Fundamentals of Cryptocurrency Trading

Successful trading of any asset has one formula: buy low, sell high. Cryptocurrencies are no exception.

If you ask Google about how to buy bitcoin, then we will get a million ways, exchangers, sellers, fraudulent sellers. And we can say with confidence that 90% of search results will lead to the wilds of fraudulent schemes and machinations.

Most cryptocurrency exchanges do not support fiat trading (ordinary money. - DeCenter), so it is necessary to enter already purchased cryptocurrencies into the exchange. For convenience, we will work with the most common cryptocurrency - bitcoin.

There are several ways to buy or exchange cryptocurrency. But we want to warn you right away that today there is no absolutely safe way to store and trade cryptocurrency. Services are hacked by hackers, stop working due to developer errors, and crypto exchange owners can take your money and disappear in an unknown direction. Learn more about liquidity token

Exchangers.  BestChange is  the oldest service that contains most of the major exchangers .

Before visiting the site of a particular service, the BestChange user can find out the time of its existence and location, the cryptocurrency exchange rate, and also find out the number of successful transactions. You can take an interest in other people's experience in the Reviews column: the first number in it means how many negative reviews the seller has, the second - the number of successful transactions. The more transactions the service has, the more reliable and safer you can make an exchange.

Take a look at the course as well. As a rule, the price of cryptocurrency here is more expensive than what you will see on  Coin marketcap , plus the site commission is included in the price.

Bot in Telegram . A very convenient  way to  buy and sell bitcoins using a Sberbank, Tinkoff, Alfa-Bank and QIWI card, as well as store it in the built-in wallet. Supports dozens of languages.

Exchange.  One of the convenient ways to get the coveted cryptocurrency and start trading is to deposit money on the exchange. However, not all exchanges are ready to accept rubles.

Overview of cryptocurrency exchanges

Bitfinex . _  Major Hong Kong cryptocurrency exchange. Supports English and Russian languages ​​(the site was translated in China, so the subtle charm of AliExpress can be traced). For normal operation, the English interface will be enough, especially in the turnover of traders, terms in English are used.

For beginners, a demo mode is offered that will introduce you to the exchange. In demo mode, the system provides access to many functions.

In technical terms, this exchange is one of the best. The developers have equipped the service with the TradingView software. This is a huge set of tools for working with price charts. Starting from the Fibonacci grid, ending with complex indicators. You can save the outline and switch to another currency.

True, there are a few downsides. The first is limited access. According to the decision of Roskomnadzor, some Internet providers block the exchange. Several providers still neglect the decision of the federal service, so you can try your luck and test access.

In addition, some netizens accuse the exchange of financial fraud and directly call it a scam. Exchange officials promise to conduct a financial audit and provide evidence of the legality of their actions, but so far the case has been limited to filing a lawsuit  against alleged false reviews .

Bit trex . As they say on the network - "the abode of altcoins." A common exchange among Russian users. Despite average trading volumes, liquidity indicators are at an acceptable level. The stock exchange deserves attention.

We are interested in two sections: Bitcoin Markets and USD Markets. The most important is in the first tab. There are a lot of coins, just have time to spend bitcoins.

The exchange interface is in English, simple and concise. Buy and sell, nothing else is needed. And yes, it can't be more. No professional tools and indicators for analysis.

In the screenshot, the green arrow is “buy”, the red one is “sell”. Do not forget to indicate the number of coins and the price of buying or selling.

The advantages include a wide variety of coins, a simple interface and good liquidity (the currency moves quickly, the market is active). The disadvantages include the lack of tools. Therefore, the next review will be just about a set for a trader.

TradingView . _ Versatile tool and helper. It is convenient to work, although annoying news or announcements sometimes distract from the process.

TradingView is a trading platform, a terminal that provides the user with a huge number of tools for analyzing cryptocurrencies by communicating with the exchange through the API.

You are assigned secret keys that you need to enter in the settings of the trading terminal and start trading on a single platform. This is a very convenient universal trading option.

Understanding charts

Good trading starts with knowledge. Knowledge of how, where and when to invest. In the cryptocurrency market, it is also worth adopting this. We select the coin of interest, determine the position for the purchase, outline approximate goals, upon reaching which you can take profits, and start earning. Nothing complicated, it remains to figure out the practice.

The price moves according to special laws that are inscribed by human psychology. Someone is afraid and sells, but the brave one buys and waits for an opportunity to sell. For understanding, it is worth noting that on the exchange, buyers are called bulls, they push the price up, and sellers are called bears, they reduce the price.

Let's take an example. We know that now many projects raise money not through traditional investment and issuance of securities, but through ICO. We also know that ICOs are usually based on Ethereum. To understand the relationship between psychology and the market, we can recall the situation at the beginning of the summer of 2017, when Ethereum grew by almost 500% in just one month. That's what demand means. The developers announced support for an interesting feature, the community supported them. In turn, this favorable news had a strong impact on the public, people began frantically “jumping” into the last car and pushing the price up until they came to their senses at $400 per Ether. As soon as the market realizes that the price is unreasonably high for this asset at the moment, sellers do their thing by selling all their coins. It is only human emotions that move the market. They saw the excitement, heard the news - they run and take bundles at any price. As soon as someone drains a large market share, society immediately picks up the wave and rolls down to reasonable limits. These limits are called support and resistance levels.

Levels.  They are divided into support and resistance lines. In the chart above, they are marked in yellow and green.

Support and resistance levels are formed from a combination of several price highs and lows that have unfolded in one place. 

The first two touches (the first two ovals) formed an invisible line, which the price hit twice before breaking through and continuing to rise. At the same time, bidders had to get used to such a high price and trade the range. Professionals call this situation “the market has overheated” – you need to let the currency cool down. After cooling, the currency rose to new values, and when market participants again stopped believing in further growth, active sales began, and the price fell to the level at which it had once found resistance. Thus, a support line was formed, which was originally considered a resistance line. These movements can also be explained with the help of psychology.

The price bounced off again and headed to defeat new resistance lines. But there are situations when experienced stockbrokers say that "the top is not visible." In such situations, it becomes difficult to assess the limits of the growth of the asset. An illustrative example is the latest rally in bitcoin, when the price doubled in just a couple of weeks.

Trend.  The fundamental task in analysis is to correctly determine the price movement vector. The term "trend" is mostly used. It is divided into ascending and descending. There is also a "flat" - a lateral movement, when the price fluctuates for some time without conquering tops or lows.

A trend is defined in a similar way to levels. Ascending means a consistent increase in the lows, descending - a consistent decrease in the highs. Accordingly, the minimum is a visually determined change in the trend from falling to growing (indicated by a red oval), the maximum is from growing to falling (green oval). Thus, to visualize a trend movement, it is necessary to draw a line along the lows or highs.

Channel . One of the projections of the human psyche is the price channel. In other words, the area of ​​trend movement. The price changes in one direction or another, observing invisible parallel lines. These are the channel lines. 

The chart clearly shows the movement of the price of bitcoin within the upward channel. Building a channel is easy. We draw a line for at least two price highs (extremums). Then we look for a parallel line touching the minima.

The chart below clearly shows a downward trend, which in this case is considered a corrective movement.

It is worth noting that an asset cannot go up or down indefinitely, candle by candle. Currency movements need unloading. This is due to the corrective movement. As a rule, the stronger the correction, the stronger the opposite movement will manifest itself. Correction occurs in both upward and downward movements.

The ability to correctly indicate the direction of the trend will be the key to successful trading. Regardless of the situation on the market, the stock trader first determines the trend, then delves into the analysis of the instrument of interest.

Fibonacci grid . The instrument is named after the Italian mathematician Leonardo Pisano, known as Fibonacci. The scientist loved the game of mathematical numbers, so he tried to equate the laws of nature with mathematical orders.

1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, 233, 377, 610, 987, 1597… If you add each subsequent value to the previous one, you get the result equal to the next number. This sequence is called the Fibonacci numbers.

The derived sequence has many interesting properties. If you divide a line into two segments so that the ratio between the larger and smaller segment is proportional to the ratio of the entire line and the larger segment, you get a proportionality factor of approximately 1.618, which is known as the golden ratio. During the Renaissance, it was believed that architectural structures designed according to the golden ratio were visually perceived best.

Fibonacci levels are built on extremums. It is necessary to draw a grid from the beginning of growth to the last maximum of this movement. A multi-colored grid with Fibonacci coefficients will appear on the chart. It is believed that "strong" levels start from 0.382 and below, and in an uptrend they are unlikely to reach 0.786, so the likely entry point will be within 0.382-0.5. Many processes in nature obey rhythms and algorithms. Including the person. Therefore, the mood of the market is a projection of the mood of buyers and sellers. To some extent, the market is also subject to natural processes, and, therefore, subject to man. Therefore, predicting market movements using simple tools is not such a difficult task. Moreover, the trader has assistants in his arsenal.

What are indicators

As practice shows, finding an entry point into a position is easier than deciding when to sell, because it is natural for a person to succumb to a destructive feeling - greed. As experienced traders say, there is no price too high to buy or too low to sell. Only the correct position and the percentage in which the profit is calculated are taken into account.

There are a myriad of indicators on the exchange, there are also user modifications that can be finalized in the right direction. But at the initial stage it is better to use classic tools.

EMA (Moving Averages) . The indicator smoothes the price of the period and helps to determine the direction more accurately. It is better to use two indicators with intervals of 15 and 30 candles. Here we will consider the functionality of the Bitfinex exchange.

Open the list of indicators, look for EMA. Double click on the Moving Average Exponential. In the indicator settings, set Length 15 and 30, respectively. Two sinusoidal lines appeared on the graph, periodically intersecting. Such indicators are called lagging and they will not be able to predict anything, but it will not be difficult to determine the direction of the trend and confirm it.

The direction of the trend is determined by the direction of the EMAs themselves, respectively. If both moving averages look up, the trend is up. Otherwise, descending. The intersection of two EMAs confirms the direction of the trend.

The width of the channel between two EMAs indicates the strength of the price movement (volatility). The stronger the price range, the wider the channel, which means that there is a possibility of an early completion of growth. The channel cannot expand indefinitely, so you need to confirm price movements with other indicators.

RSI . Relative strength index. A useful indicator in the arsenal of traders. The instrument shows overbought and oversold conditions in the market. It is better to combine it with the Awesome Oscillator and EMA, which will allow you to confirm the readings of each and take a position as profitably as possible.

There is an area, when it is crossed at the bottom or at the top, it is considered that the market is oversold or overbought. With this indicator, you can try to determine the point of sale (areas marked in red) and buys (green areas). It is important to know that in an uptrend, the RSI indicator is more often in the range from the lower limit to the breakout of the upper limit. It rarely dips below the green area, but it is certainly a great buy signal. In a downtrend, the situation is viewed in a mirror image. Comparing the price chart and RSI, let's mentally draw a line at the value of 50 - this is an "unspoken" level, near which the price chart is consolidating with a high probability. When this level is reached, the price may “bounce” in the direction of the trend.

RSI Stochastic . A stochastic indicator that averages the RSI movement, or shows the strength of its movement.

You need to use it carefully, as it often “sticks” to the upper and lower boundaries, preventing the trader from making the right decision. Therefore, it is worth understanding the features of its work in practice.

Sweeping movements sometimes make it difficult to perceive the trend. But the situation becomes clearer if you use it together with RSI. Then a clear signal to sell and buy is visible. If the Stoch sticks to the top and the RSI is approaching high values ​​outside of the green area, it's time to get into position.

In order to avoid a huge number of indicator errors, it is better to use higher timeframes (4-6 hours). This practice applies to all indicators. However, do not get hung up on one interval. At intervals of 15-30 minutes, you can more accurately track the breakout of levels, and on daily charts, it is easiest to determine the global trend.

And finally, a few more tips for beginner traders. Despite the apparent simplicity, it is very easy to get confused and lose self-control in the market. Do not give in to panic and greed! Only a sober calculation and a thorough plan. The rest is roulette.

  • You should not sell apartments, cars, houses in order to have time to buy bitcoins. Also, be sure to remember that you need to work with an amount that does not exceed 30% of the deposit. Then you will live in peace and be able to experience market ups and downs, having the opportunity to buy more when possible.

  • Exchanges allow you to trade "on credit". This is called margin trading. Beginners are strictly forbidden to use this tricky tool. Brief explanation - the exchange has its own "loan" department (the lenders are the users of the exchange), where you can take the necessary currency at low interest rates.

Let's say there is $500 on the margin balance, but we are already late with the purchase, as the currency is at its peak of growth and should soon go into a corrective movement. The principle of margin trading is as follows: borrowed bitcoins are sold at the highest price, then bought off at a low price and returned to the owner. The remaining percentage is taken by the trader. This is a dangerous tool, because the system allows you to take such an amount of credit currency, which will be equal to the value of the deposit multiplied by 3.3 (Bitfinex). This is leverage. A sane person understands that the stock exchange must hedge. She takes into account $500 as a margin, which will inexorably decrease if the price goes against plans.

In the hands of a professional, this tool becomes a versatile weapon that makes it unbeatable in any gap in the market. He carefully determines the possible risks for himself and thinks through a thousand possible situations in order to play both ways in the market. And long. And short, if the exchange allows it (Bitfinex, for example).