Here at Europe’s Premier Digital Asset Exchange, we place a lot of emphasis on trading safely and intelligently. Success for our customers is success for us.
With that in mind, we decided to provide a trading tips series that should set you on the right track as you begin your trading journey. Part 1 has already been published and can be found here. If you haven’t checked it our already then be sure to read it before you continue with part 2.
Even if you’re an experienced trader, there may be a thing or two you could glean from this series, so be sure to read along!
Building a Portfolio
If you’re looking to get serious about trading cryptocurrency, you have to be thinking about your portfolio from day one.
Many traders don’t think about the idea of putting together a portfolio until they’ve become relatively experienced at trading, believing that a portfolio is the domain of those who have been around the block a few times, and this is a mistake.
It’s never too early to trade with your portfolio in mind.
In brief, your portfolio is a collection of the various tokens, coins and ICO’s that you are currently invested in.
For the absolute beginner, it makes sense to kick-start your portfolio with the purchase of Bitcoin (BTC), as its the most popular cryptocurrency by quite a distance, and it tends to act as the standard by which other coins perform.
If Bitcoin rises, so do most other coins, and the same can be said if it drops.
Also, bear in mind that you don’t necessarily have to purchase an entire Bitcoin to begin with. You can take an amount of fiat currency that you’re happy to invest, be it USD or another currency, and trade that for the equivalent in BTC.
In any crypto investment there are two questions you should ask yourself before you add to your portfolio;
Do you believe in the project? Do you believe the project is currently undervalued and will rise in value over time?
If you answer yes to both of those questions, then the coin, token or project is a viable addition to your portfolio.
Keeping a Diary
In the beginning, this can seem like an odd idea, but as you progress through your trading career you’ll begin to see the benefits of keeping a diary, and you’ll likely wish you’d started doing it sooner.
Whenever you buy or trade a coin or token, keep a note of not just the transaction, but why you decided to proceed.
What attracted you to the project? Why did you decide to sell? Was there a dip in the market?
After a period, you’ll start to see patterns in your thinking emerge, and you can use these patterns to improve on your methods moving forward.
For example, you may look back and find that you pulled the trigger on a number of sales too soon and that if you’d held off slightly longer on some of those transactions, you could have increased your profit.
This would allow you to stop and consider your choices in the future. Is now the correct time to sell? Are you thinking emotionally rather than looking at the data before making that trade?
A diary will provide you with a picture of what you’re doing well, and what you could look to brush up on in future trades.
Keeping a diary is invaluable, and something you should do from as early on as possible. You’ll reap the benefits long-term.
Before looking at technical analysis, it’s essential that you know how to read a chart.
There is a whole lot of information available online for those who are complete novices to reading what is called candle-stick charts, so we’ll give a brief overview in this guide.
A candlestick chart is most commonly made up of bars that come in two different colors. The colors most often used are green and red, but these can vary.
For this discussion, we’ll use the green and red colored charts as examples.
A candle-stick chart contains the open, high, low and close dataset value for the period of time that you wish to display.
A green bar is an indicator that a coins price has risen, while a red bar is an indicator of a coin falling in price.
The main body of the candle is known as ‘the real body,’ while on green candles the bottom of the real body is referred to as the ‘opening price’ and the top of the real body is known as the ‘closing price.’
For the red candles, this process is simply reversed, where the top is the opening price while the bottom is the closing price.
Lines that appear at the top or bottom of the real bodies are known as ‘wicks’ or ‘shadows,’ with the top of the wick/shadow representing the highest price the coin was traded for during that set period, and the bottom the lowest price the coin was traded for during the period.
It’s worth noting that the period of time you wish to view your charts in is crucial depending on what type of trade you’re looking to make, and here on ETERBASE we provide you with the option of choosing that period to suit your own purposes.
For example, day traders tend to view their charts over 5 minute periods.
Most successful traders make use of the many technical analysis tools that are available, helping them to make informed predictions on how the future of a market is going to play out based on past performance.
Few traders or investors would argue against the belief that technical analysis is the main factor which separates professional traders from regular gamblers.
A professional trader doesn’t make decisions based on their gut feeling like most regular gamblers do, they use as much information and knowledge as they can to make an informed choice.
Many traders believe that technical analysis primarily consists of observing patterns within charts, but there is far more to it than that.
Technical analysis many times begins with looking at the market cap of the token or coin you’re interested in.
Generally, the larger the market cap, the more difficult a climb in value will be. Checking the market cap of a coin is just as important, if not more important, than looking at the price of the coin.
A terrific example would be Ripple, which many novice traders would look at as an excellent investment opportunity due to the price sitting relatively low ($0.47 on October 9th, 2018), but a quick look at the market cap reveals a value of $17,291,808,853, which is absolutely huge.
This means that price fluctuations for Ripple will be slower than that of coins or tokens with lower market caps. Remember, the lower the market cap, the rarer the coin.
Another useful tip for technical analysis is to have a look at the order book here on ETERBASE, and check the ‘Ask/Bid Spread’ which will provide you with some information on whether you are taking part in a buyers or seller's market.
As always, no method is 100 percent guaranteed of course, but the information given is certainly worth taking into consideration before deciding on your first trade.
Well, that does it for the second part of our trading guide! We’ll be back next week with some more tips for those who are new to trading!
We’d also like to point out that we offer a FREE trading guide via our website, so be sure to check that out if you want to learn more! It comes packed with lots of hints and tips!