a cryptocurrency.

The core assumption of position trading is when the trend starts, it will continue for a significant period of time. The successful position trader identifies the right entry and exit prices in advance and controls risk using stop-loss orders.

Cryptocurrency Trading Steps:

Now that you have a fair idea of what cryptocurrency trading is and how it works, it is time to understand how to get started. As promised, a step-by-step guide to follow:

1. Look for a Cryptocurrency Exchange:

While this may look like a redundant step to a newbie, it can make a lot of difference in your trading journey. For example, you would want to go with a platform that has high liquidity, low transaction fees, is technically sound (you don’t want to be stranded during sudden peaks and crashes as you can make much more during those times) and has proper support.

There are multiple options out there for traders in the form of WeTrade, CoinDCX, Binance etc.

The key benefits of trading on WeTrade are the fact that they offer ZERO fees for trading and also cover 1% TDS deducted by the government in the form of cashback. Apart from that, there are a lot of NFTs up for grabs for every new user.

2. Fund your account:

Well, the next step is pretty straightforward. Once you have created an account and completed all the formalities, you can fund your wallet using bank transfers etc. This money will then of course be used for purchasing crypto.

3. Choose your Crypto:

If you are starting fresh, we would advise you to pay attention to a smaller set of cryptos only because as you increase your baggage, your attention gets diverted. The best bet would be to try out different strategies and learn while you trade in Bitcoin and Ethereum as they are OGs in this space and have quite a significant history to evaluate and understand trends as compared to other coins.

4. Strategy:

Depending on your analysis, pick an appropriate strategy from the ones mentioned above. This is the most important step in trading as it will decide if you are going to be a part of the 10% club we talked about in the beginning. If you are an absolute fresher, you can also take certain courses on trading.

What Next?

Well, to start with, our best wishes. Trading is such a hobby or profession that keeps on giving. Even if you initially fail to make money, you can learn about life in general, philosophy, economics and patterns a lot if you stick with it. So what are you waiting for? Moon awaits your presence!