3 Cryptocurrency Trading Tips
In this article I intend to give three cryptocurrency trading tips that you can implement in your cryptocurrency trading strategy. Tips such as: which cryptocurrency exchanges to use, the best way of keeping your cryptocurrency safe, and which forms of social media you should use in-order to increase your chances of success.
A cryptocurrency exchange is a platform that allows you to buy and sell cryptocurrencies. However, there are some distinct differences between some cryptocurrency exchanges that you will need to know.
A cryptocurrency exchange that allows you deposit and withdraw fiat straight from your bank account is known as a fiat gateway. By fiat I simply mean currencies such as: USD, GBP, and EUR. In essence, fiat is what you use every day to buy your groceries or pay the bills. Fiat gateways are important because they provide the means for you to actually get your money to a point that enables you to buy and sell cryptocurrencies. Popular fiat gateways include:
Fiat gateways can often be limited in the number of cryptocurrencies that you can trade with. For example, Coinbase only supports 4 cryptocurrencies: Bitcoin, Ethereum, Litecoin and Bitcoin Cash. Therefore, it is often necessary to use other exchanges that support a wider range of cryptocurrencies. These exchanges include:
One downside of needing to move money between multiple exchanges are the fees. It therefore becomes important that you only move your cryptocurrency between exchanges when you need to. Excessive movement of money can easily result in fees eating into a large chunk of your profits.
Here is an example illustration of how you can move your money around in order to purchase a particular cryptocurrency:
In my example, I am making sure to buy ETHER (Ethereum) as opposed to Bitcoin for two reasons: Lower network fees and a faster transaction time. For reasons I will not go into now, purchasing and sending ether will result in it arriving quicker and me paying less in fees than if I had used Bitcoin.
However, this is not to say that you can use any cryptocurrency as a medium for exchange between cryptocurrency exchanges. It is important that the exchange supports the relevant trading pair. For example, if I wanted to buy NEO using ether, I would need to make sure that Bittrex supports the NEO/ETH trading pair, or else I would be unable to purchase NEO using my ether.
Social media is an incredibly powerful tool for staying up-to-date with your investments, as well as for finding new ones. The cryptocurrency market is still so small that even a tweet by an influential player can add a few percentage points to a cryptocurrency.
The three key social media platforms that I would recommend include:
Telegram – Similar to WhatsApp, Telegram is a private messaging service that allows you to create and join group chats with thousands of people. A lot of cryptocurrencies within the space tend to have their own Telegram channel that you can join in order to stay up-to-date with the latest developments. In addition, Telegram is useful for learning from people who are more experienced. Even if all you do is lurk and never comment, you can still learn some neat tricks.
Reddit – A breeding ground for cryptocurrency maximalists, Reddit is a necessary evil if you want to make sure you’re not missing out on any important news stories. If you only care about one cryptocurrency e.g. Bitcoin, then you can exclusively follow the Bitcoin related subreddits such as: /r/Bitcoin and /r/btc. However, you have to be careful of the herd-like mentality exhibited by some of these subreddits, take some of the information you come across with a pinch… or tub, of salt.
Twitter – As previously mentioned, a tweet by an influential figure can move a cryptocurrency to green or to the red. Therefore, it becomes important to make sure that you are following the key individuals within the cryptocurrency space, as well as the official twitter account of the cryptocurrencies themselves. One thing that I like to do is to turn on the Twitter notification for the important accounts so I get notified immediately after a tweet is sent out.
Keeping Your Cryptocurrency Safe
Once an investor has successfully invested in a cryptocurrency, it is not unusual for them to simply leave the cryptocurrency on an exchange in hopes that their investment will turn a profit. However, this is a dangerous practise to engage in as cryptocurrency exchanges are prone to hacks that could see investors lose all of their funds. Notable hacking of cryptocurrency exchanges includes: MtGox and Bitfinex.
Despite this, there is a secure method that you can use in order to keep your cryptocurrency safe. One of the most effective ways of securing your cryptocurrency is the use of a hardware wallet. A hardware wallet is a physical device that secures your cryptocurrency by securing the private keys used to access them. Popular hardware wallets include:
- TREZOR Wallet
- Ledger Nano S Wallet
- KeepKey Wallet
Hardware wallets are a great way of storing your cryptocurrency if you intend to hold it long term. However, if you want trade a bit more actively than that, then it is usually recommend keeping some of your cryptocurrency on an exchange, but a majority offline.
These are just 3 tips that a beginner can implement into their cryptocurrency trading techniques. If you think there are any other useful strategies that a beginner would benefit from, let me know in the comments below!