Here we are, we have reached our core business. How to make money with bitcoins and cryptocurrencies through online trading! There is Best Crypto Software for trading online.
What is cryptocurrency trading?
There are two ways to trade cryptocurrencies:
1) Sign up for an exchange that allows you to buy and sell the different dollar cryptocurrencies. Dollars that in exchanges are called “USDT,” an abbreviation that means “dollars available to buy and sell cryptocurrencies.”
What are the best exchanges you can choose, how to sign up and how to start trading on them?
2) Just like many other financial assets, the first CFDs with the most important cryptocurrencies underlying are finally being born. So a very immediate way to trade cryptocurrencies is to use CFDs, just like trading CFDs on forex.
The big problem of CFDs on cryptocurrencies is that they have been born for too little time and are, in fact, not convenient for trading because there are very high commissions on trades.
It is not advised to trade on virtual currencies through CFDs.
Cryptocurrencies are probably the most volatile financial assets ever. They are real roller coasters!
This is why they are having so much success in online trading. The more volatile an asset is, the more suitable it is for trading and, in particular, for short-term trading. Provided you can control the risks.
Being very volatile makes cryptocurrencies, on the one hand, very attractive for trading. On the other hand, however, it makes operations very risky.
But the huge volatility also leads us to a third consideration: cryptocurrencies are one of the few assets suitable for very short-term trading, scalping.
Cryptocurrencies are one of the few assets on which scalping or day trading and using very short-term charts can be advantageous
If you still don’t know, scalping means opening and closing a trade within a few minutes. And day trading means opening and closing a trade within the same day.
Here, we must admit that virtual currencies are among the very few assets that have ever analyzed where scalping and day trading can make sense, precisely because of the great volatility of the same.
For this reason, it makes sense on cryptocurrencies to try scalping and/or day-trading and try to pursue very high returns.
But this style of trading remains an activity. It is right that you know it, very risky. We will talk more about this shortly.
This type of very short-term trading is done using very fast Japanese candlestick charts. So you will have to use candles at 5, 15, 30 minutes and/or at most the hourly ones.
Trade only on the 50 most capitalized cryptocurrencies
The first rule to mitigate the huge risk of very short-term trading is to operate only on the most capitalized cryptocurrencies.
It is therefore absolutely advisable to trade only on the top 50 cryptocurrencies by market capitalization.
Stop loss: they must be placed very wide, or …
Here we are at the real sore point of cryptocurrency trading.
The great volatility allows you to earn a lot with scalping or day-trading, even just in one day. But it also allows you to touch a set stop loss easily.
It must be said first of all that the stop losses must be very large. So large, even going to lose 5% of their investment in the single trade.
Alternatively, an even more risky strategy is not to put a stop loss at all.
In recent months, the most capitalized cryptocurrencies have shown to crash now and then, with ruinous falls of several percentage points.
But then, practically always, they recovered and surpassed their previous highs in a matter of days or weeks.
So, a very risky strategy is to “transform” your very short-term scalping into a medium-term investment when things go wrong. A medium-term, which in this case, however, is simply a few days or at most a couple of weeks.
And then, when the cryptocurrency has recovered and returned more or less where it was before, you can close the position and start doing day-trading again.
How is all this possible?
It is possible because most capitalized cryptocurrencies seem destined to grow for a long time. The use of cryptocurrencies is still in its infancy, so it is possible that in this historical phase, it is possible to trade without considering a downside risk.
Conclusion: whether because here you can scalp or day-trading, and therefore it does not make sense to consider fundamental factors on such short-term trading. Also because today, cryptocurrency trading is almost pure speculation. And this makes technical analysis more valid, given that it is much more “purified” from the fundamental factors that normally act on other classic assets.