Learn Crypto Trading From Scratch
Trading is like a game. It’s a permanent betting system between bulls and bears – buyers and sellers.
One group is betting that a price will increase while at the same time the other group is betting that this price will go down.
That’s why we have buyers and sellers in every single moment – that’s why there are even buyers on extreme highs – and both participant groups each change their roles again and again, depending on price action.
Basic Cryptocurrency Trading Goals
In crypto trading people have two general goals, one or the other:
1. Get more Bitcoin by trading altcoins against BTC.
This group is generally convinced that Bitcoin will increase in price in the long run, so they assume that having more of it will increase their future wealth.
2. Get more USD (or other fiat money) by trading BTC against USD (/fiat) or Altcoins against USD (/fiat).
This group just wants to use Bitcoin in the same way as any tradable asset to get more fiat money, they would use any similar asset with such great volatility.
Long and Short
The basic principle is easy: Buy low and sell high, which is called “long” in trading language.
Or sell high and buy back low, which is called “short”.
This terminology of long and short positions actually comes from leveraged trade practices, that is trading with borrowed money to have bigger positions and thereby higher profits. This explanation is only given in relation to the terms’ origins. At the beginning, for any trader, leverage is not recommended, as it’s a powerful tool for professionals which could make newbies poor quickly.
3 Points of Data in Every Trade
Professional traders usually know three points of key data for their trade in advance, before they execute the trade:
- 1. They know their entry price.
- 2. They know where to put their stop loss order.
- 3. They know their estimated profit target.
So, it’s relatively clear in advance what will happen to their trade in any scenario. When a price goes in the direction anticipated, they take their profit. When a price goes against them, the stop loss saves their capital from big losses. That’s basically how trades are executed professionally.
Example of a Trade Setup: