Cryptocurrency trading can be risky. Because no one can say how the price changes or how it will be. But there are some important facts mainly depending on the price.
Following them in the right way can make your day. In today’s post, I’m going to show you how exactly to make profits from Cryptocurrency trading.
There are many methods of investing Cryptocurrency. Some people keep trading daily(day trading), Some often trade. Some investing in Cryptocurrency and hold (most commonly used as hodl) them till price become as they hoped.
Here are my Top 10 Trading/Investing facts that I use every time.
- Bitcoin Price Change
- Take a Look Around[Project Websites]
- Total Coin Supply/Circulating Supply
- Market Capitalization
- Follow Cryptocurrency News
- Technical Analysis
- Buy/Sell Walls
- Market Trend
- 24Hour Volume
- Community Base
1) Bitcoin Price Change
Bitcoin price change heavily effecting on alternative Cryptocurrencies because of most Cryptocurrencies have trading pair with BTC
Here is the thing,
You invest in a Cryptocurrency that priced with BTC in exchange. If Bitcoin price rises, your coin also does. This doesn’t happen all the time. But most times.
This happens when traders sell their alternative coins and buy BTC.
This also could happen in vice-versa. This means if BTC price rises alternative coins could fall in price.
Let’s jump into some examples
This is the Bitcoin(BTC) chart along with the Ethereum(ETH) chart. As you can see both price changes looks the same in the highlighted areas. Same time range, Same pattern.
Which means changes in Bitcoin price, Effecting on alternative coins.
Attention to the price of BTC is really helpful if you’re into Trading or Investing.
2) Take a Look Around[Project Websites]
You can simply head over to the project website in which cryptocurrency you are hoping to invest. This helps you to understand their vision/mission technology etc. And avoiding scam because there are a lot of cryptocurrency scam websites. Understanding the cryptocurrency background is always a great idea.
Every cryptocurrency has its own team helping with the future of that cryptocurrency. What kind of things are they doing? , How active are they? , What kind of technologies they have?
Knowing these facts helps you a lot in choosing the perfect cryptocurrency for you.
What kind of things you need to look in a project website?
Road map: Road map is the path they showing their updates/upgrades, achievements, goals, etc. A road map gives you a sense of what the team behind the cryptocurrency has in mind for the future.
White paper: A whitepaper is a document presented in an ICO(Initial Coin Offering) which contains in-depth discussions about the project. This helps you to take ideas about their main functionalities.
Social media: Walkthrough to their social media websites and check how many communities interested in their projects.
Partners & Clients: Check out the partners and clients who agreed to involve in their project.
Team: Watch the team behind the project and see how active are they. Check out their profiles individually and so on.
These are the major facts that you need to care about on a project website.
3) Total Coin Supply/Circulating Supply
As I said in the first post, Cryptocurrencies are different from fiat currencies for one main reason. “Supply is Limited”
The prices of cryptocurrencies could change frequently. Just think. If some people tend to buy specified cryptocurrency, The price needs to be managed to balance the cryptocurrency market after a successful bought.
Let’s figure out some most wanted keywords.
Total coin supply – Total number of coins that the project owns
Circulating supply – The number of coins that available in markets for trading
Circulating supply is depending on the mining process of that coin. Every coin that gains from mining, It’s on circulating.
How can you use this coin supply fact for perfect trading?
A higher number of coins means the price changing is much slower considering to lower number of coins. But, this also depends on how quality the project is.
XRP(Ripple) has nearly 43Billion circulating supply just now. But it ranks #3 on cryptocurrency market capitalization.
You better choose lower total/circulating supply coins for day trade.
4) Market Capitalization
In simple words, Market Capitalization is the price of the coin into the number of circulation supply.
Let’s say coin ‘A’ has a circulating supply of 20,000 coins and price of ‘A’ is 2.5$
Market Capitalization = Circulating supply x Price of the coin
= 20,000 x 2.5
This is the basic of Market capitalization.
Why is this so important?
Because You see a lot of different cryptocurrencies in the market but only some of them having a higher ranking on cryptocurrency market capitalization.
Here is why,
Cryptocurrency projects like perfect Technology, Team, Community, etc, having a higher ranking on market cap. A higher market cap means a high amount of people are believe in that cryptocurrency. Which makes the best and only path of gaining in price.
In fact, You really need to pay attention to the market capitalization to make perfect tradings.
5) Follow Cryptocurrency News
Here you have an awesome thing. Following cryptocurrency news is another key factor. Cryptocurrency news can be divided into two categories.
- Basic news
- Project news
Basic news – Global news related to cryptocurrencies.
Project news – Hard/Soft forks etc.
Forks? What does it mean?
The updates and upgrades relevant to cryptocurrency called as cryptocurrency forks
Where can you refer to cryptocurrency news?
Coinmarketcal is my all-time favorite website. You can find every kind of news related to coin by coin.
All you need to do is read every news posted on that website related to cryptocurrency that you are going to invest in. And also you can find news by searching google. Simply go to the news tab after the result came in.
6) Technical Analysis
Following some mechanics to predict the price change usually known as ”Technical Analysis“. This is a whole different topic but I will explain it shortly.
Using historical price data and study of trends to make opportunities for trade or predict the price. It’s all about the trend and pattern.
Check out the image below
This is the basic of Technical Analysis. But the highlighted points are important. Its called support and resistant lines.
Traditionally, These price patterns stick with the support and resistant lines whether it’s in uptrend or downtrend
Let me show.
You can use this support/resistance mechanics to make perfect tradings. The upper part that I highlighted with green, price should go down whenever the pattern touches the line.
When the pattern crossing the support line, Price should go up.
Check out more from here: https://swissborg.com/blog/how-to-apply-technical-analysis-to-cryptocurrencies
7) Buy/Sell Walls
Buy/Sell walls may appear in cryptocurrency exchanges and some websites with market data. It’s a visual indicator showing how buys and sells happening with the coin.
Large buy walls represent a healthy trend for a cryptocurrency. (Green)
Large sell walls indicate that the cryptocurrency is being liquidated. (Red)
8) Market Trend
For some reason let’s say all the cryptocurrencies going down. This is the period that you must not invest in cryptocurrency.
Maybe you see all the cryptocurrencies gaining their prices. That is the time you should invest in.
This both facts called Market Trend. So be careful.
Check out my market cycle explanation article for more info.
9) 24Hour Volume
One of the most important things if you are going to trade cryptocurrency on an exchange. The 24-hour volume of a coin is the total volume that obtains within 24hours.
You may compare them with older dates and calculate the increment for better trading.
Some exchanges pointing down the highest 24-hour volume coin for you.
On bittrex, Showing the top 24-hour volume cryptocurrencies on the front page.
You can also check out from here: https://coinmarketcap.com/currencies/volume/24-hour/
10) Community Base
A higher community base shows you a better future of that cryptocurrency.
So take your time and research. Check out their social media platforms. Community amount, How they are reacting on the project etc.
This will not waste your time.
Giving you a perfect idea about the project basement.
Check out my previous educational posts from below. Leave a like and comment your ideas. Don’t forget to share.