About Cryptocurrency Trading – What Should You Know?
If you’re reading this, then it’s likely that you either want to get started with cryptocurrency trading, or are already involved and are looking for some solid advice on how to improve your returns on trading. The cryptocurrency market has seen hundreds of thousands of new traders jump on board recently, enthused and enticed by the impressive 3000% returns being experienced by many market players.
The days of relying on small, slow, 10% returns on the plain old boring vanilla stock market are over. We’re now fully advanced into the digital age, with the possibility of lucking into massive, quit-your-job level multi million dollar returns looming around every crypto-corner.
If you dream of living a life similar to Gordon “greed is good” Gekko or Jordan “the Wolf of Wall Street” Belfort, the cryptocurrency market is the right place to start on your path to riches. If you’re fuelled by a burning desire to generate massive stacks of currency, digital and fiat alike, then you’re in the right place.
If you’re looking for the number one place to learn all of the secrets you need to dominate the cryptocurrency market, generate billions of dollars overnight, and escape the drudgery of the nine to five into fiscal paradise, you’re in the wrong place. Mainly because there is no “secret” to cryptocurrency trading, no ultimate, super-secret strategy that deliver guaranteed success.
Just like any other market, the cryptocurrency market has its own patterns, highs, lows, and extreme levels of complexity. There isn’t a secret formula that can help you achieve success in the cryptocurrency market, but there are a number of highly effective practices that, if followed, can help you along the way to developing an effective and reliable trading strategy.
While it’s true that cryptocurrencies have one of the best ROI’s in history, it’s best to approach them with the same techniques used in other investment markets. These techniques are tried and tested, and when used to exploit the highly volatile and profitable cryptocurrency market, can be extremely effective.
With this in mind, we’ll present this guide as a list of the best techniques, resources, and practices that you can integrate into your trading strategy to invest in the right way. It’s important to note that this guide is presented from the perspective that cryptocurrency is the future of finance, and blockchain technology is set to revolutionize the world.
You won’t find any balanced, milquetoast criticisms of blockchain technology in this guide. Blockchain technology and cryptocurrency is a fire that is set to burn across the entire world affecting all aspects of society, and the current nascent generation of prometheus-like crypto pioneers and investors are currently setting the shape of things to come.
Getting on board with cryptocurrency is accepting the inevitable, and offers savvy, fast, and intelligent investors the ability to generate a significant return on investment as early adopters. Venture capitalist
Chris Dixon has stated that he believes Bitcoin, the most popular and most valuable cryptocurrency will be worth in excess of $100,000 within the next few years, and eccentric cybersecurity legend John McAfee has stated that he will perform an egregious sex act on live television if the price of Bitcoin doesn’t reach the outrageous price of $500,000 per coin within three years.
In this guide, we won't be making any soothsaying predictions of the prospective future price of Bitcoin or other cryptocurrencies, but we will be presenting a clearly delineated explanations of proven techniques that can enhance your cryptocurrency trading game.
Questions Before Starting Cryptocurrency Trading
Do You Have Money To Invest?
The very first question you must ask yourself before investing money into the cryptocurrency market is, do you have enough extra money to actually begin investing?
Understanding the concept of extra money is critical in creating a balanced and effective cryptocurrency trading strategy. The US Securities and Exchange Commission actually provides some very good advice in this regard. While there are many good reasons to level criticism at the SEC, such as their inability to address an ongoing pyramid scheme for decades, they are occasionally good for something.
The SEC does promote a range of restrictive accredited investor rules that limit profitable trading to only extremely wealthy individuals, as well as establishing the concept of the “pattern day trader” that requires traders have a minimum of $25,000 in order to day trade on the traditional markets. This rule does not apply to cryptocurrency markets yet, but it’s no secret that the SEC likes to get their grubby paws into virtually everything finance and trade related.
There is some merit to this rule, however. The specific amount required to begin day trading by the SEC may be vasty unfair, but it does have a positive sentiment behind it: the SEC is attempting to prevent investors and traders from losing money that they don't have to lose.
While stores such as “ I Invested All My Spending Money in Ethereum (And So Did My Friends)” and “Man sells everything he has for Bitcoin as he pre-empts the ‘ultimate cryptoboom‘” may appear funny on some level, they are somewhat disconcerting. While a college student may have the discretionary funds available to lose out on a plummet in crypto prices, a man selling everything he and his family owns and moving to a campsite in the forest in anticipation of an “impending crypto boom” does not, and could suffer from real, serious consequences.
The cryptocurrency market and news cycle is full of stories such as these, with individuals selling everything they own in cryptocurrency-induced hysteria, taking out second mortgages on their homes to invest in “shit coin pumps” in which traders collaborate to invest in worthless tokens in order to artificially spike the price, then dump the worthless cryptocurrency on hapless idiots. These practices, and others, are what is arming cryptocurrency opponents with the ammunition they need for their criticisms.
The number one rule of investing in cryptocurrency, or any the market, is:
Only invest what you can afford to lose.
If you’re not currently able to sink a large amount of money into the cryptocurrency market, then start small. Maxing out your credit cards or taking out a loan in order to fund a speculative or aggressive venture in the cryptocurrency market is an incredibly bad idea. By beginning with what you can afford, you’ll be able to adapt to the learning curve associated with cryptocurrency without losing out big.
The second question you should ask yourself before getting involved with cryptocurrency is:
Are You A Buy-And-Holder Or A Trader?
There is a vast different between these two different types of cryptocurrency investors. The best strategy for 99% of individuals seeking to profit from the cryptocurrency market is simply to to buy and hold. In practice, this process is extremely simple.
It’s easy to purchase a range of the most stable, profitable, promising, and well-known cryptocurrencies such as Bitcoin, Ethereum, Dash, or Litecoin, and lock them away in cold storage such as a hardware wallet. Purchase your cryptocurrency and then throw the cold wallet in the sock drawer, beneath the floorboards, in a safe, you name it.
This cryptocurrency investment strategy is immune to the wild swings of the cryptocurrency market, and allows investors to ignore the cryptocurrency news cycle, the predictions of doom from the press and incumbent financial institution managers, and simply ride out the cryptocurrency wave. After a few years, dig your wallet out of storage and sell, buying more with the profits. Repeating this process until retirement is a guaranteed way of generating a tidy nest egg sum for some easy living in your twilight years.
Trading, however, is a different beast altogether. Trading means you’ll be getting in and out of the market on a regular basis, but offers dynamic and fast-moving individuals the ability to generate a massive amount of profit in an extremely short amount of time.
#1 Rule When Trading
The number one rule of the trading game is:
Buy low, sell high (as if you didn’t already know).
This concept, however, is easier said than done. The trading game is broken down into two separate elements:
- Making money
- Keeping it
While many traders are able to succeed in the first part of the trading game, most fail at the second. A bull market will allow everybody to make money, but few are able to retain this money afterwards. While this may seem concerning, there are many positive and exciting aspects to trading.
On successful days, trading is the ultimate rush, the ultimate thrill. Generating profit on good trading days comes with wild abandon and uncontrollable glee. Bad trading days, however, are brutal. Large losses are stressful, and on these days you’ll lose sleep, hair, money, and sometimes even friends. Bad trading days will leave you drained, scattered, tired, and angry.
So Why Trade At All?
For many traders, the answer is because trading is the ultimate game. Trading is the ultimate P2P MMO, the ultimate game of poker. The game of trade is played on an ever-shifting field with incomplete information, against completely anonymous strangers as well as the cryptic, unpredictable, malicious, and sadistic spirit of the market itself.
Success In Trading
To succeed in trading is to work against your own mental strength, emotions, and belief systems. All of the precepts taught in business school regarding the rationality of the equity market is complete trash. Markets are irrational, people are irrational, life is irrational. Markets are driven by fear, greed, and uncertainty. Only ivory tower economists would believe otherwise- anybody that has spent five minutes trading knows otherwise.
Traditional economic intelligence would have traders believe that the market is composed of rational actors with perfectly distributed information making rational decisions in the marketplace. Firstly, marketplace information is nowhere near evenly distributed. All traders are operating with partial or incomplete information in a thick fog of war, with each trader possessing varying degrees of ability in processing and analyzing this information.
The market is composed of both smart and stupid individuals, with an emphasis on the latter. No matter how much information you have, if you’re working with a room-temperature IQ, there’s not much you can do with it. The truth of the matter is that most of us likely fit within the latter category, and are constantly working with magical belief systems and broken mental heuristics that are actively working against us every second of the day.
If you were to ask a group of people how many of them believe that they are “above average drivers”, then you’d find that virtually all of them would consider themselves to be “above average”, which is impossible by definition. Not everybody can be above average, but all of us believe we are.
Even the very best traders are not immune to this quixotic narcissism. Simply believing that you are is a key indicator that you aren’t. In the practice of trading, all of us make mistakes on a daily basis, some of which can be extremely costly. Without remaining focused and up to date, success is impossible to achieve.
Biggest Reason Traders Fail
One of the number one reasons many traders fail is the fear of missing out. Another important rule of trading is: If you miss a trade, stay out of the market. All humans are fear based creatures that are driven by the fear of loss. No matter how strong your trading strategy is, if you make trading decisions based on fear, loss inevitable.
A common phrase repeated across market floors around the world is “This makes no sense, the market is wrong.” The market is never wrong. Traders are. Traders are either in line with the market and generating money, or are working against the market and losing it.
One of the main issues the traders suffer from is the inability to separate their perception of how life, and systems within life- such as markets- operate, and how they operate in reality. Most of us are completely unable to separate the expectations of how systems should function from the way they actually function, making it impossible for most of us to actually change the way we think.
Retaining a static mindset that is incapable of change doesn’t work when trading. Markets are a profound lesson in humility. Traders learn to view the world and the systems that compose it as they actually are as opposed to how they expect them to be. The rules of economic Darwinism are immutable, and ignoring them is a surefire way to lose everything.
We’ll proceed to illustrate a simple example of how established belief systems work against you in the cryptocurrency market. The Wolf of Poloniex is a highly successful cryptocurrency that offers traders one on one advice on trading strategies via a closed private trading signals group called the “Wolf Pack”. We’re not members of the Wolf’s group, but we do follow him on Twitter for the big market move news he posts on his feed.
As a general rule it’s best to perform your own research and make calls based on evidence you’ve gathered yourself, thereby taking responsibility for your own actions. The Wolf of Poloniex, however, maintains a fast and aggressive trading style that regularly assists thousands of traders around the world in generating a significant amount of income with his market calls.
An important question to ask when assessing the advice of individuals such as the Wolf of Poloniex is “are they right?” Nobody is right 100% of the time. In most cases, even the most successful traders in the world are wrong more often than they are right. The very best traders in the world make their money on just one fifth of their total trades, with the others only making small gains or, in most cases, losses.
Can You Trust Market Analyst?
How can we tell whether somebody providing trading advice is right or wrong?
The simplest measurement is the direct impact it has on your finances. If you’re making money, then the individual providing trading advice is right. If not, then they’re wrong. It’s that simple. Many opponents of the Wolf of Poloniex, however, hold the opinion that the advice the provides is terrible.
One of the main reasons so much criticism is levelled against the Wolf of Poloniex is the upfront, in-your-face persona he has cultivated that has rubbed many industry players and traders the wrong way. The Wolf frequently throws shade on other industry commentators and observers when they are wrong, which has led to the development of a community of traders that are quick to pounce on him in anticipation of his advice proving incorrect.
The majority of the Wolf’s opponents want him to fail, not because his advice is bad, but because they are unable to separate the market calls he makes from the persona he has cultivated. Whether a market observer is likable or not is irrelevant- the only thing that matters is whether the calls they make result in profit or not.
People, as a general rule, are extremely attached to their opinions. Before getting started in the cryptocurrency trading market, it’s essential that you burn your opinions. Opinions mean nothing in the cryptocurrency market.
If you thought a bull market was starting but it is revealed to be a bear market, then your position was wrong. In this case, an intelligent individual will accept their incorrect perspective, adjust it, and move on. Many of us, however, cling to our opinions. The human brain is neurologically wired to resist change, and is littered with mental pitfalls.
Being “right” while objectively is a highly effective way to lose a lot of money fast.
Consider this interesting fact: more than 38% of the United States population is unable to tell you which political party is more conservative in America. Most voters don’t vote based on politics, policies, or election promises at all. The vast majority of voters will vote for the candidate that they like the most and then project their own established perspectives onto that person, even if the candidate has expressed perspectives that are completely at odds with their own.
These statistics paint a depressing picture of the effectiveness of democracy in practice, and an even bleaker image of the human race as a whole.
With all of this mental insufficiency, can we expect to get any good at trading at all?
The answer is yes.