In the previous lesson, we discussed the differences between a physical crypto versus a crypto CFD. As it is safer to trade crypto CFDs, in this lesson we will dive more into the specifics of crypto trading. Similar like Forex trading, the main task for a cryptocurrency trader is to make correct forecasts and make profit on the trades. To do so, you can use both technical analysis and fundamental analysis, which relies mainly on the blockchain and cryptocurrencies news.

Crypto Technical Analysis

The effectiveness of technical analysis in relation to cryptocurrency raises some doubt. Instrument’s behaviour on crypto exchanges (cryptocurrencies, tokens, etc.) can be manipulated by groups of traders, who can significantly increase volumes at one time. Nevertheless many market participants successfully apply a small list of technical analysis instruments to forecast prices. When analysing cryptocurrency from a technical perspective a trader is usually using 4 main elements:

  • Chart;

  • Sell and buy orders list;

  • History of transactions;

  • Trading volumes conducted on exchanges.

Crypto Fundamental Analysis

News trading strategies are more effective; however, it is extremely difficult to find relevant crypto news on time. One of the best sources where trader can look for news are crypto forums and blogs, where experts often post their thoughts and comments on further market developments. Mass media crypto news is usually published with a long delay, which reduces its relevance for traders.

It is important to mention that major movements on the cryptocurrency exchanges are created by limited groups of investors who trade with large volumes and are able to make significant changes in quotes. Such groups or individual traders will unlikely speak about their intentions in advance, so you have to detect the beginning of such events and act accordingly.
Even more dangerous situation occur when some market participants intentionally cause a sharp price movement in order to draw the attention of new traders to the beginning of a more significant movement. As a result many hasty traders support the initial breakthrough and begin to trade stimulate movement by their own money.

Important tips for Crypto Traders

Greed is the main enemy of any trader. You should never expect more than your forecast suggests, it is stop on time, than risk your profit and initial deposit for the sake of greed. Patience is a guarantee of profit. This applies to both maintaining open positions and waiting for more reliable entry signals. This simple thesis allows you to understand how to trade cryptocurrencies correctly by avoiding unnecessary impulsive entries in anticipation of strong momentum.

DOM (Depth of Market window) is the main source of information for crypto traders. Volume size and market capitalization are key factors reflecting the mood of other traders. Therefore knowledge of this information will help you to forecast future dynamics.

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