Do you want to make cash using cryptocurrencies? Yes, of course you do. Cryptocurrencies have become the new method people are using to supplement their income or even act as a full-time investment.
With over 1600 cryptocurrencies entering the market between 2009 and 2018, it appears that opportunities to make money still exist and in some cases are even increasing. However, despite these fast-growing opportunities, people still find it an uphill task to select the best method to make money with cryptocurrencies.
Some people fear that cryptocurrencies are highly volatile, while others argue that they are unregulated. While these arguments are indeed true, there is no doubt that Blockchain technology is an idea whose time has come. Therefore, do not be left behind making money trading digital assets.
This post is a closer look at the crypto industry to establish how to make money trading cryptocurrency and answer questions such as “What are the best strategies for trading cryptocurrencies?” and “Is this the best time to start trading digital coins?”
Why Trade Cryptocurrencies?
When people hear of crypto token trading, two questions that may come to mind are: “Why not just trade fiat currencies?” and “How to make money from cryptocurrency trading?” Cryptocurrencies are the next big thing in many niches, not just the finance sector.
After Bitcoin demonstrated that it is possible to run completely decentralized transactions, the technology is now being implemented almost in all industries ranging from academic to gaming. Here are the main advantages of trading cryptocurrencies:
- The markets operate on a 24/7 basis: Unlike the common forex markets that close at midnight, cryptocurrency trading operates every day and night, seven days a week. This means that you have far more hours trading cryptocurrency for profit.
- There is no pattern day trading rule: Traders in the US market are required to follow the No Pattern Day Trading rule that prohibits those with less than $25,000 from making more than three day trades per week. However, the rule does not apply to cryptocurrency trading.
This implies that users can trade as much as they want no matter the amount they have in their accounts. For example, you can join a cryptocurrency exchange and trade the whole day using only $200.
No limitation opens the door for small traders to follow good trading practices to grow their portfolios. This is good for the entire cryptocurrency community, as well as the financial community as a whole.
- You can use standard equipment to monitor trading: The process of trading cryptocurrencies is easy because it does not require advanced equipment. Most exchanges such as Binance have invested in advanced mobile apps that allow their users to follow the cryptocurrencies’ performance on the go.
- It is possible to make high returns within a short time: Although the volatility of cryptocurrencies has been cited as a negative, it is an important component to help drive high profits. To rake in more profitability, you only need to follow the right market trends and execute a trade at the right time when the price swings.
Create A Trading Strategy Before Starting To Trade
As in forex trading, you can only make a profit from cryptocurrencies by crafting a clear strategy. This is the method expected to help you follow the market, make the right decision and avoid incurring losses. The following are the top strategies you can use when trading digital coins:
- Target The High Potential Coins
As more cryptocurrencies enter the market, you can only be sure of making a profit by selecting the right assets. The best coins to select are those listed at the top of the ranking sites such as the CoinMarketCap. These are Bitcoin, Ethereum, Bitcoin Cash and Ripple just to name a few.
The good thing with trading the top assets is that they are more stable compared with smaller ones. Therefore, the involved risks are relatively low compared with smaller cryptocurrencies. Note that this does not mean traders should completely ignore emerging coins.
You also should consider coins that are viewed as having a high potential and are likely to join the top ranking the assets. Good examples are Steem and BNB, which have been attracting significant support from the community and corporate entities.
- Research the Selected Cryptocurrency Pair Comprehensively Before Starting to Trade
Once you have selected the preferred cryptocurrency pair, it is important to carry out comprehensive studies to understand the expected trends. This means following the daily, monthly, and annual movement of the price in the market.
The good thing about how to make money from cryptocurrency trading is that most exchanges generate advanced metrics to help users make the right decisions. Therefore, do not simply follow uncorroborated reports from users in open forums such as Reddit and BitcoinTalk. Go for expert analysis.
It is also crucial to check the individual currencies to establish its potential. Does the platform present good potential for users? For example, EOS is considered a high-potential platform capable of surpassing Ethereum and Bitcoin.
- Consider Working With Experts To Make The Right Move
If you are unsure you are making the right market prediction, it is still possible to succeed by working with experts to help narrow down a profitable trend. Here, the focus is identifying experts with a proven record in market analysis.
Some of the top experts you should consider include Willy Woo, who runs Woobull.com, to understand the long-term trends in the cryptocurrency market. You also could follow Spenser Bogart, who is the head of Blockchain Capital, a venture capital firm with an interest in Blockchain companies.
- Understand the Involved Risks and Install Mitigation Measures
Trading cryptocurrencies comes with serious risks that every trader should identify in order to come up with appropriate mitigations. Some of the risks include the danger of losing your investment and becoming addicted to trading.
Your cryptocurrency trading strategy should anticipate these risks and craft reliable mitigations including the use of stop-loss order and limiting your trading time-frame. You also should consider pre-testing the strategies to ensure that they will deliver the results you want.
Special Tips To Use When Trading Digital Assets
Before digging into different methods of how to make money trading cryptocurrencies, it is important to understand the following useful tips.
- Only Invest In What You Can Afford To Lose
One characteristic of cryptocurrencies is that they are highly volatile. This implies that the prices experience extreme market swings that can result in considerable losses. A good example of this volatility was demonstrated in January 2018 when the prices of most coins crashed.
Bitcoin, the pioneer and leading crypto coin, experienced a sharp drop in price to $13,000 on January 1, 2018, from $19,000 on December 19, 2017. But this was not all. Over the next six days, the price dropped to $6,252.44.
- Always Pay Special Attention To Bitcoin
To know the direction of different cryptocurrencies, you need to closely monitor the price shift of Bitcoin. When Bitcoin price goes up, altcoin holders dump their coins and jump to BTC. The main driver of this move is that there is no need to focus on small coins when Bitcoin is paying more returns.
- Make Sure To Trade On The Best Exchanges
The returns you can make trading cryptocurrencies will partly depend on the selected exchange. Here, the secret is picking the exchanges that have lower transaction charges to avoid the bulk of the profits getting eaten by the platform. For example, if you want to trade Bitcoin, exchanges with the lowest transaction charges include Binance and KuCoin, which charge 0.1%.
- Ensure You Understand The Nuances Of Cryptocurrency Trading
Trading cryptocurrencies is a technical undertaking that requires the development of the right skills. You should focus on following market trends, so that buy/sell orders are executed correctly and on time for optimal profits.
If you are new to cryptocurrency trading, it is advisable to take time learning the ins and outs of the industry to ensure you make money trading cryptocurrency. Consider starting with a demo trading account to hone your trading skills in the markets.
- Appreciate That You Cannot Make A Profit All Of The Time
Once you start trading cryptocurrencies, it is important to understand that all of your trading sessions will not be profitable. Only about 60% of the moves are profitable. Therefore, as you prepare to rake in profits, know that losses also will be part of trading.
- Make Sure To Spread Risks Across Different Assets
Although you might have a preferred coin when entering the market, it is advisable to avoid carrying all of your eggs in one basket. You should consider spreading the risk by targeting various coins.
Top Cryptocurrency Trading Methods
The following are the top three cryptocurrency trading methods you can use in the market today:
Buy, Hold, And Sell Cryptocurrencies
One method of making money using cryptocurrency trading is buying the coins when the price is low and holding them until the price increases. This is the simplest method of trading the coins in the market.
The aim is to identify high-value coins that are likely to increase in value, buy those coins, and hold them until the target price is reached. People apply this tactic when new tokens are released through ICOs (initial coin offering) before hitting the markets.
One coin that was released through an ICO and gave traders a high return on investment (ROI) is the BQX token. Between its launch in June 2017 and early January 2018, the price of BQX moved from $0.03 to $10.41.
Most coins suffered the effects of a bear trend that began in January 2018, but prices are now stabilizing and are expected to rise. Therefore, today could be a great time to buy coins such as Bitcoin and Ethereum as the market waits for the price to go up.
Consider Day Trading Cryptocurrency for a Profit
As the name suggests, day trading digital coins is a short-term trading approach that involves taking positions and closing them in a span of a 24-hour cycle. Although the process is risky because of the highly volatile nature of digital assets, it is still possible to make a profit.
Expert day traders target short price movements and use them to optimize returns. The focus when trading short-term shifts is following trends to make the right move and closing the trade when the target is reached.
It is important to follow evaluation methods such as Fundamental Analysis and Sentiment Analysis to make the right prediction. Fundamental analysis is based on the happenings outside of the markets such as looming regulations to determine the expected price movement. However, the sentiment analysis gauges people’s views about a digital coin to predict the expected price movement.
Make Money Lending Your Digital Coins
For years, people have been lending money to others and making a profit from interest. Crypto lending works using the same principle. If you have a significant amount of coins held in a wallet, it is possible to lend them to borrowers who will return the coins after a specific period with interest.
Although this method is considered a risky undertaking because cryptocurrencies are not regulated, lending platforms have created checks that reduce the risk of default. For example, some platforms now ask for collateral before coins are released to borrowers’ accounts.
Most of the platforms allow coin holders to lend coins to borrowers for margin trading. For example, you can lend Bitcoin to borrowers on the Poloniex exchange for margin trading. Other platforms that support lending of crypto coins include ETHlend and SALT.
The Final Take
If you have considered trading digital assets, it is important to focus on selecting the right strategy and using good mitigation measures. The first step should be learning how to trade cryptocurrency and gaining insights into the preferred cryptocurrencies.
Experts also recommend that traders should always remain up-to-date with the occurrences in the market to ensure they make the right moves in time for optimal profits. Because of the high risk involved with cryptocurrencies, it is important to work with various assets.