Since its emergence over a decade ago, cryptocurrency as an asset class has been at the centre of tremendous success stories earning its traders’ incredible returns. Despite some market fluctuations, the bull has raged basically uncaged from its infancy in 2009 until December of 2017 when bitcoin (BTC) reached an all-time high of approximately $20,000 in value.
However, 2018 proved that there is no such thing as a sure thing in trading and as the market took a dive so did the value of cryptocurrency. In comparison, BTC was in 2018 worth approximately $3,000 which was a stark difference to its earlier value the year before. The bear seemed to be hibernating fast and as traders around the world tried to gauge the trajectory of the market, information such as cryptocurrency analysis by DailyFX, was invaluable.
The decline was rapid and forceful leading many to believe that the glory days of cryptocurrency were gone. 2019 seemed to have proved them wrong though and it has been hailed as the year of triumphant return for the asset class in question.
What is it we’re talking about, really?
With over two thousand cryptocurrencies currently in existence it is plausible to suggest that there is still a keen interest in trading with digital assets. By securing and verifying transactions using cryptography, cryptocurrencies rely on Blockchain technology to validate trading. As there is no central authority it relies on its traders to keep it honest.
Before diving into strategies and tips when it comes to trading cryptocurrency, a few sentences on what actually affects the market might be on order.
Triggers to look out for
A few triggers have widely been identified as having an effect on the cryptocurrency market, effectively adding to or subtracting its already inherent volatility. Speculations for instance have always had a tremendous effect on trading markets and most of all if the traders in question are inexperienced. Another factor that leaves a great impact are regulations. Lack of, or ambiguous ones makes it difficult for the market to stabilise and it leaves traders vulnerable. Finally, it’s the newcomers you need to be weary of. With more and more cryptocurrencies entering the market, competition is fierce.
Before diving in, consider this
1. Let your personality decide – trading is not for the faint-hearted and the volatility of the market is enough to keep even the most collected person up at night. That is why you need to decide which trading style is most suited for your personality. This will then align with your choice of strategy. It’s important to decide early on whether or not you are looking to engage in long-term investing or short-term trading.
Most decide to trade either via derivatives or via an exchange where the former indicates trading via financial derivatives such as binary options and the latter involves trading via an exchange, i.e. purchasing the assets themselves. In the latter, it is common to have some trading fees and these exchanges are also usually unregulated which have led to a debate on cybersecurity.
2. Immerse yourself in the market – in trading there is no such thing as too much information, meaning that you are wise to make sure you keep yourself updated with all the current trends, speculations, and trajectories. By observing the market over a chosen period of time you will soon be able to detect certain trading patterns.
These patterns will then give you an indication as to where the market might be heading, effectively allowing you to plan accordingly. It will be very much worth your while to educate yourself about the different characteristics of bullish, bearish and reversal patterns in order to be able to make predictions of your own. It all comes down to maximizing your profits as well as limiting your losses.
3. Choosing the right strategy for you – in alignment with choosing the right strategy, you will find the concept of risk management as well. Before engaging in any type of trading it is always wise to take stock on how much you have the ability to lose. It might seem as if this goes against the entire nature of the trading business and its volatility, but it is an important factor to bring into the equation.
There are different types of strategies when it comes to trading cryptocurrency and the one you choose to utilise is very much dependent upon the two previous considerations that are mentioned here. Choose carefully between day trading for faster returns or make positions trading your game. A scalping strategy will allow you to engage in a large number of trades or perhaps go for swing trading instead.
Preparation is key
The market has recovered in 2019 and here are now discussions of how long the current bull market will persist. To stay aligned with the market choose the trading style you feel most comfortable with, stay updated on current trends and opt for a strategy that will allow you to maximise your ROI.