How to Trade Cryptocurrency: The Definitive Guide [2020]

Easily one of the most exciting and talked about ways of making money online in 2020 is trading cryptocurrencies such as Bitcoin, Ethereum, and the other thousands of different cryptocurrencies available.

While it does take a lot of time and effort in order to properly learn how to trade cryptocurrencies profitability, the income that can be generated is also substantially higher than what is possible through employment or even starting most kinds of businesses.

But cryptocurrency trading is a multi-dimensional activity and it requires a deeper knowledge of many topics, with the more knowledge that a trader can build up about the markets and the assets that they are investing in, meaning the higher likelihood for the generation of profit reliably.

This guide is designed to break down exactly what cryptocurrency trading is, and helping those new to the cryptocurrency industry by taking a look at why so many people are cryptocurrency trading, the best strategies for cryptocurrency traders to use, and the best places available online to trade.

What is Cryptocurrency?

Who or What is Satoshi Nakamoto?

The name of the creator of the first cryptocurrency, Bitcoin, is Satoshi Nakamoto, however this name is really all that we know about them, including who they are exactly, whether it is an individual or a group, and which part of the world they come from.

To put the creation of cryptocurrency into context, Bitcoin was first introduced to the world in a research paper known as the Bitcoin Whitepaper which was released in 2008 by Nakamoto.

At this point, the world was still in the midst of the global financial crisis, which was an economic meltdown that was created and perpetuated by the banking and financial system, with a sea of greed that flowed throughout that system leading to the accumulation of enormous amounts of bad debt that could not be sustained any longer.

It therefore fits well that Nakamoto would create and release a digital currency that does not rely on banking at all in order to be able to function, and is designed as a decentralized currency with power and wealth to be shared amongst many people.

This may show us that more than an opportunistic computer scientist and entrepreneur, that Nakamoto may have been more of an idealist, and somebody that deeply cared about what had just happened with the global financial crisis.

Digital currencies have been explored since the 1990’s, with much of the financial anarchist movement and cypherpunk movements that have underpinned this exploration being highly idealistic in nature.

How is Blockchain Different to Cryptocurrency?

Almost as famous as cryptocurrency is the technology that allows it to function which is known as blockchain, and which was also created by Nakamoto and built into the core of Bitcoin.

Blockchain is essentially a ledger system, or a digital system of managing who owns how much of the assets that is being traded within the system, as well as all of the transactions of the assets as well.

The key difference between Bitcoin and normal central-bank-run fiat currencies such as the USD is that Bitcoin is decentralized, as are all other cryptocurrencies, whereas fiat currencies are centralized.

What this means is that the decisions that are made about how much of the currency is created, who it is given to, and other management issues such which are managed by a central bank within a fiat system, are not the case for Bitcoin and other cryptocurrencies.

Instead of needing a central bank to manage this system, cryptocurrencies use blockchains which are an autonomous system based upon mathematics and algorithms that makes the decisions that are typically made by a central bank, and cannot be controlled or affected by any group of human beings.

The differentiation to be made here though is that blockchain is not only a separate technology to cryptocurrency, but it can be used not only for financial applications, but also for a wide range of non-financial applications as well such as within supply management and in the medical sector.

Is Bitcoin Going to Zero or is it Going to $1M?

This question, or a question similar to this, is continuously asked within crypto social media and is something that everybody would like to try to understand better, being whether Bitcoin has got the longevity to grow in value substantially, or whether there is something about cryptocurrencies that are inherently flawed that will lead to the collapse of these systems.

The best way to look at this is that there is no conclusive answer to this point to allow us to be able to predict the future, however if we went on a scale of the probabilities of these two outcomes occurring, it would be fair to say that there is less than a 1% likelihood that Bitcoin will go to zero at any point in the near future, and there is at least a 50% likelihood that the value of a Bitcoin will reach $1 million within the next 20 to 30 years.

The reasoning for this is that first, the value that has been seen in Bitcoin has only led to a continual increase in value, and there is unlikely to be anything which will expose Bitcoin as worthless or a system that does not in fact provide value.

Looking at it from the other point of view, the likelihood that Bitcoin will reach $1 million is actually much more likely than many people would think.

If we travel back in time to 2013 when the value of Bitcoin was less than $10 each, if you ask anyone at that point in time what the likelihood of Bitcoin getting to $20,000 would be many people would say that it would not happen at all, and if it did it would take a decade or more.

In fact, only for short years after that the price of Bitcoin reached almost $20,000, which was 2000 times more than what it was in 2013.

If the price of Bitcoin grew by 2000 times compared to what it is now over the next four years it would reach almost $2 million, and while this is perhaps not the most likely scenario, it shows that it is not impossible for this to happen.

Why Do So Many People Trade Cryptocurrency Today?

Can You Make Good Money Crypto Trading?

Trading cryptocurrency is one of the most profitable online activities in 2020, and this is the main reason that so many people today are active cryptocurrency traders.

Throughout the history of Bitcoin and other cryptocurrencies, the profitability of engaging with the cryptocurrency market has been almost legendary, with this being the major draw card for why so many people have flooded into the market with the hopes of getting rich.

In reality it is rare for traders to become millionaires by trading cryptocurrency, and without investing many years ago and holding cryptocurrency for a number of years, there is no other easy route to be able to achieve this.

Instead however, there are a large number of people that are earning maybe not millions of dollars, but substantially more than would be possible from working 9 to 5.

Unlike stocks forex and other traditional assets which can also be profitable, but have much lower volatility, cryptocurrencies are highly volatile and this presents the opportunity to generate significantly higher profits within the cryptoasset market and it does and other financial markets.

Is it Hard to Get Started Trading Cryptocurrency?

Many people who are today trading cryptocurrency every day as their main source of income started out by simply buying a relatively small amount of Bitcoin or other cryptocurrency, and attempting to trade based upon the fluctuations in the price of that cryptocurrency.

Getting started in the cryptocurrency market is as simple as this in its most basic form, with anyone essentially being able to become a cryptocurrency trading today simply by buying some cryptocurrency or another, and developing a basic strategy for when and why they will close the position.

In order to become a professional cryptocurrency trader however, and the distinction here is somebody that trades based on large amounts of current information, with rigid and robust strategies in place, and often for significant amounts of money, the process of getting started is a bit more in depth.

While anyone can buy and sell cryptocurrencies, and order to trade in a way that can be reliably profitable, it is important to develop a deeper knowledge of the cryptocurrency market and of trading principles such as technical analysis.

Only by doing personal research, completing online courses and financial training, and by building experience through executing large numbers of trades, can traders properly get started as becoming professionals.

What are the Pros and Cons of Trading Crypto?

There are many pros and cons to choosing to become a cryptocurrency trader, and these are largely based around the kinds of risk that can be involved, as well as the kinds of opportunities that may present themselves.

Some of the obvious pros of becoming a successful cryptocurrency trader are the ability to work flexibly at any time of the day which you would like, autonomy in the kind of work you do without needing a boss or manager, and of course the high potential for generating large amounts of profit.

For most people, the kind of profit that can be generated in one week of cryptocurrency trading is substantially higher than the amount of income that they could generate from most kinds of employment that are available to them, and this is a common reason that so many people have entered the cryptocurrency market over the past few years.

However as with everything, there are also cons to becoming a cryptocurrency trader and they should also be taken into account.

One of the most obvious cons is the risk that is inherent within the cryptocurrency market, being that there is a real chance of losing a substantial amount of money by trading in a careless way without doing enough research and building enough knowledge.

Luckily however, most professional traders use risk mitigation strategies such as the use of stop losses, and advanced trading platforms which provide robust professional features in order to mitigate the risks of cryptocurrency trading loss leaving the potential for high generations of profit still in play.

From Beginner to Pro Crypto Traders

How to Get Started with Bitcoin Trading?

Depending on the type of Bitcoin trading you’d like to get involved in, there are different types of preparation that will be required and different levels of knowledge and understanding that will need to be developed in order to successfully execute upon Bitcoin trading strategies.

For anyone that is planning on buying Bitcoin or other cryptocurrencies and planning on holding them long term, the most important thing to figure out is a safe platform in order to be able to store your assets.

Contrary to traders, investors complete significantly less amounts of trades, however spend much of their time storing assets on platforms, and therefore selecting a trading platform with a robust security system in place is critically important.

For any trader that is planning on a more complex strategy then simply buying and holding, then learning about the fundamentals of any kind of financial investment is key, especially considering that the principles of investing in many different financial assets will have a large amount of cross over into investing into crypto assets.

What is also important for cryptocurrency traders is to develop industry knowledge of both the cryptocurrency market, and the assets that comprise it.

While much of trading in cryptocurrencies is similar to trading in other assets such as for actual stocks, there are nuances to the cryptocurrency industry that mean that simply applying the same strategies, tactics, and methodologies that would be applied in the traditional asset market to the crypto asset market is doomed for failure.

How to Take the Next Step

The step from being a cryptocurrency trader to being a professional cryptocurrency trader often involves the process of adding more structure to the way that a trailer engages with the cryptocurrency market, as well as often involving the development of more advanced strategies.

Professional cryptocurrency traders often treat their profession as if it was a business, with considerations being taken into account such as the level of profit that is available, the reliability of the profit that is coming in, the cost of obtaining the revenue that comes in, comparisons of different risk factors of different strategies and investments, and the value of investing into the development of knowledge and supporting resources.

Professional cryptocurrency traders are serious about the choice to generate profit within the cryptocurrency market, and will often have already been in the market for months if not years prior to making cryptocurrency trading the sole source of income.

Another common factor in those who are professional cryptocurrency traders compared to novices is the focus on the acquisition of a broad range of information and knowledge that can support the development of reliably profitable cryptocurrency trading strategies.

What is a Great Opportunity for New Crypto Traders?

Another phenomenon over the past three or four years has been the introduction of social trading into the cryptocurrency space, with it having been a large part of traditional asset markets as well, and gradually filtering across into the digital asset space.

Social trading is the practice of allowing investors to share the information and resources that they have at hand in order for all investors to collectively generate more profit together, and it is this efficiency in the way that investors can interact with the market that is led to its spike in popularity.

Major cryptocurrency trading platforms such as PrimeXBT have integrated social trading into the offering that they provide the market, with PrimeXBT’s Covesting Module being the most recent introduction of a major cryptocurrency platform to the social trading market.

For this specific platform as an example, investors are able to create peer-to-peer investment funds where they can publicly display the success and performance of their investments, with other investors being able to decide which funds they would like to invest into and to pay fund managers a nominal fee in order to be able to back the same trades that they are making.

Social investing is a new way the cryptocurrency market is becoming more advanced and sophisticated in the profit generation and sharing capabilities that are found within it.

The Best Places to Trade Cryptocurrencies Online

PrimeXBT

PrimeXBT is the world’s leading multi-asset margin trading platform and provides advanced services and solutions for both the cryptocurrency market and the financial asset trading market as well.

Over a relatively short period of time of a few years, PrimeXBT has grown from launching with a white list of 150,000 traders, to releasing a wide range of features and tools over the last few years, to today being a platform that manages up to $2 billion worth of global trade every day.

PrimeXBT lists a wide range of cryptocurrencies, as well as traditional assets, and provides some of the highest leverage available in the industry.

Cryptoassets such as BTC, ETH, XRP, LTC, and EOS can be traded on the site with leverage of up to 100X, and traditional assets such as stock indices, forex pairs, and commodities, can be traded with leverage of up to 500X.

PrimeXBT’s fees are also the lowest of any major cryptocurrency trading platform in the industry with a flat rate of 0.05% across all trades.

Coupled with this is PrimeXBT’s advanced security measures that include bank-grade features such as hardware security modules with rating of FIPS PUB 140–2 Level 3 or higher and full risk check after every order placement and execution.

Binance

Binance is another large cryptocurrency trading platform that provides a range of features and a lot of listings of cryptocurrencies for traders and investors to choose from.

Binance was also launched a few years ago and has grown rapidly over that period, with a number of tools being created that allow traders to access opportunities within the cryptocurrency market in powerful ways.

Binance lists one of the wider ranges of cryptocurrencies available in the market, and this is its main strength, as well as having an easy to navigate platform.

Binance does have questions hanging over its security after being hacked in early 2019 to the tune of $40 million of users’ funds, and this has been something which has made many wonder about whether or not Binance is able to protect their platform from hackers.

As well as this, Binance’s fees are substantially higher than any other platforms and this is a deterrent for some users that would like to maximize the profit that they generate and keep the costs down.

The Best Strategies to Make Money Trading Cryptocurrency

Scalping

Scalping is another very simple concept which is more prevalently found within traditional trading in a formal sense, but that is widely used within the cryptocurrency market also in order to develop methods of generating profits.

The basic principle behind scalping is to create short-term trades which take a smaller amount of profit then longer-term trades, but that add up to becoming a significant amount of profit when added together with multiple scalps throughout a day or week.

Scalpers will look for opportunities where predictable short term movements in trend will occur, often looking for repeatable situations such as a given indicator showing that a new trend is about to form, and then executing a short term trade with a quick entry and exit for clean profit making.

In order to successfully generate profit as a scalper the first step in executing the strategy is being able to identify a given situation or indication that a profitable scenario was about to unfold, and then being ready in order to execute upon it.

This can either be done manually, or more commonly, can be done algorithmically with software-based systems detecting scalping opportunities and executing upon them autonomously.

Triangular Arbitrage

Arbitrage is a strategy that is used commonly throughout all financial trading, and is one that is highly attractive because of its minimal risk.

The basic idea of arbitrage is to identify situations where trades can be made that will lead to guaranteed instantaneous profit being yielded, and there being no risk of loss as a part of this situation.

While other traders may seek to find high profit opportunities where substantial amounts of profit can be generated in one trade, arbitrage traders often are content to generate minimal amounts of profit, even under 1%, which then cumulatively add up to being substantial with other such trades the course of a day.

Triangular arbitrage is an extension of the strategy, with the principle of triangle arbitrage being to look for opportunities to make three trades concurrently that will exploit the differences in exchange between three different assets, and yield profit with a guarantee as is the case with normal arbitrage.

Crypto Swing Trading

Swing trading is a common strategy within all financial trading that is simple to understand and can be very profitable when executed correctly.

Cryptocurrencies, as well as all other financial assets, fluctuate as they move with upwards trends for a period followed by demonstrating downward trend, and over time traders have realized that a successful strategy for generating profit can be to try and trade with these fluctuations.

Typically swing traders will look to create a position when they feel that the cryptoasset has come to a low in its fluctuation, and a few days later will look for where they feel that the natural high is in order to sell close to that point.

Swing traders base the decision making purely on technical analysis, and observing the historical patterns of an asset as it moves across the charts.

In Conclusion: How to Trade Cryptocurrency

Trading cryptocurrency remains one of the most popular ways to make money online in 2020.

There are a number of ways this is possible, and a range of different strategies that can be used in order to interact with the cryptocurrency market.

While there are more cryptocurrency trading platforms available online than ever before, the two platforms mentioned above provide a number of unique advantages which are not seen in other platforms in the industry.

To learn more about these two platforms check out PrimeXBT and Binance.


How to Trade Cryptocurrency: The Definitive Guide [2020] was originally published in Data Driven Investor on Medium, where people are continuing the conversation by highlighting and responding to this story.