With the hype around bitcoin only getting stronger, more and more people are looking to get into the crypto market and make a profit. Because of the ease of access to exchanges, many people who have never traded before are opening their first trades in the cryptocurrency space. Due to their lack of experience these novice traders will almost certainly lose money to the more experienced traders. There is a saying that goes:
A novice trader comes with money and no experience and leaves with experience and no money. A seasoned trader comes with experience and leaves with money.
Keeping this in mind, you will almost certainly lose money until you can develop a market intuition when it comes to reading indicators and price sentiment. That's why we have developed a beginner’s strategy guide to minimize these loses until you gain the knowledge and discipline to trade the markets for profit.
1. Find an exchange to trade on
There a plenty of crypto exchanges out there now and all of them support Bitcoin (BTC). If you want to trade alt-coins, then support among exchanges is not universal. You will have to do some research on what exchanges support what coin and plan appropriately. You can use Coin Market Cap to find a list of all top cryptocurrencies. Clicking on a coin will take you to that coin's stats page that lists what exchanges you can trade that coin on. Many exchanges have Know Your Customer (KYC) laws to prevent money laundering. This requires you to provide your identity. While I don't agree to handing over your ID to random companies, there is things you can do to safeguard yourself. You should place a clear piece of plastic over your ID with the date and the name of the website written on it. What this does is makes it so that any hackers or malicious employees of the exchange that steal images of your ID cannot use it for ID theft. It will be too much effort to remove the date and exchange name from the image so they will just discard your image and move on. You can take your chances with exchanges that do not have KYC regulations, such as Binance however it is risky. The US government has taken down unregulated sites before and everyone who had funds on these sites lost them. Liberty Reserve is the prime example of this. I recommend opening an account on a crypto exchange that is within your country if the laws there protect consumers.
2. Get good trading data
To make profitable trades, you need accurate and up to date data on the market. Most crypto exchange platforms use Trading View as their charting provider. Therefore, you should familiarize yourself with Trading View's platform and how to use their charts.
The two settings you will use the most is change timeframe and add indicators, as shown in the image above. You will use the timeframe to 'zoom out' on the data and get an overall price trend sentiment before commencing with any trades. I always select the daily timeframe to begin with as that provides a good view of the current price trend. The next button you will use often is the Indicators button. This button brings up a selector that lets you add new indicators to your chart. Once you have added an indicator to your chart, a small box will appear on the left-hand side of the chart with controls for that indicator. You can use these controls to customize the indicator's settings and visual appearance. The cross button removes the indicator from the chart.
There is no limit to the number of indicators you can add. Choosing what indicator to use is often personal preference. I encourage you to explore what indicators are present and use what ones feel good. Some indicators are better than others and you will have to research how to use the particular indicators you choose. We have created another post about five top indicators to use, if you want to jump in right now.
3. Establish your trading indicators and follow them
Once you have determined what indicators you would like to use, you must develop the discipline to follow them. If all your indicators are signalling that you should sell, then sell. Don't get overly attached to the asset you're trading and don't fall for the hype. It's well known in trading communities that emotions hurt your ability to make a successful profit. Once you fall onto the hype train, you begin to rationalize how a particular asset is 'going to the moon' or 'Bitcoin 100k by June' etc. and this prevents you from exiting the market in situations when you should be. If you follow your indicators properly, this prevents this from happening as indicators don't succumb to the hype.
4. Don't expect immediate results
The market moves a lot slower than people initially expect. You will realize this if you sit down and watch a chart in real-time. It may go whole days and only move a couple of percent - very unexciting! This is where people develop a medium-term trade strategy. A short-term trade strategy can be defined as buying and selling an asset on the same day. A medium-term trade means holding the asset for a week or two. Using a medium-term strategy and trading on weekly trends is far more sustainable, as you only have to look at the chart a couple of times a day. Because of this, you won’t see profits till at least a few weeks into your trading.
5. Choose the right amount to trade
You should almost never put your entire cash balance on a single trade. The only time you would trade your entire cash balance is if you're a super risky person and all the market sentiments point to a bull run (yolo), or you inside trade. In my entire trading career, I have only ever seen one scenario that *almost* guaranteed a bull run, so don't believe the hype, whatever coin you're looking at is not guaranteed to rise. Don't yolo your entire cash balance. When you make a trade, you should only ever use 5-10% of your current cash balance. This does two things: prevents you losing all your money if you're wrong and lets you open trades in multiple markets simultaneously. If you always have cash on hand, you can always open a trade when the indicators signal to buy.
6. Should I use leverage?
The answer is no. Not until you are comfortable in the market and making consistent wins. Leverage lets you make greater wins and losses with a smaller initial investment. It sounds great for new traders as it lets them make the big trades with a small starting portfolio. The downside is it greatly amplifies your losses (which there will be many) and can liquidate your other position which may be making you money. A real bad investment with leverage will wipe out your entire portfolio leaving you with nothing.
Using these six tips, any novice trader should be able to pick up the hobby of trading bitcoin and turn it into a successful stream of income. Don't expect to make big bucks initially but with time and experience you can turn this into your main source of income.
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Authored by Brendo @ The Trader's Blog
