A Guide To Crypto Trading

If you are a newbie or a freestyle trader searching for some advice, this article will guide you to the right skill set to become a high-profit trader.

A guide to crypto trading

CHOOSE A RELIABLE TRADING PLATFORM

People with bad intentions happen to be everywhere and beginners can easily jump on the bandwagon without enough consciousness. Fraud cases do happen in this world and it happened a lot before. Accordingly, it’s always crucial to learn about the providers and their services before getting your assets involved. Doing in-depth research on their business profiles, legitimacy offers, partnerships, projects, etc thoroughly will never be an excessive job. Another term to consider is which model of exchanges you want to interact with.

Decentralized exchange model is allegedly the most secure with the philosophy of no middleman controlling the flow of funds and returning peer-to-peer permissionless interactions. In order to resolve all the issues associated with a centralized platform, specifically massive security attacks on Mt.Gox and Coincheck, the hosting of DEXs distributes throughout the networks’ nodes, which eliminates the risks of server downtime and hacking possibilities since there is no centrally controlled servers.

Decentralized vs. Centralized (Image: blockgeeks.com)
Key differences between Centralized and Decentralized Model (Image: Blockgeeks)

HB DEX is a 100% decentralized exchange, which enables users to trade crypto assets directly between each other with no requirements for personal data. The decentralized exchange operates entirely on HB Wallet Desktop Application, offering a more efficient, robust and secure platform than any web-based exchanges and wallets.

All essential functionalities can be found in HB DEX. The exchange offers users a seamless crypto trading experience from storing tokens, conducting transactions, paying fees to checking for transaction statuses. The process is faster, less expensive, and solves the common issues occurring within any centralized exchanges.

HB DEX supports real-time trading with any tokens on ERC-20 for ETH and vice versa.

In addition to the sophisticated structure, users are able to sync their wallets into the HB Wallet mobile version after trading and monitor their assets from mobile devices.

Specifically, HB DEX is 100% free. Users will only have to pay a small amount of Ethereum fees for validating their transactions.

Detailed tutorials on how to perform transactions on HB DEX are also conducted within the platform for complete support.

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HAVE A DECENT TRADING STRATEGY

If you are a freshman in this world, it’s purportedly vital to learn about the markets and important terms in trading firsthand. Having a good sense of market movements and a sharp trading strategy can help you become a high-profit trader. However, there are always risks associated with trading. By applying proper risk management and having a good mindset of trading, you will also be able to lessen the common mistakes and risks, as well as make massive profits in a bull market. Accordingly, this article will give you some ideas of what you are likely to face and the steps you must take to gauge the situation.

Having a sharp trading strategy can help you become a high-profit trader

KEEP YOUR CAPITAL SAFE IS THE KEY

It’s a common thing to think of how much profit you can make when you first start trading.

Massive fast-growing markets are intriguing, unfortunately, there have been hundreds of cases in which crypto traders got off to a great start but lost almost all of their money and quit, simply because they don’t have a proper money management strategy. Good signals can sometimes give you false alarm and market cycles can lead you to a long thread of losing trades.

If you don’t want to end the game so soon, protecting your capital is more important than urgently seeking lots of profits. If making long-term profits is your goal, risk management strategies need to be planned and applied effectively to increase your possibility of becoming a high-profit trader and avoiding tragic pitfalls.

THE 1% RULE

Everyone has been told at least once that not to risk more than 1% of your account balance. But what is the reason behind that?

The answer is to guarantee long-term sustainability.

If you wake up on the wrong side of the bed that day and lose 30 trades in a row, you will still have approximately 70% of your initial balance. These losses can be made up with a couple of successfully profitable trades, and you can quickly recover as well as achieve new heights again. Thus, if unfortunately, you have to go through a losing streak, the risk on each trade will decrease progressively according to the fixed percentage per trade of risking. This will in turn structure a reverse compounding effect.

Instead of selecting a number such as $3000, 0.3 BTC, or 15% of your stack like every newbie often does, calculate how much you can afford to lose on each trade. To do this, simply calculate your maximum risk by solving this simple mathematical problem:

Account size/100 = Your maximum $ risk.

For example, if the size of your trading stack is $30,000 and your strategy is to risk 1% per trade, don’t risk more than $30,000/100 = $300 per trade. It also means that if your trade hits “stop-loss”, you will lose $300.

KNOW HOW MUCH YOU AFFORD TO RISK (POSITION SIZING)

In a crypto trade, Target Price is the projected future price level on a specific trade. A Stop Loss is an order placed on your exchange that closes a specific trade when it moves against you and reaches a certain price level. Stop Loss orders are designed to stop any loss after a certain point for your own sake. In each trade, you must identify a stop loss either to prevent yourself from a free fall. When the market performs against your position, it can only move down to a set point, after which the trade is forced to close for a small loss.

Risk/ Reward ratio shows you the expected return on each trade compared to the undertaken risk. The higher the ratio is, the less risky your trade will be.

Recommended risk/reward ratio:

1:1 and Lower = Never trade

1:1 = OK

1:2 = Great

1:3 and Higher = Ideal

When you enter a trade with an entry price of $9350. Let’s imagine the price decides to move down and hits your stop loss at $9138. In order to determine your position size effectively, you must also calculate the maximum pip risk. Pip is for “percentage in point”, or simply the price movement. When the price moved from 1000 to 1001, the pip is 1. The maximum pip risk can be calculated by the distance between the entry price and the stop-loss price.

Maximum pip risk = entry price — stop-loss price = $9350 — $9138 = $212

According to this, the maximum amount of pips you can lose is 212. If your trade hits stop loss, you will lose 212 pips. If you also chose to risk $300 on the trade, your trade must be sized so that each pip is worth $1.41.

Pip value required for trade = $ risk/Pip risk = $300/212 = $1.41 (per pip)

Assume you had exactly chosen a trade size that exposed you to only a $1.41 risk per pip, you’d take a loss of $300 eventually, which is only 1% of your total account size of $30,000.

AVOID FEAR AND GREED

When a Stop Loss is hit, a high-profit crypto trader doesn’t emotionally rush themselves to win the money back. Losses are inevitable and don’t view them as such a horrible reason to quit on trading, otherwise, getting comfortable with them and you’ll get very far.

In pursuance of becoming a high-profit trader, you must construct a trading strategy that will hold your ground against the periods of losses. It’s a harsh truth that not many traders out there have a proper money management strategy. Losses will inevitably occur at some certain points in your trading journey and it is best to practice these strategies with patience and discipline to avoid bad results. It’s easy to let greed creep up on your head after one or two winning trades and you might try to seize your opportunity by risking too much on your next trade. This behavior might not only get you badly hurt if you lose but also leads to an endless loop of loss that you could quit on trading completely.

A high-profit crypto traders doesn’t emotionally rush themselves to win the money back
A high-profit crypto trader doesn’t emotionally rush themselves to win the money back.

Long-term profits will take you much further than gambling and if you master these rules and mindsets, your future of trading is very promising.


A Guide To Crypto Trading was originally published in Data Driven Investor on Medium, where people are continuing the conversation by highlighting and responding to this story.