The attention for crypto trading has been increasing for years. It is continuously in the media and more and more consumers and entrepreneurs are investing in cryptocurrency. Because an increasing number of people are enthusiastic, the news spreads like wildfire, resulting in a significant growth spurt in crypto Trading.
Next-Level Crypto Trading
Do you want to know how to trade crypto, but are you afraid that you are too late to invest? Don’t worry, because it’s still a fairly new phenomenon. It is not yet a mainstream market, but developments are continuing steadily. The chance that it will become a mainstream market is therefore very present.
A big difference with traditional currencies is the value of the ‘coins’. The prices in the world of crypto are much more volatile than, for example, the Euro. There are heavy price fluctuations going on, but this makes it interesting for traders. Not quite sure what you’re doing yet? Then it can be a dangerous trend, so read carefully and be aware of the risks.
Are you ready for next-level crypto trading? Then read on in this handy blog about how to Crypto Trading. Note: you will learn many new terms and sometimes you will not immediately know what it is about, but eventually the penny will drop. You can do this!
It is good to know that our own research deserves priority. Keep exploring and exploring and don’t let yourself be slowed down or distracted when something doesn’t quite fall into place. Start with small investments and manage your risks effectively. Maybe you make mistakes, maybe there are ambiguities; make sure this isn’t going to be too much of a setback. Whatever phase you are in, it is always important to never invest more than you want to lose. You must protect yourself against costly transactions, the risks of which you cannot bear.
When you start to understand the actions, you will get into the flow and you will develop quickly. Get comfortable in the industry and gain confidence as it is really interesting and rewarding.
Choosing a Crypto Exchange
The first step is choosing a crypto exchange. In our country, Bitvavo is an obvious choice, because they offer many different crypto coins. They are affordable, have a user-friendly interface and offer their platform in Dutch. If you prefer to go for something else, then other well-known fairs you can choose from are:
- Coinbase;
- Binance.
- Huobi;
- crack;
When you sign up, you will be guided through a registration process. An important factor in crypto trading is your online security. Make sure you use two factor authentication, also known as 2FA.
We assume that you have now chosen an exchange and will now tell you about all the ins and outs related to crypto trading.
What are the Different Wallets?
You’ve probably heard of a wallet: this is a digital wallet with which you can store, send or receive your crypto and NFTs. There are different types of wallets available, such as mobile, hot or cold, desktop, hardware, as well as paper ones.
A wallet works by means of public and private keys; passwords created by your wallet to ensure the safety of your funds. Let’s go a little deeper into this.
Public Keys
The public keys already speak for themselves, because that is the key that is public. This is linked to your unique wallet and is necessary for other parties who want to trade with you. By using the unique key, people can send you NFTs, cryptocurrency and other digital assets.
Private Keys
You must have guessed that the private keys are not supposed to be public. The private keys are usually quite long, between 12 and 24 words. These private keys allow you to access your wallet, so keep these words safe and never ever share them with anyone else.
If someone has obtained this seed phrase, they have access to your wallet and therefore also access to your assets. You also need these secret words to access your own wallet, if your hot wallet crashes on the computer or if you ever lose your hardware wallet.
You may think that your coins are waiting in that wallet for you to show up, but nothing could be further from the truth. Your coins are on the blockchain and your wallet is just a connection you make to your digital assets. The private keys are essential when you want to approve transactions.
How do you know when to buy or sell Crypto?
Buying or selling crypto is entirely at your own discretion. As an outsider, it is impossible and unethical to advise on how to use or withdraw your capital in the smartest way. It is important to delve into the possibilities, and this blog is a good first step.
When you know what is possible, you can map out your trading strategy. You may be able to do this immediately, but it is absolutely not a luxury to take a course in crypto. On Coinbase you will find a free course, but also a Masterclass. The Masterclass consists of 14 modules and 180 lessons, in which we explain all related topics in detail. Below we will take a closer look at the different definitions and strategies.
The basis of support and resistance levels
The basis of watt? I hear you thinking. But support and resistance are indispensable concepts if you want to know what the prices are doing. We also call it support and resistance. Everything in economics is a matter of supply and demand, so the world of crypto is no different. With support, there is a floor price, where the prices hit the floor. Resistance is the opposite of this, because a ceiling is hit.
If you can analyze price charts and interpret candlesticks (take it easy, this will be discussed later!), and draw a plan from that, then you have the right tools to invest.
Supports
Support is a way of representing a price level, especially the breakout, which is causing a downtrend. The result of this is often a price increase, but because the crypto is volatile, the floor is also often broken. In the chart below you can see how the price goes up and down before it breaks out. When the price doesn’t break through the floor, as seen below, there are more people buying than selling.
Resistance
Resistance is the exact opposite of support, so we don’t look at the floor, but at the ceiling. The chart below already indicates what is going on at such a moment: resistance arises, as a result of which the coin cannot peak further and therefore slips away. The price stabilizes or falls, because more is sold than bought.
Determine support and resistance levels
By pinpointing support and resistance levels, you can somewhat predict when to get in and out of trades. This of course sounds like a very handy trick, but in practice it is very difficult to determine. I can give you some guidelines, so you know what to look out for:
- What does history tell? What were past highs and lows like?
- Fibonacci Retracement ;
- Round numbers, because this is psychologically important.
Fibonacci retracement levels are horizontal lines, showing you where resistance or support is most likely to occur. They are based on Fibonacci numbers, which are remarkably important in the crypto world. Each level is linked to a percentage. This percentage stands for I’ll give you a small example:
The series starts with two numbers: first the 0 and then the 1. The number that follows is the sum of the previous two numbers. So after 0 + 1 comes 1 and then comes a 2 (1 + 1) to end with a 3 (1 + 2).
It takes quite a bit of research to even understand the logic of this, while what you gain with it is really nothing more than a hypothetical prediction. If you want to learn more about this, make sure you don’t apply it until you have absorbed and applied enough knowledge. If you can properly assess risks and you know how the support and resistance levels work, then you definitely have an edge over those who have not mastered this.
What is a candlestick?
A candlestick is known to be used to predict the price of crypto. Usually a candle chart is used per trading day, so for a month (20 trading days) you have 20 candlesticks. The origin of these price charts can be traced back to the Japanese rice trade of the 18th century.
Candlesticks are used to describe price action in the market, but focused on a specific time frame. Periods that you can set are, for example, 1m/3m/5m/15m/1h/1d. By combining candlesticks, they form a pattern, which serves to predict price variations.
The candlesticks were green in the beginning, but are now blue. This color indicates a positive change in price, while the red candlestick indicates a negative change in price. Factors that play a role in determining the price include: highs and lows, opening prices and closing prices.
In the picture below you can see that the graphs have both a body and shadows. These shadow shapes protrude from the top and bottom of the candle. Thanks to this tool you can see differences between the opening and closing price. The blue candle at the top represents the closing price, while the lower shadow represents the opening price, and for the red candle, this is reversed. This makes identifying patterns easier, so that you can form a better picture of current developments in the market.
In the video below you can learn more about reading and interpreting candlesticks.
What is the Relative Strength Index?
The Relative Strength Index is a way to analyze the financial market. Thanks to this formula, it is possible to determine buying and selling times. The RSI indicator shows the level of enthusiasm in the market and whether there is a lot of sales. The formula looks like this: RSI = 100 – (100/(1-RS)). With this you compare the size of the profits with recent losses to determine whether there are overbought or oversold situations.
You can always easily view this yourself when you check the stock exchanges. Go to the currency you want to view and click trading view. You will now see a graph, which you can adjust the way you want. If you press Indicators you can set all kinds of factors yourself, but if you choose Relative Strength Index you will see the strength and speed of the price movement.
The graph looks like a wavy motion. Pay attention to the purple line, because if it rises above 70%, then the coin is overvalued. If the line dips below 30%, the coin is undervalued, so you can expect a price increase. Be well aware that it is not a sure thing as the chart can also display false buy and sell signals.
What’s Next?
If you start crypto trading, you will also have to deal with certain costs. You also have to take into account so-called trading pairs: a link between the two different currencies to determine the value against each other. There are also a few visitor questions that we would like to address briefly.
- What is the difference between a limit order and a market order?
With a limit order you buy or sell immediately and with a market order you buy or sell at a specific price. - What is Slippage?
Slippage is the situation where you have to settle for a different price. This is often due to a price movement. The moment the order enters the market is different from the moment the transaction is completed. This can cause major differences, because the crypto market is very volatile. You can prevent slippage by placing a limit order. - What is a stop order?
A stop order is an order to buy or sell a cryptocurrency if the price exceeds a certain point. This allows you to limit your loss or increase your profit by responding to the predetermined entry or exit price. - Do I have to inform the tax authorities about my profit?
According to Dutch law, yes. A crypto income is also just income, so pay attention to this in time. You don’t want to be faced with nasty surprises!
Now is the time to start, so where do you start trading?
What websites do you use to trade crypto?
There are various websites that are suitable for you, as a beginner, if you want to trade crypto. Read along with us and see which of the three sites is a good start for you.
- CoinMarketCap
This site is the leader if you want to follow your crypto rates in real time. You will find over 6000 coins here, all of which you can analyze in real time. - CoinGecko
This is the largest feed reader in the world, which keeps track of more than 400 exchanges with all associated crypto coins. - Cryptoindex 100 (CIX100)
This is an automated index, which is calculated by a machine learning algorithm. You can save considerably on costs and energy, thanks to the tool of this platform.
But, like anything in the world of crypto: do your own research! Everything is a tool, but in the end you are the one who has to take the plunge and take the risks.
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Conclusion
You should now have a solid basic knowledge of crypto. Wallets, exchanges, coins, costs and relevant definitions: you’ve got it all! You know it’s not all very simple, but it’s a nice world and also very useful for the future to delve into.
