Basic features of cryptocurrency trading

In the first material of the special project, the specific features of cryptocurrency trading will be considered, as well as the differences between short -term trade and Buy strategy&Hold. At the end of the article there is a glossary with terms and slang expressions used in the material.

2017 was marked by the exponential growth of the cryptocurrency market, the dynamics of which amazes the imagination. Last year, many once again became convinced that the profitability of investing in new assets is often more attractive to investment results in the shares of even the most successful companies. The prospects for obtaining significant profits at invested funds attract more and new participants to the cryptocurrency market, including well -known players in the world of traditional finance.

Below is a rather entertaining infographic taken from the Visual Capitalist website. It depicts amounts in which by the end of last year it could turn $ 1000, invested in the shares of famous American companies a little more than ten years ago, on the eve of the global economic crisis.

Note that the pre -crisis October 2007 was chosen as the basic period, when these shares were traded on “Hahai”. On the other hand, it would be much more profitable to buy these “Blue chips” Soon after the global market collapse, for example, in 2008-2009.

The industrial index of Dow Jones (the arrow indicates the most suitable moment for the purchase “on the bottom”)

Nevertheless, a patient and rational supporter of long -term investment, subject to a successful choice of assets and even with the most optimal choice of entry point, could significantly increase his capital for ten years (at least several times).

The cryptocurrency market makes it possible to achieve comparable profitability for a much smaller period of time (unless, of course, it is purchased “on the Hai” and not to sell prices in periods of collapse). For example, the same $ 1000, invested in bitcoin just a few years ago, could also grow ten times:

Data: Coindance (as of 14.05.2018)

Of course, the comparison of bitcoin with the shares of top companies is not entirely correct – Bitcoin appeared only shortly after the start of the global financial crisis (possibly, as a kind of answer to it). On the other hand, if the cryptocurrency appeared a year or two earlier, then the indicators of its profitability are unlikely to be fundamentally different and would look no less impressive.

Below is a comparison of bitcoin with the most profitable shares of 2017:

Other cryptocurrencies demonstrate amazing profitability indicators. So, over the past year, the second Ethereum cryptocurrency has increased in price ten times:

Thus, it is easy to guess why in recent years the market of cryptocurrencies attracts institutional investors and is increasingly integrating with the traditional world of finance.

Few will doubt that cryptocurrencies are very attractive as an object of long -term investment, as well as a tool for diversification of a portfolio with various classes of assets. However, a logical question arises: what is attractive cryptocurrencies for an ordinary trader selling on small Timframim?

We list the main advantages of this market for short and medium-term trade.

Unlike the traditional financial market, the cryptocurrency market is deprived of many restrictions. So, it is distinguished from the stock market that it works in 24/7 mode, has no high barriers to the entrance, while trading commissions are relatively small. Since the cryptocurrency market works around the clock and without interruptions, there is no need to close positions at the end of a trade or week.

Low threshold https://gagarin.news/ua/news/south-korean-technology-company-lg-electronics-inc-wants-to-enter-the-cryptocurrency-sector/ for entering

To enter the foreign exchange market, an investor should have a significant deposit, which is problematic for newcomers of trading. Even greater capital is required for entering, for example, to the securities market (for the American stock market, this is from several tens of thousands of dollars). Bitcoin trading is the minimum possible order is relatively small (usually from 0.0005 to 0.001 BTC, depending on the rules of one or another crypto -tank).

Lack of correlation with other assets

Cryptocurrencies are also distinguished by the fact that they practically do not correlate with assets of the traditional financial market. Moreover, during periods of reducing world indices, buyers are often activated in the digital currency market. Thus, more and more investors see in Bitcoin a “quiet harbor” to preserve capital during periods of economic upheaval.

In recent years, even supporters of a conservative approach to investing are increasingly striving to diversify their portfolio with cryptocurrencies, and at the same time increase the profitability of the latter.

Volatility

Many “dinosaurs” of the world of traditional finances scold digital currencies for their volatility. However, significant fluctuations in prices, on the contrary, attract crowds of traders to this market.

It’s no secret that cryptoactives are much more volatile than fiat currencies. The latter Forex markets are mainly traded only “with the shoulder”. For example, when trading liquid currency pairs, let’s say EUR/USD, the volatility will be approximately 2-5% per month. Such a slight scope of price fluctuations determines the need to use borrowed funds in trading.

“Chip” cryptocurrencies is that they can be successfully traded on Sports market, without the use of a credit shoulder and, accordingly, without stop losses, Marzhin-Collov, commissions for the use of borrowed funds and additional risks.

The intraday volatility of bitcoin can reach, 10, 10 or more percent of a day, which is very attractive to the trader.

Significant growth potential

Digital currencies are still an emerging market that is incomparably small in comparison with the stock market, forex or market of derivatives of financial instruments. This indicates significant prospects for the growth of cryptocurrencies in the coming years.

From this it follows that even if you ever purchase altcoins “on the Hai” and soon the price of these low-liquid coins will fall significantly, they can be left “for long-term”. Sooner or later, the market will recover, some coins will sink into oblivion, some will fall even more in price, but several of them can grow ten times, and in the end you will remain in the plus.

However, the trade in “non -excess” is still a very risky venture. Therefore, at least at first, you should focus on the first ten or twenty rating Coinmarketcap.

It is also worth noting that blockchain technology is rapidly developing and attracts the attention of not only private investors, but also the largest corporations. The more solutions are developed on the basis of the blockchain and the more investments are directed to their creation, the more popular the cryptocurrencies become and, accordingly, the more intense the capitalization of this market is growing.

Why trace if possible “Blow”?

Data on the profitability of cryptocurrencies for a relatively long period is very attractive, and many are asking the question: why not simply invest in cryptocurrencies according to the Buy strategy&Hold and keep them in a “cold” wallet for at least a couple of years? This question can hardly be given an unambiguous answer, since everyone has their own strategy, psychology and a tendency to risk.

Some arguments in favor of trading:

• Not all cryptocurrencies live for a long time, and those assets that are now in the leaders can become outsiders after only a year or two; This is very clear if you find the screenshot for 2013 or 2014, which depicts, say, the first dozen of the top at that time cryptocurrencies, and compare it with current data;
• invest Buy strategy&Hold is quite justified if there is significant free capital, which can be distracted from circulation for a long period of time;
• You can increase the profitability of investment in cryptocurrencies if you combine the Buy strategy&Hold with active trading (or at least from time to time to make a portfolio);
• When giving preference only long -term investment, it is impossible to acquire trading skills, which, by the way, can become an additional (if not the main) source of income, etc. D.

As for the arguments in favor of the Buy strategy&Hold, the image below is most clearly illustrated:

Thus, trading allows you to make profit in the short term, and long -term investment does not require frequent activities, as well as studying various intricate indicators and trade strategies. However, in both cases, a rational choice of assets, discipline and balanced decision are required.

Materials of this course are designed to help beginners of cryptornica get basic knowledge. Perhaps this knowledge someday protect someone from the “drain” of the deposit. Thanks to the understanding of the basic principles of trading, it will become clear to many why you should go into the deal “From the level”, Why shouldn’t Va-Bank go and “chase the departing train”, why greed and extra emotions are so dangerous, and t. D.

Probably, over time, many will have analogies with real life, where buyers seek to buy quality products cheaper, and sellers – to sell them more expensive (but in no case).

Glossary to the article

“Hai” (from English. High – high) – slang expression. Means that the price of the asset is currently very high and, most likely, it is overestimated. Experienced traders often advise newcomers not to buy “on the Hai”. The term “lou”, which is used in relation to the extremely low price of the asset, is opposite to the opposite value.

Blue chips – the most liquid shares of large and reliable companies with stable profitability indicators.

Timframe – the time period of the graph used to display the movement of the price in the market. The most common weekly, daytime, four-hour, hourly, 30-, 15- and 5-minute timframes.

Spot – direct exchange of one asset for another without using the credit shoulder. Trade in the spot market makes it possible to “sink” a significant drawdown without a threat of losing a deposit due.

Marzhin-Call – a circumstance in which the enforcement of the transaction is carried out. This happens when the balance balance necessary to maintain the amount of the pledge of all active transactions is approaching zero. Like Damocles Sword, Marzhin-Call “hangs” over traders who trade using borrowed funds (“with shoulder”) and do not follow the principles of risk management.

“Hodl” – Presumably came from the typo of English. ‘Hold’ (“hold”). Literally means to store the asset “for long -term”, without selling it under any circumstances.

Levels – price marks, near which many orders are concentrated and where the distribution of customers and sellers (demand ratio) is significantly changing. Distinguish support levels (located below the price) and resistance (are above the price). The first of them seem to restrain the onslaught of “bears” (sellers), and the latter serve as an obstacle to further price growth.