Three keys to crypto trading
Crypto trading means buying and selling digital assets (tokens, coins, NFTs) like those listed on our Cryptocurrency Prices page.
For the purposes of this discussion, a trader is not an investor. Investors set goals and build portfolios for long-term return. The trader is focused on profits right now. The goal is to get in and get out fast, pocketing the profits. Thatâs what day trading crypto is all about.
Most traders lose money. Some turn a profit.
There are three keys to trading:
Fundamental analysis is based on the fundamentals of a company or project, including its product vision, its existing customer base, the quality of the team, partnerships, current revenue, and so on.
Technical analysis focuses on the price chart using various indicators from the past to make predictions based on historical patterns. This is the main focus of most trading.
The psychological game is about developing the right patience, discipline, and trading methods to reduce risk. This is the most important element of trading strategy.
The essential questions of trading reduce to this:
What should I buy?
How much should I buy?
When should I buy?
When should I sell?
Coins go up and down in value based on market perceptions about their value. Those perceptions are based on traders looking at the patterns of the price chart (technical analysis) and other market participants watching the news for project updates (fundamental analysis).
Choosing what to buy and when depends on a great deal of research and lucky timing based on market cycles.
Booms and Busts in Bitcoin Trading
Bitcoin is notoriously volatile, which means that it rapidly rises and falls in price. A recent Bitcoin boom came in January 2018 when Bitcoin reached a price of 15,000 euros.
The bottom of the bust was December 2018 when Bitcoin dropped to about 2,400 euros.
Then the cycle began again.
Your cryptocurrency trading platform should give you plenty of data for spotting market cycles â especially if you are trading Bitcoin. Visit our Bitcoin price page to see the current price chart for BTC.
This pattern is essentially a fractal, which means it repeats across time-frames. Tiny boom/bust cycles within medium-size boom/bust cycles within big boom/bust cycles. They donât always show the exact same pattern, but the main shape of the cycle is apparent when you zoom out.
This fractal dynamic allows the discerning trader to spot cycles at different time frames (hourly, daily, weekly, monthly) and then take advantage at the right moment by timing entry and exit positions accordingly.
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