Crypto Frontline

Crypto Trading Beginners Guide

February 12
11:08 2018
trading guide


Trading cryptocurrencies is one of the new trends that began early in 2017. With the price of cryptocurrencies reaching record highs and that huge amount of volatility that characterizes this type of asset, a new opportunity emerged once online brokers included digital currencies on their instruments list. Traders are now able to diversify their portfolio with cryptocurrencies, but since we are talking about a new type of trading instrument, you will need a different plan and different tools in order to manage to trade cryptocurrencies successfully.

That is why we’ve assembled this material in order to draw a framework for beginners that want to trade cryptocurrencies using an online broker. It is hard to recognize, but most of you reading this article want to trade cryptocurrencies because you have been misled by the media with illusive returns and promises of getting rich. Although cryptocurrencies are extreme volatile instruments and with volatility, you have a great profit potential, it is very important for you to understand that cryptocurrencies are not a get rich quick scheme.

You need to treat them as a usual business and that is why you have to work hard and study in order to be able to generate profits. We’ll talk below about some of the most important things that you need to make before starting to trade cryptocurrencies with your own money.

Understand the game

Just like Albert Einstein said “You need to understand the rules of the game and then you have to play better than anyone else” you need to apply this mindset to cryptocurrencies as well. The blockchain technology is truly a revolutionary invention, but you need to understand it in order to exploit its potential. Also, you need to understand each cryptocurrency that you are trading. Bitcoin, Ethereum, Litecoin etc, all have some unique characteristics that make them special and those are the reasons why their price is so high today. Study each one in particular and see what makes them special and the factors that can influence the price in the future. You need to understand where you invest your money before actually doing it.

Don’t be a fool like those who have reportedly sold their houses in order to invest in cryptocurrencies. We know that is deceiving to see such high price performances in just a year, but you won’t be able to exploit them and turn them into profits if you do not know first how to trade cryptocurrencies.

Choose an appropriate strategy

Since you will be trading in an extremely volatile environment, you will need some proper tools to do it. Your trading strategy needs to be adapted to this kind of world. Besides volatility, you also need to understand that cryptocurrencies are illiquid instruments at this moment. Low liquidity and high volatility mean that you will need to have a different approach when it comes to actually place a trade.

Since liquidity is low, support and resistance levels will generally fail to provide enough buying/selling power, which means you will see a lot of breakouts of certain important levels, only to see the market reverse in the opposite direction. Cryptocurrencies are subject to a lot of false breakouts and that is an important aspect you will need to take into account.

Trade cryptocurrencies on a demo account first

One key aspect that traders ignore, especially if they have already traded a little in the past, is that they do not use demo accounts anymore. It is not advised to put your money at risk from the very beginning. Use a demo account first, see how it is to trade cryptocurrencies without risking your money. It is important for a trader to have feedback from a live account, but since you are wanting to trade a new type of instrument, a little bit of exploration is a must. Try to get familiar with the cryptocurrency market, see how it behaves, what particularities the price action has and other things like this. The details always make the difference, so if you really want to get involved and trade cryptocurrencies, make sure you are fully prepared.


Risk management

The main problem beginning traders have is related to risk management. Most of the trading strategies could be successful with a proper risk management system. This is the main difference between professional and retail traders and it is one aspect you definitely need to take into account. Since cryptocurrencies are illiquid instruments and volatility is very high, you need to understand that the probability of you encountering losses is high. That means your accuracy can be smaller, which also means the reward to risk ration should be bigger.

In other terms, make sure your take profit is three times bigger than your stop loss. Always target for a higher ratio. Cryptocurrencies fluctuate a lot and you do not have to worry about that.

The trick will be to learn how to spot optimal entry locations, so you will be able to set smaller stop losses and higher take profits. This is a skill that takes time to learn and you will need a lot of practice to do it.

Another aspect related to this aspect is the capital that you have in your account. There is no limit in terms of that, if you do it with 1k or 10k, it doesn’t really matter. You can be profitable with both, but what is really important is that you allocate capital in such a way that you will have enough margin to fulfill the brokers’ requirements. If not, if the trade goes against you, you could face a margin call, which is not good at all.


With that being said, this is just a brief guide for those of you that want to trade cryptocurrencies. These are just steps for the beginning and should prepare you properly for this activity. Make sure you understand the industry of cryptocurrencies before you start to trade them and remember to have a well-established plan. Focus on what you need to do and don’t be mesmerized by the huge profits you see on the news.


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