Over the last few years, it seems like everyone has been talking about cryptocurrencies – and with good reason. This practically new asset class has taken the investing world by storm, making millionaires practically overnight. Needless to say, they have intrigued many investors, and thanks to their low barriers to entry, anyone can begin trading crypto. However, one needs a bit of expertise to succeed in this highly volatile market. For that reason, we have found it necessary to outline all the tidbits necessary to begin a successful trading career, even with as little as $100.
Before you can access the crypto market, you will first need to choose a suitable trading platform and create an account with them. The factors to look out for here are its simplicity, security, and the variety of assets on offer.
Once you have selected your platform of choice, you will need to register an account with them. This is usually a straightforward process of filling in a registration form with your name, email address, and password. You will then be required to verify your account using a government-issued ID so as to satisfy KYC (Know Your Customer) and AML (Anti-Money Laundering) requirements. Once this is complete, you can fund the $100 into your account, and you’ll be ready to begin trading.
Fair warning, a $100 account is a small account in the crypto trading realm. For that reason, you should not expect to make substantial profits right out of the gate. It takes time to build a successful career, so focus on building your skills as you grow your account.
Choosing an asset to trade
There is no holy grail cryptocurrency, but there can be the most suitable crypto for a particular use case. For instance, if you’re looking for a store of value, BTC is the king as it has the widest adoption, as well as a fixed supply that makes it deflationary.
Typically, the best cryptocurrencies are those among the top 50 by market capitalization. Most of those further down the list are likely to be scams or tokens with little to no utility. This makes them much riskier investment vehicles than large-cap coins like Ethereum and BTC.
Before you invest in a coin, find out as much information as you can about the team behind the project, the project’s goals, as well as the roadmap to achieve these goals. This information can be found in the project’s whitepaper. This will give you a better idea of what lies behind the curtain.
Understanding what moves crypto prices
Once you have your choice of crypto-asset narrowed down, it is now time to understand the mechanics of its price movements. After all, this is the key to successfully trading it. To that end, there are two types of analyses you can perform – fundamental and technical analysis. The latter resembles the TA done on other financial markets, as it involves looking for repetitive chart patterns and using technical indicators to help predict future price moves.
Crypto fundamental analysis, on the other hand, differs from most traditional markets. For one, the hype or sentiment around a coin can move its price significantly. News stories, Twitter chatter, and google searches are some of the contributors to this sentiment. This is displayed on an index called the fear and greed index, which speaks to the overall mood of the market participants. Political events such as countries banning crypto or others accepting a crypto coin as legal tender can also move their prices.
Types of crypto trading strategies
This is a short-term trading style that aims at taking advantage of the daily price fluctuations of cryptocurrencies. Usually, trades will be closed by day’s end, and day traders hardly target large profits per trade. This strategy relies heavily on timing the markets and making multiple trades, which makes it a risky technique.
This is where you make an investment to cancel out the risk of loss from a prior investment. This is used by traders who want to hold their coins yet avoid exposure to losses from their volatile price moves. Such traders utilize instruments such as futures, options contracts, and CFDs, which allow them to bet on future prices of these assets. This is an advanced strategy that may prove difficult for beginners.
This is the most straightforward crypto trading strategy. It involves identifying a coin with upward growth potential, after which you buy and hold for the long term, hoping to sell off after it rallies significantly. This is colloquially called holding on for dear life, hence the acronym HODL.
Similar to other financial markets, this strategy involves buying or selling coins depending on whether their prices are moving up or down. The greatest trick is identifying when the market is going to rally so they can buy or when it’ll fall so they can sell. Trend traders will usually utilize multiple timeframes to identify the trends and make suitable entries and exits.
Risks of crypto trading
Crypto is one of, if not the most, volatile markets in existence today. It is not uncommon for prices to spike significantly in a matter of minutes or falls just as quickly. Therefore, without proper risk management, losses could pile up in an instant.
There are also numerous fraudsters in this market, as it is largely unregulated. To avoid falling prey to scam projects, always DYOR before investing your money in them. Additionally, losing the password to your wallet and, worse still, your private keys is also a great risk. As the common saying goes, not your keys, not your coins. Also, before sending crypto to anyone, always double-check the addresses and networks you’re using, as it is close to impossible to obtain a refund of coins sent to the wrong address.
The crypto market is one of the most volatile markets in existence, which presents traders with numerous opportunities for profit. However, it takes skills and expertise to navigate this market expertly, and research is the key to succeeding in their trade. Always watch out for scammers, as this is largely an unregulated market.