Basics of trading in the cryptocurrency market | Lesson 1
Good evening everyone!
Now, when trading on the stock exchange has become available to anyone who has Internet access, and no longer requires contacting brokers or installing specialized software, more and more people are interested in trading cryptocurrencies. Indeed, the idea of getting rich quick on crypto seems very tempting, especially since the market is highly volatile, and with the proper approach, this seems to be a very real task.
Therefore, today we are starting a series of tutorial posts for beginners. For those who have a desire to earn, not lose their deposit. We will analyze the basics of technical analysis (TA). After this course (provided that you have mastered all the material, of course), you will be able to become a beginner trader and try your luck in trading cryptocurrencies and more.
The first post will be rather introductory, then we will proceed directly to working with tools.
Of course, apart from TA, there are other approaches to trading on the stock exchange.
1. Wave analysis.
2. Candlestick analysis.
3. Fundamental analysis (news background, events: ICO, mining, bills, bans, etc.).
4. Fractal (fractals and "alligator" by Bill Williams, there is his famous book "Chaos Theory").
Fractal analysis is suitable for adherents of non-linear analysis. A minimum of 5 Japanese candlesticks is required to form a fractal. The candlestick in the middle shows the biggest high or low. This method is used for breakout trading when the price breaks at least one point beyond it (in any direction).
Naked fractal analysis does not show high efficiency, so it is best to use additional indicators and elements of technical analysis. In this case, the success rate will be higher, and the risks will be significantly reduced.
However, as practice shows, TA + fundamentals work best in the cryptocurrency market. Although, if you own other forecasting methods, then by combining them, you can get a much better result.
So, you want to become a trader. Let's first understand what trading is.
Trading is an activity aimed at making a profit from the difference in the exchange rate by buying and selling currencies, stocks and other securities.
Trade trade is different, and you can do it in different ways and at different intervals, therefore:
There are the following main styles of trading
1. Scalping is literally “scalping” every price move. We opened a deal, a little bit of profit appeared - we closed it. A rather risky and nervous way of trading. Profit, however, is also not small. Meanwhile, scalping remains potentially the most profitable type of trading. Currently, scalping has become mainly the lot of trading robots. Which is understandable, in principle. This style of trading is the most cost-effective for use in algorithmic trading strategies, due to its high demands on the speed of trading operations.
2. Day trading (day trading: 1 hour - 1 day). At the end of the trading day, all transactions are closed.
Advantages compared to scalping:
• Compared to the scalper, the day trader sleeps better! Less risk and emotional stress, trading several hours a day;
• Greater leverage or margin;
• You can not bother much with fundamental analysis;
• Don't worry about bad news that comes out between trades.
It is recommended for all beginners to take a baptism of fire in day trading. You need to learn to control emotions, learn to see market movements, changes in the trend, the mood of the players, correctly place orders and limits, etc.
3. Swing trading (aka medium-term, from 1 week to a month). If you can't take your eyes off the monitor every time you wobble, then this style isn't for you. Here, first of all, you need to develop patience in yourself, and sooner or later it will bear fruit.
4. Positional/Long-term (from a month or more). The position is held for months; Ideally, while the trend continues. That is, all intermediate pullbacks and corrections are swallowed up. In other words, if you consider yourself as a position trader, then a 10-15% profit fluctuation should not cause you emotional excitement. A sufficiently large drawdown in the trading account is possible.
Most traders do not like to wait for profit / loss for months, with the exception of the largest sharks, such as investment funds, Market Makers or large holders.
* A market maker is literally translated from the English phrase “To make market” - “to make a market”. Then, it turns out that Market Maker is a direct participant in the trading process, which has a great influence on price formation in the financial market. Summarizing this concept, we can give the following answer to the question “who are Market Makers?”: Market Maker is any participant in the trading process who is able to manipulate the value of a certain instrument on the stock exchange in any way.
Holder - The owner of a certain amount of financial assets (in our case, cryptocurrencies), who adheres to the belief that this asset will grow after a certain period of time and does not change his strategy even if the rate drops.
And I want to highlight arbitration as a separate item. In essence, you buy a currency at the same rate on one site and then sell it at a higher price on another site, using pricing discrepancies on different sites. This method is suitable only for large volumes of transactions, otherwise the game is not worth the candle.
By the way, I have already observed such a story more than once that at first, beginners manage to earn money, make profitable transactions. The saying “beginners are lucky” will be very useful here. But, after a certain time, luck disappears somewhere, and people drain their deposits. First of all, the key to successful trading is awareness, risk control and consistency.
Why is it important to control risks and develop your own trading algorithm?
A trading algorithm is a set of rules based on the results of some kind of analysis. The trading system clearly defines the conditions for the entry and exit points of the position (signal), the working timeframe and other mandatory conditions.
Many beginners make the same mistake - they start trading without any algorithm, a specific strategy - this is their main mistake. For example, when you get behind the wheel of a car without a license and not knowing how to drive. Get on the road and rush forward at high speed. Moving slightly to the left or right is more likely to cause an accident. A similar situation will be in such a volatile market as crypto.
Levels and trend
Trend - the direction of price movement, it can be ascending and descending and flat (sideways, sideways, consolidation). To determine the trend and its phase, various indicators and their combinations are used, we will talk about this later.
As you understand, for a trader, understanding where the price will go and where it is better to enter / exit a position are the most important points.
Level - a line or an area of accumulation of candles. The price can often stand still or, conversely, bounce. It is on these points that the levels are built. It is worth noting that in the cryptocurrency market the levels work out very clearly, you could see this more than once, even if you had even a little experience.
For an uptrend (bullish), we build support levels based on the lows.
For a descending (bearish) one, on the contrary, we build levels by high points (tops).
Now let's return directly to the trading system itself and highlight the main
1. Trend (market following system). Let's say we have determined that there is an uptrend. Then on pullbacks, when the price bounces from a certain level, we buy more (strengthen our position) with the expectation that the market will continue to grow.
2. Inside the price range (when there is a flat). We define support from below, a resistance zone from above, and we make deals from these boundaries. Bottom - buy, top - sell.
So, let's sum up. Today we have analyzed what Trading is, types of Market Analysis, trading styles, talked about what a trading algorithm, trend and levels are.
There is already quite a lot of text for the introductory day, so that's all for today and see you soon with the continuation!
Subscribe to me so you don't miss the next ideas! Links below
Now, when trading on the stock exchange has become available to anyone who has Internet access, and no longer requires contacting brokers or installing specialized software, more and more people are interested in trading cryptocurrencies. Indeed, the idea of getting rich quick on crypto seems very tempting, especially since the market is highly volatile, and with the proper approach, this seems to be a very real task.
Therefore, today we are starting a series of tutorial posts for beginners. For those who have a desire to earn, not lose their deposit. We will analyze the basics of technical analysis (TA). After this course (provided that you have mastered all the material, of course), you will be able to become a beginner trader and try your luck in trading cryptocurrencies and more.
The first post will be rather introductory, then we will proceed directly to working with tools.
Of course, apart from TA, there are other approaches to trading on the stock exchange.
1. Wave analysis.
2. Candlestick analysis.
3. Fundamental analysis (news background, events: ICO, mining, bills, bans, etc.).
4. Fractal (fractals and "alligator" by Bill Williams, there is his famous book "Chaos Theory").
Fractal analysis is suitable for adherents of non-linear analysis. A minimum of 5 Japanese candlesticks is required to form a fractal. The candlestick in the middle shows the biggest high or low. This method is used for breakout trading when the price breaks at least one point beyond it (in any direction).
Naked fractal analysis does not show high efficiency, so it is best to use additional indicators and elements of technical analysis. In this case, the success rate will be higher, and the risks will be significantly reduced.
However, as practice shows, TA + fundamentals work best in the cryptocurrency market. Although, if you own other forecasting methods, then by combining them, you can get a much better result.
So, you want to become a trader. Let's first understand what trading is.
Trading is an activity aimed at making a profit from the difference in the exchange rate by buying and selling currencies, stocks and other securities.
Trade trade is different, and you can do it in different ways and at different intervals, therefore:
There are the following main styles of trading
1. Scalping is literally “scalping” every price move. We opened a deal, a little bit of profit appeared - we closed it. A rather risky and nervous way of trading. Profit, however, is also not small. Meanwhile, scalping remains potentially the most profitable type of trading. Currently, scalping has become mainly the lot of trading robots. Which is understandable, in principle. This style of trading is the most cost-effective for use in algorithmic trading strategies, due to its high demands on the speed of trading operations.
2. Day trading (day trading: 1 hour - 1 day). At the end of the trading day, all transactions are closed.
Advantages compared to scalping:
• Compared to the scalper, the day trader sleeps better! Less risk and emotional stress, trading several hours a day;
• Greater leverage or margin;
• You can not bother much with fundamental analysis;
• Don't worry about bad news that comes out between trades.
It is recommended for all beginners to take a baptism of fire in day trading. You need to learn to control emotions, learn to see market movements, changes in the trend, the mood of the players, correctly place orders and limits, etc.
3. Swing trading (aka medium-term, from 1 week to a month). If you can't take your eyes off the monitor every time you wobble, then this style isn't for you. Here, first of all, you need to develop patience in yourself, and sooner or later it will bear fruit.
4. Positional/Long-term (from a month or more). The position is held for months; Ideally, while the trend continues. That is, all intermediate pullbacks and corrections are swallowed up. In other words, if you consider yourself as a position trader, then a 10-15% profit fluctuation should not cause you emotional excitement. A sufficiently large drawdown in the trading account is possible.
Most traders do not like to wait for profit / loss for months, with the exception of the largest sharks, such as investment funds, Market Makers or large holders.
* A market maker is literally translated from the English phrase “To make market” - “to make a market”. Then, it turns out that Market Maker is a direct participant in the trading process, which has a great influence on price formation in the financial market. Summarizing this concept, we can give the following answer to the question “who are Market Makers?”: Market Maker is any participant in the trading process who is able to manipulate the value of a certain instrument on the stock exchange in any way.
Holder - The owner of a certain amount of financial assets (in our case, cryptocurrencies), who adheres to the belief that this asset will grow after a certain period of time and does not change his strategy even if the rate drops.
And I want to highlight arbitration as a separate item. In essence, you buy a currency at the same rate on one site and then sell it at a higher price on another site, using pricing discrepancies on different sites. This method is suitable only for large volumes of transactions, otherwise the game is not worth the candle.
By the way, I have already observed such a story more than once that at first, beginners manage to earn money, make profitable transactions. The saying “beginners are lucky” will be very useful here. But, after a certain time, luck disappears somewhere, and people drain their deposits. First of all, the key to successful trading is awareness, risk control and consistency.
Why is it important to control risks and develop your own trading algorithm?
A trading algorithm is a set of rules based on the results of some kind of analysis. The trading system clearly defines the conditions for the entry and exit points of the position (signal), the working timeframe and other mandatory conditions.
Many beginners make the same mistake - they start trading without any algorithm, a specific strategy - this is their main mistake. For example, when you get behind the wheel of a car without a license and not knowing how to drive. Get on the road and rush forward at high speed. Moving slightly to the left or right is more likely to cause an accident. A similar situation will be in such a volatile market as crypto.
Levels and trend
Trend - the direction of price movement, it can be ascending and descending and flat (sideways, sideways, consolidation). To determine the trend and its phase, various indicators and their combinations are used, we will talk about this later.
As you understand, for a trader, understanding where the price will go and where it is better to enter / exit a position are the most important points.
Level - a line or an area of accumulation of candles. The price can often stand still or, conversely, bounce. It is on these points that the levels are built. It is worth noting that in the cryptocurrency market the levels work out very clearly, you could see this more than once, even if you had even a little experience.
For an uptrend (bullish), we build support levels based on the lows.
For a descending (bearish) one, on the contrary, we build levels by high points (tops).
Now let's return directly to the trading system itself and highlight the main
1. Trend (market following system). Let's say we have determined that there is an uptrend. Then on pullbacks, when the price bounces from a certain level, we buy more (strengthen our position) with the expectation that the market will continue to grow.
2. Inside the price range (when there is a flat). We define support from below, a resistance zone from above, and we make deals from these boundaries. Bottom - buy, top - sell.
So, let's sum up. Today we have analyzed what Trading is, types of Market Analysis, trading styles, talked about what a trading algorithm, trend and levels are.
There is already quite a lot of text for the introductory day, so that's all for today and see you soon with the continuation!
Subscribe to me so you don't miss the next ideas! Links below
