How to trade cryptocurrencies

Author: https://medium.com/swlh/7-principles-for-trading-cryptocurrencies-414d11198e90 written by Gavriel Shaw https://medium.com/@gavriel


This is a primer for anyone new to cryptocurrency trading.

It is NOT intended as investment advice, other than ‘caveat emptor’ — buyer beware! I will try to give a valuable set of ideas, observations, principles, and warnings to help beginner-to-intermediate crypto traders.

This article will evolve into a comprehensive series over the coming months, possibly next few years. For updates, follow me on Medium, and on Twitter.

Who am I?

I got interested in cryptocurrency in 1996. Yes it existed back then, at least the concept of it.

J Orlin Grabbe was an early cryptographer, economist and rugged individualist. In 1996 he published this article ‘The End of Money’ in which he recounts:

“Cryptology is the future,” he responded emphatically. “It’s what’s going to protect us from Big Brother.”

It wasn’t until late 2013 that I cottoned on to ‘Bitcoin’ as an attempt at this type of cryptographic ‘end of money’.

While traveling long-term in 2014 and 2015 I traded bitcoin, and unfortunately ignored the Ethereum ICO or Ripple XRP’s gradual development. Ah well…

By 2017 I joined the Bitcoin Debit Card provider Wirex as their first Head of Marketing, building the marketing team to 18 over a year and 3 months. There were many days of excitement as we watched trading volumes, crypto prices, and sheer quantity of crypto coins mushroom beyond expectations.

Then came the big 2017 December highs and a very miserable 2018 crash-in-slow-motion until the market had lost ~80%.

In November 2018 I published this Beginners Guide to Cryptocurrency. Read that if you’re really new to the whole crypto thing.

As of today, 18 May 2019, I still watch the charts for fun, intrigue, and wonder. But I avoid trading for the time being. My blockchain marketing career has kept me busy, working with the likes of Bitcoin.com (love ‘em or hate ‘em), a decentralized exchange http://metamorph.pro (one to watch), and others.

Now, let’s dive in to trading…

Principles of Cryptocurrency Trading for Newbies/Intermediates

I’m not going to claim useful insight for advanced/expert traders. I’m still on a learning curve and since I don’t earn my keep via trading, I don’t consider myself by any means a ‘professional crypto trader’.

But here’s the punchline:

It seems many of the so-called crypto trade consultants, advisors, or info publishers are grossly unreliable.

It seems their flair for social media publicity often does not translate into a well rounded approach to risk management in crypto trading.

So again, buyer beware.

Here’s a short list of principles that I suggest are worth keeping in mind:

Know the difference between Technical Analysis and Fundamental Analysis. Technical is all about the price charts. Indicators of momentum. Where as fundamental analysis is all about the project/company itself (whose on the team, what’s the product, etc). Traders may consider fundamentals, including short-term news, but the focus is on the technicals (price charts).

Learn technical analysis. If you’re going to attempt trading then you have to learn the technical details. No short cuts. No ‘play your luck’. No “rely on so-and-so from twitter as he publishes a lot of charts so he must know what he’s doing”. Where to learn trading? A great place to start is this long article by SatoshiMoku. I don’t like his attitude about various crypto projects (he mostly comes across as a Bitcoin Maximalist and dismisses the viability of other coins), but his technical analysis is excellent.

Trade less often! Use higher time-frames to spot long-term swing trade opportunities, rather than getting caught in the choppy seas of short-term fluctuations. If you are really, really new to trading, then don’t ‘trade’ at all… instead, buy to hold (HODL — hold on for dear life) IF you believe in the long-term development of cryptocurrency. Which means, research some coins you like, diversify into a handful of them, keep tabs, learn more, and don’t fret. In the mean time, learn trading as a bonus side-project if it interests you to do so. And only trade a small portion of your portfolio, as you continue to accumulate more coins over time. Long-term swing trading on higher time-frames seems to be recommended by experienced traders (those who aren’t trying to sell you a course).

Learn risk management. Despite how long it might take to learn technical analysis, it still won’t make you a good trader until you learn how to manage your portfolio diversification, position size, exit strategy. That is, when to actually buy, how much to buy of different coins, and when to actually sell to close the trade. Ultimately, this is why ‘trading less often’ is quite sage advice, because it helps reduce the amount of mistakes 🙂

Don’t trade on emotion. Speaking of mistakes, the biggest mistake, the most basic underlying mistake of all trading, is a lack of objective discipline. That is, trading on emotion. When bitcoin starts to spike we have FOMO (fear of missing out). Then it starts to crash and we have buyers remorse, so we sell for a loss because ‘we don’t want to lose everything’ fearing that it might ‘crash to zero’… and then low-and-behold the price recovers, goes back up, and we are simply left with less dollars and no crypto, because we traded too often, and made decisions based on emotion.

Develop your own system. What works for some will not work for you. Partly because you don’t watch the charts as often as they do. Or because your personality is different. Or whatever. Learn from others. Be curious. Adapt. But create your own approach, based on the historical accumulated knowledge about trading (read, learn, absorb, master).

So with those 6 points, what I’m really saying is, probably don’t trade at all 🙂

You may have heard that ‘most people lose money on the stock market’. I’m guessing that applies to the cryptocurrency markets too.

Far better is to save yourself both time and stress, by simply buying and holding for the long-term gains.

You are essentially speculating, or you may consider it investment. Like buying shares of IBM, Apple or Google in the early Internet days.

If you do want to trade, then understand there are smoke-and-mirrors on social media. And it’s a very complex skill that takes the proverbial blood, sweat and tears to get good at.

You might get lucky. The market may enter a strong bull run and you make 500% in a few months. Does that make you a good trader? No. Or you might catch the start of a bear run and your account drops by 50% in a week. Does that make you a bad trader? Maybe. Welcome to cryptocurrency trading.

I’ll add a 7th point to the list:

7. Take profits. This is one that was (and still is) difficult for me to follow. I had a long-term HODL mentality even as I got more comfortable with trading. Once you do get good at reading the charts and want to actively trade, there is nothing wrong with taking profits on winning positions. So you may lose out on a bit of the upside potential, but steady accumulation of locked-in profits over time is what separates the ultimate ‘pros’ from those who still ‘work for a living’… like me. So ‘taking profits’ is still a principle I’m battling to learn.

Ultimately, it all boils down to one thing:

Buy low. Sell high. Not the other way around.