There’s no magic formula for making money in the crypto market. However — whether you want to begin day trading crypto with no prior experience or just enhance your current skills — there are a few good practices that can lead the way to safe and profitable trading.
Tip #1: Understand how the crypto market works
Unlike all major financial markets of the past, the cryptocurrency market never stops. It operates 24 hours a day, 365 days per year.
In addition to that, the crypto industry is still extremely young and far from mainstream. As a consequence, most of the value of various coins today is based on speculation about future potential, rather than current results. This contributes to cryptocurrency prices being extremely volatile in nature, meaning that they can go up or down significantly in a short time period.
These two factors make the crypto market incredibly risky — you can go to bed with great profits and wake up in the morning to find that your portfolio went down 20% while you were asleep. But at the same time, that volatility is why learning how to trade cryptocurrency can be so profitable too. No matter how small your portfolio is when you start, you can build it up very fast with solid trading strategies.
What’s important is that you never leave yourself vulnerable to massive price swings while you are away. That’s why stop limits are fundamental to your success in the crypto trading game.
Tip #2: Research the best coins to trade
A big part of your journey as a beginner is figuring out how to pick a cryptocurrency to trade. There are thousands of coins and tokens in the crypto market, but only a small percentage of them are smart options for trading.
Generally, it’s a good idea to find projects that you actually like and believe in long-term, as those can be more enjoyable to follow on a daily basis.
However, what’s really important when analyzing a coin’s tradeability is its liquidity and volatility. Without high liquidity, it will be difficult to get in and out of trades and you’ll be vulnerable to large price swings. Without volatility, you won’t have much opportunity to make a big profit in the first place.
Once you’ve researched and experimented to find some cryptocurrencies that you like — which also have high liquidity and volatility — you’re ready to go.
Tip #3: Get familiar with price charts and charting tools
Trading cryptocurrencies without looking at price charts is like trying to find your way out of a maze with a blindfold on.
Price charts enable you to look at past market data in order to forecast future price movements. This is a technique known as technical analysis, and it is the foundation of day trading crypto.
Once you understand the basics (e.g. what candles are and how to customize the data you see in your chart), you can start using charting tools to perform your own analysis and develop trading strategies.
To help you get started, we’ve attached a little cheat sheet of the most common patterns here, with some suggestions of when to buy or sell and where to set up limit orders.
This doesn’t guarantee success, but it at least gives you a solid place to start. From here, you can practice using custom charting tools and executing these trades in our trading simulator.
Tip #4: Master your emotions
Whether you’re trading for a living or you just learned how to buy Bitcoin yesterday, one thing we all have in common is that we are emotional beings. Clicking the ‘Buy’ or ‘Sell’ button and putting our hard earned money on the line can be stressful, terrifying, and thrilling all at once.
As you learn to trade crypto, you also need to develop awareness of your emotions so that you can make rational decisions. Otherwise, your mental state can become as volatile as the crypto market itself, and your journey to be a Bitcoin trader will be over before you know it.
On that note, there are two super common acronyms in the global crypto community that you may have come across already:
FUD (Fear, Uncertainty, and Doubt)
Refers to content that makes us feel worried about our cryptocurrency investment. Some FUD is warranted and some is completely meaningless. Your job is to minimize your emotional response and remain rational in either case.
FOMO (Fear of Missing Out)
The feeling that you get when you see cryptocurrency prices pumping sky high and you don’t know when/if they’re going to come back down. When BTC’s price surged above $10k on its way to $20k in late 2017, FOMO is what caused many people to make their first bitcoin investment without properly researching it or being patient for a better buying opportunity.
Ultimately, learning how to invest in Bitcoin (and any other asset) is as much a journey of understanding yourself as it is understanding the market. When you master your emotions, you’ll unlock your potential to make money with Bitcoin and to live a more fulfilling life in the process.
Bonus: Repeatedly practice in a risk-free environment
Cryptocurrency trading will inevitably have its ups and downs, which is why continuously learning from your mistakes is a huge key to longevity. Our Bitcoin game allows both beginners and experts to learn and test strategies by trading BTC and 90+ altcoins using play money, without any real cost or risk.
If you want to start putting the tips above into action, sign up for free to our cryptocurrency simulator.