Cryptocurrency trading for absolute beginners
Welcome to the highly volatile world of crypto trading
Are you ready to take a dip into the treacherous waters of crypto trading? A word of caution this isn’t for the faint-hearted. You need to be mentally prepared to lose, only then you’ll end up profiting. In this article we’ll be covering all the aspects from the point of view of a newbie crypto trader. Even if you’re into the stock markets and other asset trades then too, I’d personally recommend taking things slow in the world of cryptos. Crypto markets are highly volatile and require Diamond Hands (Patience and control to HODL your assets). People with Paper Hands (Panic Sellers or FOMO opportunists) often end up liquidating their assets with impromptu decisions. We’ll be covering strategies for mid-term and/or long-term gains via basic market trading and extremely basic graph analysis. Also noteworthy is that this article targets bullish (positive) market trends for trading purposes.
This is the second article in the series. I highly recommend going through the first one as well. It covers various fundamentals and keywords that we’ll be using here directly. Link to the first article 👇
Should you be the bull or the bear?
The answer is pretty simple, don’t be a pig (metaphorical sense).
Bulls make money, Bears make money, Pigs get slaughtered
For an explanation of the aforementioned quote read on
Bulls: To the Moon
A Bull Market(Bullish Trend) is occurring when asset prices are generally trending upward. These periods are marked by investor optimism and confidence. During bull markets, the markets are usually healthy, unemployment is low or trending lower, consumer spending is rising, and average enterprise sales and profits are rising. Bullish investors believe the upward trend will persist for the foreseeable future and thus tend to keep purchasing more stocks. The combination of a healthy economy, business growth, and investor confidence create a cycle in which stocks gain value over time — sometimes for many years.
The bull as a symbol is derived from how the animal attacks. A bull tends to charge with its horns thrusting upward into the air.
Bears: Pessimists of the trading world
A Bear Market is one in which pessimism and low investor confidence reign. Bear markets tend to coincide with economic recessions, high unemployment, low or declining consumer spending, and weak corporate sales and profits. Holding a pessimistic outlook on the economy, bearish investors are likely to sell stocks, causing stock prices to fall. Investing during a bear market can be profitable but also challenging because it’s hard to determine which businesses will perform better than their peers. When a bear market ends is hard to predict.
The bear is symbolically derived from how bears attack. Bears tend to swipe their paws in a downward motion.
Pigs: Just don’t be one
Pigs are investors who assume high degrees of risk or overlook risk entirely, with a singular focus on short-term profit. They take impromptu decisions and buy without conducting enough or any research. As a result, pigs tend to lose assets: hence the adage they get “slaughtered.”
Bulls and bears have opposite investing styles, but each type of investor can make money in the long term by investing according to their stated investment goals and strategies. Pigs, by contrast, eschew long-term goals and approach investing inconsistently.
Getting things started
Setting Up CEX account
We’ll be setting up an account on a CEX (centralised exchange) which will be on CoinDCX. It is amongst the most trustworthy exchanges in India. Indians can also go with WazirX. For people residing in the US, you can go with CoinBase, Binance US, ByBit, or Robinhood. Residents of European nations can go with Coinbase, Binance, eToro, or CoinsBit.
The benefit of using local country exchanges is that you can easily use the local currency to buy cryptos. Whereas if you opt for global/international exchanges you may have to pay an additional amount as currency conversion charges to the payment gateways. Also, the availability of Peer to Peer (P2P) trading varies from country to country and that gets restricted. Using local country exchanges kind of guarantees that you are trading most legally as per your nation’s regulations.
Now for the process, it is fairly simple, all you need is an email, a phone number, and some government IDs. If a referral code field pops up you can use the below codes corresponding to your CEX of choice (optional | you get some trading benefits|varies per platform basis).
- Binance: Link | Code: QZ2IJPI3
- WazirX: Link | Code: qwnnscne
- CoinDCX: Link | Code: 11581056
- CoinsBit: Link | Code: 1bab9ca2–42e8–46b9–919f-80190a7317d2
You can DM me on my socials if you want referral codes for some other exchange.
Now go for additional verification where one needs to provide government IDs. Mine was already done so the buttons don’t show. But you can easily get the idea from the above image. This is necessary as only after this step you’ll be able to buy crypto with your local currency on the exchange.
While you’re at it you may load up your wallets with fiat currencies as well. All these steps are generic to all the CEXs out there.
Portfolio Management: Coin Trackers and Crypto News Hubs
The two simple and basic tools for basic portfolio management that we’ll be looking at in this article are CoinGecko and CoinTelegraph. CoinGecko is the best and most lightweight coin tracker application. It provides an easy interface to checkout coins listed on various CEXs and DEXs. It also has a basic interface to manage one’s assets. Through this, one can very conveniently track coins on various exchanges without even logging into the exchange.
CoinTelegraph is the most widely used crypto news hub. It is also a very minimalistic application and provides insight into all the ongoings of the crypto world. It is an essential app that helps you keep an eye on the possible future of the coins/assets you are interested in. It also informs the user about new IEOs and ICOs. Interested investors can buy into such offerings and receive a new cryptocurrency token issued by the company. This token may have some utility in using the product or service the company is offering, or it may just represent a stake in the company or project.
An initial coin offering (ICO) is the cryptocurrency industry’s equivalent to an initial public offering (IPO). A company looking to raise money to create a new coin, app, or service launches an ICO as a way to raise funds.
An Initial Exchange Offering (IEO) is conducted on the platform of a CEX. Contrary to Initial Coin Offerings (ICOs), an IEO is administered by a crypto exchange on behalf of the startup that seeks to raise funds with its newly issued tokens.
Spot Trading for “Casual Traders”
Coin Pairs: What are they?
Coin pairs, trading pairs, or cryptocurrency pairs are assets that can be traded for each other on an exchange. Example: Bitcoin/Litecoin ($BTC / $LTC) and Ethereum/Bitcoin Cash ($ETH / $BCH). Some cryptocurrencies can only be bought with other cryptocurrencies, so knowledge of cryptocurrency pairs is necessary to expand your crypto holdings beyond the most common coins. Also, Knowledge of crypto trading pairs gives savvy crypto investors the chance to exploit arbitrage opportunities — the chance to profit from differences in asset prices between markets.
A base currency is a way to denote an agreed-upon value of different assets. Base currencies are a common tool for comparing exchange rates across fiat currencies in different countries. Base currencies can be fiat currencies as well as some stable-coin such as $ETH or $BTC.
Americans traveling to Italy will want to convert USD into the Italian currency, the Euro. In this case, the USD serves as the base currency. The same principles apply to crypto-assets too.
To keep track one need not wander from exchange to exchange instead may very well use CoinGecko. CoinGecko has coin pairs listed alongside other specifics of the token.
For deeper dive into crypto pairs, Suggested Reading 👇
What is Spot/Market Trading?
Various types of trades can be done on CEX but the most common one is Spot Trades. A spot trade also referred to as a spot transaction, can be defined as an acquisition or sale of an equity or a financial asset that is due to be immediately delivered on a particular spot date. It is done over various coin pairs, like $DOGE / $USDT and $RCN / $BTC. Wherein one currency acts as the counter currency for the transaction.
Crypto prices fluctuate instantly like a flash. The current price of a financial asset is called the spot price. It is the price at which a trader can buy or sell the asset immediately. Once a buyer puts up a buying order for an asset at a specific price it gets listed on the exchange. As soon as someone lists the same asset for selling at that price, the transaction/trade happens. The Buyer gets the asset and the seller gets the base/counter currency. Another way to look at it is to create the spot price, sellers and buyers post their buy and sell orders on the market. If the market is liquid, the spot price can change in a matter of seconds, because outstanding orders are filled and new orders enter the marketplace.
The Overall Strategy for Beginner Bulls
Make profit by aping (buying) at dips and selling at higher points/price. This is a bull strategy and spans over medium to long-term gains. After relevant research and analysis, one can even just ape and check back anytime after 3 months to over a year. People use this strategy a lot. If a coin offering seems promising enough, they just go all-in on that coin and after some time cash out with 10x ~ 300x profits. Again this is not financial advice, and also if deemed necessary, you may cash out early. This strategy can be applied to both stable coins and meme coins.
In the crypto-verse, ‘aping’ or ‘to ape’ refers to entering a position in a coin. It’s a slang term used a lot in chats and on Twitter. For example ‘ What coin are you aping into?’ would mean ‘ What coin are you buying?’
Basic Graph Analysis to boost profits
As stated earlier in this article one shouldn’t make rash decisions. Traders should actually research out the coin they are interested in, analyse market trends and then only trade. One part of analysing market trends corresponds to graph trend analysis. In the world of Crypto trading, the most widely used graph is the Japanese Candlestick graph. It has two types of candles a green one denoting bullish trend or a red one denoting bearish trend.
Now there are a few terms that one should know from a beginner’s POV,
- Bullish trends — A segment of the graph that is increasing in nature. Price of the asset increases in this phase. Callout slang ‘to the moon’ and ‘mooned’ are used for this phase which means that the prices are skyrocketing/increasing or have skyrocketed, respectively.
- Bearish trends — A segment of the graph that is decreasing in nature. The price of the asset decreases in this phase. Callout slang ‘shorting’ and ‘dumping’ are used for this phase which means that the prices are decreasing or have decreased, and people are selling their assets.
- Support — A support level is where the price of an asset tends to stop falling. It’s like a barrier at which the graph seems to bounce back upwards from bearish trends into a bullish trend.
- Resistance — A resistance level is a point at which the price of the asset stops rising. It’s another barrier through which the bullish trends seem to bounce back down into a bearish trend.
- Relative Strength Index — The relative strength index (RSI) is a momentum indicator used in technical analysis that measures the magnitude of recent price changes to evaluate overbought or oversold conditions in the price of a stock or other asset. (Will be covered in much detail later in the series)
- Market Movements — There are 3 types of market movements: Short, medium, and long. The primary movement is the “long movement” which is a major trend and may last from less than a year to several years. The medium swing is a secondary or intermediate reaction and may last from ten days to three months. It generally retraces from 33% to 66% of the primary price change since the previous medium swing or start of the main movement. The short swing or minor movement varies according to market speculation from hours to a month or more.
The market remains in trend despite “market noise.” Determining a reversal in trend is not easy. The trends will exist until definitive signals prove that they have ended.
There will be a Crypto centric graph analysis in this series in the future. But for now, if you want to explore and/or take a deeper dive into financial graph analysis, suggested reading 👇
Applying the strategy and analysis for and trading
Now let’s get going with our first ever purchase in the account we just created.
Choosing a coin to purchase: NFA(Not Financial Advice) but, for now, we’ll put our bets on $MATIC (Polygon). It is an Indian crypto and is extremely good. It has pretty awesome underlying financial applications as well. I’m pretty bullish for this crypto. It shows some promising bullish trend in the long run. Though because of Crypto Crash 2021, the currency has become quite unstable. Nonetheless, we get the benefit of buying it at a much lower price and booking even higher profits. It has the potential of reaching $4.00 easily in the mid to long run when the market settles and becomes bullish again. But until then we may bank on profits in the short run as well. If you want to learn more about the Matic Network (now Polygon) check out 👇
Looking at the graph it shows support at 1.55 USD and resistance at 1.92 USD but it won’t matter much as we are going in for the mid to long term so we need to zoom out a little bit and actually see the major trend.
The major price trend pre-crypto crash 2021 sure seems positive, so let’s go ahead and purchase our first ever crypto. A word of caution, it is not advisable to buy during the crash. I’m doing this for demonstration purposes only. And will probably short sell it right away.
Open your CoinDCX App, make sure you are signed in. Get over to Crypto Markets via tapping DCXTrade, highlighted on the center left with a red square. You can also access Markets via simply tapping ‘Markets’ highlighted in the bottom navigation bar. These so-called ‘Markets’ list all the coin pairs available for trading alongside their relevant details.
Using the search bar on the top search for $MATIC, this will list all the $MATIC coin pairs available for trade. Select the one with your choice of the base currency, for us, it’ll be $MATIC/$INR. This will open up that coin pair’s trade page. Now you would want to go for charts that can be accessed as per the highlighted rectangle towards the top left.
Once you’ve analyzed the graph and the entry price seems to be good enough then proceed to buy. The Buying Page will list real-time trade orders listed on the exchange on the left side while giving you buying/selling form on the right. Just plug in the values in the upper highlighted rectangle and reconfirm them in the lower highlighted rectangle. Once everything looks pretty enough just go for it. Once the order gets settled, voila! You now own your very first cryptocurrency. Congratulations!!
If done at the right price point you may be able to book Bull profits in Bear Markets as well. Look at the below graph,
Here one could’ve easily booked a 20% profit over some time of approx. 16 hrs. It would have been pretty impressive and the perfect example to put in this article but I was sleeping so here we are. My point being if you want to constantly churn profits you have to be vigilant throughout and book profits from time to time via selling at good prices and then you’ll be able to make money in the short term as well.
Millionaire Mindset for Making Profits
With all this knowledge you might be wondering how to make profits out of trading? And the answer to that in concise terms is to have a mindset or more appropriately a millionaire mindset. As stated in the very opening warning section of this article, one should be patient. Have Diamond Hands. Never Panic and always control your emotions. You’ll have to be logical and rational. Analyse market trends, do research on the tokens you’re investing into/have invested in. Be up to date with crypto news. And always trade with capital you’re ready to lose. This mindset in its entirety can be seen as an absolute discipline.
Crypto Trading is a dangerous venture, yet again trading in itself of any type is risky enough to make one liquidate all of their assets. But I believe if you follow your rational and logical instincts, you might just pave additional new ways to generate income (passive income). This article covered everything that was required from a newbie to a trading standpoint. All this is also limited to bullish trends. Further down the series, we’ll be having strategies for bears as well.
