Hello All,
I have been asked lately regarding crypto trading and how it is done. A lot of people link trading to currency trading, USD/EURO, etc…and when we say crypto trading, they think they will be buying Bitcoin on a lower USD price and then sell it at a higher price. While this is viable and can be done on some platforms, such as eToro, however, one thing to note is that in such trading method/platforms, you are only trading against the price. So if you bought BTC/USD and bitcoin price went higher, you win, if it got lower you lose money. However, you are not owning any Bitcoin here, you are simply trading against a price. There is no BTC wallet on eToro where you own the coin and can transfer it to other wallets on other exchanges or other locations.
The purpose of this article is to discuss how to trade crypto on an exchange, while actually owning the coins and having flexibility to do anything with them (Buy, Sell, Transfer, Exchange with other coins).
To be able to do good trading, you need to do your homework:
- Follow social media about news related to your target coin – Twitter is your friend here, because it is the quickest and you get the update fresh as soon as it is out there (Speed is important here, outdated news are already used by others and market price already reflects that. Each minute counts so follow the right resources and activate notification settings for critical ones)
- Follow the price of your target coin – Blockfolio app is a good one on your mobile. It tracks price vs BTC (Satoshis) and can give alerts (Price below or above a certain threshold) and has graphs (1H, 12H, 1D, etc..) so you can set automated alerts on major support level and resistance levels.
- Follow the price is Satoshis/BTC and not in USD. USD is misleading, because let’s say you bought 1 Bitcoin at 3000$ and with that Bitcoin you bought 3000 of coin X at 1$ per coin (Around 33’333 Satoshis Each Bitcoin is 100’000’000 Satoshis). If today bitcoin is worth today 4000$ and coin X is worth 1.1$, you might think that you did 10% gain, which is true if you look at your USD investment vs profit, however, if you look at your Bitcoins, the 1 BTC that you had before and traded for 3000 Coins X, are now worth 0.825 BTC and hence you have less Bitcoins that what you used to have.
Based on the above your aim would be the following:
- Get the right news at the right time to buy the right coin that will make higher gains compared to BTC, in a way that if you buy the coin now using BTC and sell it later to BTC, the total amount of BTC you achieve would be higher than what you initially invested
Let me elaborate in a real example.
Yesterday night, while going to bed, I received an notification on Twitter stating the following “OMG will be added to Binance Exchange tomorrow”. This message shown below was received from a Crypto guy that I was following it on Twitter. What does it mean? When a new coin is created, it is initially available on very few crypto exchanges, however, with time, and when it starts having success and good community, more exchanges start listing it for trading on their platforms. That will give more people/geos/locations/countries to have access to this coin and usually this pushes the price higher.
Thank you CryptoRand for the hint/signal by the way.
Of course other types of news can be a sign as well, it is not restricted to the addition of a coin on an exchange:
- New beta release of a wallet or application
- Important event
- Partnerships newly established
- New recruitments / Team members as part of the company
So what did I do when I saw the above Twitter message?
Opened my Blockfolio mobile app and checked the OMG (OmiseGo coin) chart to see if it already did its gain (Maybe the news is old and I just received it).
Saw that the price has been steady around the 2700000 satoshis and didn’t do any major Bull run yet.
Went back to my laptop, opened Bitrex exchange page and Bought 30 x OMG coins at the price of 269090 Satoshis per coin (0.00269090 Bitcoin) and for a total amount paid 0.08092881 BTC (after the 0.25% commission fee).
Went to sleep after that :)
Below a copy of the buying transaction record:
Woke up in the morning to found that price surged to 320000 satoshis (0.003200000) and then went down around the 298000 satoshis. This was already around 10% profit based on the price purchased.
Sold the 30 OMG coins at that price as show in the below selling transaction record.
And what is the summary outcome of my trade?
I started with X amount of BTC and was able to make that amount 1.1X through 10.45% Profit out of that transaction as shown in the below detailed record:
So got the idea of a successful crypto trade?
You need to invest into altcoins using Bitcoin in a way to grow further your Bitcoins. If you can start with 1 Bitcoin and over time with multiple good transactions transform it to 2 BTC or 3 BTC or 10 BTC that would be the aim.
Forget about the BTC price vs USD or the altcoin price vs USD. Bitcoin will be increasing in price over time. Just look on the long term chart for the past 6 years. There will be bumps and Ups and Downs, but overall, it going higher.
You aim from the short term trading would be to use your Bitcoins to MULTIPLY them.
Good learning and Happy Trading.
Regards,
Michael