If you’re an experienced forex or crypto trader already, you’ll have your own strategies. If you’re new to all of this, it’s worth bearing a few simple points in mind.
So you want to make money trading crypto. It’s understandable, what with all those online adverts and stories of wealthy traders driving Lambos they’ve bought with their crypto gains. But here’s the thing: it’s actually not as easy as they make out.
There are various reasons for that. One is simply that day-trading is a zero-sum game: all things being equal, someone wins and someone loses on any given trade. (We’re talking about short-term trading here. If you’re a long-term investor, then that’s a different matter and a different article.) Another is that the crypto markets can be quite heavily manipulated — ‘whales’ (large holders with deep pockets) are good at pushing the price around for their own ends and making a mess of your carefully-devised trading strategy. Another is the maxim that ‘the market can remain irrational longer than you can remain solvent’: even if you manage to win 50% of the time, if you get wiped out you have no funds to come back with — a statistical concept known as ‘gambler’s ruin’.
Anecdotally, some 80-90% of daytraders lose money and many of them get burned badly enough not to try again. The reality is that learning to trade costs money — you will make mistakes, and although practice accounts will help you a certain amount, there’s no substitute for having real money on the line.
Given there’s already enough risk involved in trading, you won’t want to increase it by using a shady exchange where your funds could be hacked, the connection might inexplicably drop at an inconvenient moment, or the exchange owners turn a blind eye (or even be involved in) shenanigans that go on with their platform. Ideally a Decentralised Exchange like the Waves DEX is best, though you’ll want to make sure the speed and interface are up to the job (Waves uses centralised matcher nodes for real-time trading, whilst trades are settled peer-to-peer on the blockchain — so it’s both fast and secure).
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Expert traders will use all kinds of exotic tools and indicators to gauge where the market might head. If you’re starting out, though, keep it simple. Look at price, volume, support and resistance to start with. These should give you a reasonable idea of likely targets above and below the current price, and how decisive and movements up or down have been. Support and resistance are zones of particular activity, off which the price is likely to bounce (up and down, respectively). Breaking through them signals the possibility of a move to the next zone. If you get the hang of those, you can start looking at Fibonacci lines, RSI and other arcana of the discipline.
If you need an introduction to different trading strategies and methods, the website BabyPips has an excellent School of Pipsology. You could do a lot worse than work your way through that material.
Otherwise, bear in mind that successful trading isn’t just about making money: it’s about not losing it. Risk management is incredibly important. That means locking in profits, even if it means you won’t make as much as you might if you kept a trade open, and it means knowing when to close out a trade at a loss to prevent a bigger loss. A common approach is to ladder buys downwards, so you can buy as the price falls, and similarly ladder sells on the way up. That way, you never go all out and never go all in. That’s important in the crypto markets, which can rise or fall more than you ever thought possible.
All in all, you’ll need pretty strong nerves to trade successfully, and not letting your emotions dictate your decisions — successful trading means being one of the few parties in the market capable of making cool, rational decisions and sticking to them.
If you’re not suited to trading by temperament, you may find long-term investing easier — the ‘buy and hold’ strategy. Or, as they say in the crypto world, HODL.
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