The complete beginner’s guide to “Crypto Currency” trading
Table of contents:
Bitcoin, created in 2009, was the first decentralized cryptocurrency. Since then, numerous other cryptocurrencies have been created. These are frequently called altcoins, as a blend of alternative coin.
Below is a poll I did in late January 2018, and as you can see below the majority of people have made money, and that is encouraging.
How do I know which coins are good?
2) How do I get started?
Step 1 – Deposit Funds
Below is a very interesting thread where people are discussing which exchanges they like –
- Australia- Coinspot
“In 2015, YoBit was introduced on the BitcoinTalk forum. It offers many of the same features and characteristics of other cryptocurrency exchanges.”
“Bitfinex is a trading platform that exchanges five pairs at current: BTC/USD, LTC/BTC, LTC/USD, DASH/BTC, and DASH/USD.”
Review – https://www.scambitcoin.com/qryptos/
“Operated by Quoine, a next-generation fintech company involved in various blockchain-focused projects, Qryptos is a cryptocurrency exchange which brings quite a few fresh ideas to the table. “
“Livecoin is a Bitcoin and altcoin exchange platform that offers many currency pairs, including trading altcoins for FIAT currency.”
“Bittrex was founded in 2014 by four security professionals with a shared interest in cryptocurrencies and experience in online security.”
Review – https://www.cryptocompare.com/exchanges/poloniex/overview
“Poloniex is a pure crypto to crypto exchange based in the United States. With a grand redesign in early 2015 the site has added a wealth of features to provide a fully immersive trading experience. “
- Local Bitcoins
The full list of coins you can track is Bitcoin, Ethereum, Bitcoin Cash, Litecoin, Ripple, Ethereum Classic, Zcash, Monero, Dash, Stellar, Qtum, Bitcoin Gold, OmiseGo, NEO, Lisk, and Dogecoin.
CNBC did a video that explains tax implications –
3) Trading Vs Investing
If you are a trader, your goal is to buy and sell in a short period of time
An investor, you plan to buy and hold, or HODL.
If you are a trader, then you use chart and momentum, investors use DD, such as viability of the project and maximum coin supply.
For more, check out Investopedia –
In this example, we can see how far above the upper BB the price is, which gives us a clue that the price is a little hot and due for a pullback. This chart is a 240 min or 4 hour chart, so its even more so unusual to move this fast above the upper BB.
In this example, we see how sometimes the middle BB(MA 20) can act as support. Three times here it was tested and held as support, so you can watch to see how the price interacts with the middle BB.
The lower BB can often act as support, but when it breaks you are often facing a nice value situation. A general rule of thumb is that when the price is below the lower BB there is a favorable risk/reward.
BB Pinch – For our last example, we see what it looks like when the bands are “pinching” or “Squeezing”
In this case you can see Bitcoin in a bullish flag, and the bollinger bands are starting to squeeze, or pinch (get closer together)
As you can see here, the price moved up after the pinch. It does not always go up, it can go down too but the pinch suggests a move either way is coming.
For more, watch this video at Stock Goodies chart school –
On balance volume is a very important indicator to judge the strength or weakness of a move. Some of you may be familiar with “A/D”, or “Accumulation distribution”. This is basically a better version.
In this example you can see how the price was rising and nearing a resistance area. The strong OBV suggested it had a good shot to break that resistance and go higher, which it did.
Sometimes you will observe the OBV rising before the price rises, and this is called “Bullish Divergence”
Shortly after this, the price rose. Additionally you can observe OBV falling before the price falls, and this is called “Bearish Divergence” which is often an early warning sign.
For more, watch this video at Stock Goodies chart school –
Stochastics RSI is a very important indicator to use for determining the general “over bought” or “over sold” condition of a stock or a coin.
In this example we can see that the StochRSI has bottomed (near the zero), and is giving us a crossing buy signal (red line crossing the black).
In this example we can see how the StochRSI is over-bought and giving us a crossing sell signal with the red line crossing the black line.
To learn more about Stochastics RSI –
One very common and effective signal people look for is when moving averages cross.
In this example above you can see I am anticipating the yellow line crossing the blue line which would indicate potential for further upward price movement. Below, you can see we got that cross and some further upward movement.
In the below example, you can see I am anticipating another MA cross, and am pointing out the last time there was an MA cross we saw some nice movement.
Here is some more information about Moving Average Crosses:
Head and Shoulders
Head and Shoulders Bottom or Inverse
Cup and Handle
Using different time frames
What is the best time frame to use? Well, this is a very difficult question to answer so simply. As a general principal, you want to start with a wider time frame and work your way down. If you are a day trader, typically you want to be using a 4 hour and 1 hour chart, and then when there is heavy volume look even closer with a 15 minute chart. In my experience some of the biggest mistakes I have made came when I was trying to use a 5 min chart and look for trend lines and patterns. It is very easy to get fooled with a 5 or even 15/30 min chart with a trend line or pattern, only to be crushed by the larger trend (4 hour or daily)
- Gravestone Doji
A gravestone doji pattern is a common reversal pattern used by traders to suggest that a bullish rallyor trend is about to reverse.
- Dragonfly Doji
A Dragonfly Doji pattern is a relatively difficult candlestick pattern to find, but when it is found within a defined trend, it is often considered a reliable signal that the trend is about to change direction.
- Shooting Star Doji
Shooting stars indicate potential price tops and reversals.
- Morning Star Doji
- Abandoned Baby
How to draw a trend line
Debate I had with another excellent trader about how many points you need for a trend line –
5) How to survive a downtrend
Tether – On Binance you can sell your coins and move them into Tether or $USDT. Earlier in this article I go into more detail about Tether.
Nubits – On Bitrex, you can move your funds into Nubits, or $NBT, which is basically Bitrex’s version of Tether.
Major coins – If you decide to ride out the storm, you can pick which of the 3 major coins are doing the best, and historically it has been $ETH or Ethereum.
HODL – If you are a long term investor and do not really care, then just hold and hold on for dear life.
Below are some other ideas of how to handle a crash –
You can also follow @WhaleCallsAlts for $LTC $BCH and $ETH
When a short position is liquidated, this is bullish. When a long position is liquidated that is bearish.
You can also track shorts/longs on tradingview under the symbols:
6) Common Terminology
Bag Holder – Someone who bought a coin at a higher price and did not sell, and is now “holding the bag”. Often times you will hear people talk about being “stuck”, or “bag-holding”.
HODL – “Hold on for dear life” This basically means hold no matter what, even if you are down 90% because in the long run you will be a winner.
BTFD – “Buy the F’ing Dip” – Basically, if the price goes down buy.
REKT – Basically means you lost all your money, or “wrecked”
Bounce – A recovery and upward price movement.
Leg – Next step in the journey, or next chapter. Often you may see me mention how something may be ready for a new leg, that means it may be ready to move up in the interum. (Re-Do)
Breakout – Bullish condition where price has broke through resistance and is free to run.
MA (Moving average) – which is the simple average of a security over a defined number of time periods. Often times people use the crossing of different moving averages as buy or sell signals, such as 20 crossing 50.
Centralized vs Decentralized coin – https://blockchain.wtf/what-the-faq/centralization-vs-decentralization/
Ethereum Network Token – https://blockgeeks.com/guides/ethereum-token/
7) Website Resources
- Coin market cap
- Bit universe
Review – https://coincentral.com/shapeshift-exchange-review/
“ShapeShift is an established cryptocurrency exchange platform that has been in operation since 2015. It aims to make switching between digital assets quick and simple.”
“Wirex – previously known as E-coin – combines digital money with traditional banking services. “
Really cool website that gives you an overview of the top 100 coins.
“CoinScanner is a free tool to compare cryptocurrency rates across the web”
- Coin Telegraph
- Trading view
Awesome website for charting cryptos. You can share chart ideas and learn from others, highly recommend it.
Website that gives ratings on coins, not sure how valuable though.
8) Mobile Applications
Review – http://echeck.org/revolut-review/
“When you sign up with Revolut, you get as many multi-currency accounts as you need, and you get a multicurrency account. When you visit another country, the card acts as if it is from that country and automatically starts using the local currency, even if your online wallet says you do not have that currency in your wallet.”
“Whether you’re just getting started or you utilize multiple exchanges across numerous countries and bank accounts (like I do), understanding how price swings and news has affected your Cryptocurrency portfolio is essential. Lucky for us, there’s Blockfolio!”
Review – https://www.pcmag.com/review/342992/telegram-messenger-for-iphone
“The Telegram iPhone app balances security and fun with easy messaging and a novel decentralized system that allows anyone to create and share sticker sets.”
Review – https://bitcointalk.org/index.php?topic=1958486.0
“TabTrader is a FREE trading terminal for bitcoin (altcoin or cryptocurrencies) exchanges “
Review – https://steemit.com/cryptocurrency/@parkermorris/altpocket-io-the-best-way-to-view-your-altcoin-earnings
“Altpocket.io is an amazing website where users can keep track of their investments by either entering them in manually, or by having them automatically entered and calculated by using Bitrexx’s API.”
- Enjin Wallet
Here is an article discussing security options:
Cold Wallet Options
Ledger Nano S- Company Website
Review – https://99bitcoins.com/ledger-nano-s-review-bitcoin-wallet-better-than-trezor/
Ledger Blue- Company Website
Trezor – Company Website
Keep key – Company Website
Electrum – Company Website
My EtherWallet- Company Website
Exodus – Company Website
Bitcoin Paper Wallets – Company Website
- One good tip to avoid getting phished is to use a different email address for each exchange, that way if one account is hacked they will not be able to access the other ones
- Make sure to use 2FA, or 2 factor authentication. What is 2FA?
Two-factor authentication: What you need to know (FAQ)
10) Beginner Mistakes
FOMO stands for fear of missing out. This is one of the most deadly mistakes you can make and is very hard to avoid. Once you see a stock or coin running is it very hard to avoid jumping in because you don’t want to miss out, even though the timing of your entry is likely way off.
Playing pump and dump plays
The value in having your funds spread out (not only in several plays but also cash) is that you do not become overly emotionally attached to any one play, as well as not having your bankroll be dominated as much by swings.
Buying based on USD price
Not keeping extra cash just in-case
Not using a stop loss
Using 1 min or 5 minute chart
When using a smaller time frame such as a 1 or 5 minutes you are going to be receiving a lot of false signals. It is important to zoom out and always keep a larger time frame in mind.
Comparing yourself to others
It can be incredibly annoying to sell a stock/coin only to see the price go up. There is nothing you can do to control this, so my advice is to make a decision and stick with it. Once you have sold something, move on. Judging yourself with the benefit of hindsight is an unnecessary exercise.
Stockgoodies Chart School