Cryptotips Andrew Strogoff

Risk Management, Trading Psychology As Key Factors For Crypto Trading Success

💡 Cryptotips
Money, risk management and trading psychology: factors helping traders to become successful
Risk Management, Trading Psychology As Key Factors For Crypto Trading Success

When you hear somewhere that your trading success depends on a good strategy or luck, it is not true. The key factors of long-term profit in cryptocurrency trading are money and risk management as well as trading psychology.

Most newcomers try to avoid those subjects first thinking that will learn some strategies and use them carefully in order to reach their goals. However, they start to lose money and the more they waste, the closer is the moment they open such articles as this one looking for answers to their numerous questions.

We have gathered here the most important key aspect that help professional traders to succeed. First, we are going to cover money and risk management and give you several recommendations on how to use them in practice.

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Money and risk management

The importance of those aspect is hard to overestimate as they play an important role in trading in general. There is no a single professional trader who skip money and risk management in his or her daily trading routine. Let’s see some useful advice:

Do not overheat your trading account

This is one of the main rules of money and risk management. There are several ways to overheat your trading account including overtrading, breaking money management rules and the others. What does it mean “to overtrade”?

Most beginner traders and investors think that the more orders they place, the more money they will earn. This sounds obvious, but in practice, the more you trade, the more risks you take as you have less money in reserve.

What is an average number of trades per day? There is no answer to this question as everything is individual and depends on many factors including the number of trading opportunities, initial funds, trader’s mental and physical state and the others.

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Many beginners think that they always have to “stay in market” in order to take advantage of every crack. However, this is the best way to overheat your account by overtrading. There is no need to place a trade just in order to be in market all the time.

The best crypto strategy for every trader is to find entry points before placing orders and use them in order to gain profit and not vice versa.

Determine your risk levels

When you trade cryptocurrencies, you need to determine your risk levels for every single order meaning you will close your positions manually or automatically once this point is reached. How does this work in practice?

Let’s say, you have $10,000 on your trading account and determine risk at five percent level. You buy a certain number of cryptocurrency for $1,000 but your forecast was wrong and the price went downwards. Your risk level is $50 meaning you can not lose more than this amount in a single trade.

Why is it necessary to determine risks per every position? This is useful not only for your money and risk management strategy but also for your mental state as you are prepared to lose this amount already. However, when you fail to close your position at this level, your losses will grow leading to all your negative emotions to take control over you.

Use stops, limit orders carefully

Most novice traders when they first start their cryptocurrency trading try to use all types of orders thinking that they can improve their results by placing market or limit positions. This approach is right and helpful but only when they understand what they are doing and what targets do they have.

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Limit orders are useful only when you have conducted your analysis and found out that the price of the asset will reach a certain level before going into the forecasted direction. Otherwise it makes no sense to wait. Sometimes it is better to use simple market orders when you suppose that the price will start to grow from current level or somewhere close to it.

As for stops, they are also helpful as they are part of risk management strategy. However, before placing such an order, you need to calculate your potential risks carefully. You can also use trailing stops in order to automate your risk management strategy.

Calculate your risk/reward ratio

This is an important rule for both traders and investors. Risk/reward ratio should be at least 1:2. If less, you won’t be able to increase your funds in the long term using simple trading strategies with 50/50 profit/loss ratio.

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What does it mean to calculate risk and reward? Let’s see an example. A trader wants to buy one Bitcoin for $7,000. He is ready to lose $300 in this position (which is equal to 1 risk unit). When using such risk amount, he is to plan $600 profit in order to follow his 1:2 risk/reward ratio strategy.

Those are the main recommendation related to risk and money management. Now it is time to get down to trading psychology.

Trader’s emotions that can ruin any trading system

Professional traders know that emotions in investing are the worst enemies capable of ruining their funds quickly. This is why they always need to control them and to be self-disciplined in order to become successful.

Kill your greed before it kills your money

Trading seems to be like gambling for novice traders. They think that their routine consists of placing orders and winning money. However, there is a big difference between trader and gambler as first is guided by his trading system and the second by greed.

What is greed and why should investors control it? This is a small animal, sleeping inside of most of us. However, once we sit down to play cards, roulette or trading, this animal awakes asking for food. It tells you to increase your per trade amount, forget about your system, do not close your positions at stop loss levels etc.

Greed is a good quality for casino holders only as they make money on gamblers. The more player bids, the more he will potentially lose. However, for traders greed is something that may kill all their efforts.

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Let’s say you have earned $10,000 by trading for nearly half a year. It was not the easiest period as you had to be self-disciplined, to follow your strategy, to manage risks and money. This is your first positive result.

Greed isn’t sleeping now and it makes you make mistakes by increasing your per trade volume, holding trades to take more profits and many other things that are contrary to your trading system.

Control your fears

Another bad emotion that may affect your results negatively is fear. It shows up after one or several losing positions. In contrast to greed, fear is unable to ruin your fortune, but it prevents you from making money when trading.

Why should you control all your trading fears? First, they make it difficult for you to take reasonable decisions. Affected by fears, traders sometimes miss evident opportunities to open position. In other cases, fears paralyze investors meaning speculators are afraid to make any decision at all.

However, this is not the end of the list. Fears affect your trading even when the position is in play already. Influenced by this emotion, traders try to close their positions as quickly as possible, gaining less than they could make by holding trades for a longer period.

How to control emotions in trading

There are several ways to do it as well as several tools to use in order to smooth the influence of emotion to trading. The first thing that is to be mentioned is self-discipline. Most beginners will say that they are enough disciplined in their everyday life. However, those words are far from being true.

Self-disciplined traders follow their trading plan, trading system, 24/7, 365 days per year for their lifetime. Otherwise, they lose. Is it easy to be self-disciplined all the time? Naturally, it is not! Even professionals may step out their way and break their own rules. However, they do understand why they commit such a mistake and try to follow their strategies in future.

What are the main tools that help traders to control their mindset? They are the following:

  1. Trading plan. Here you can describe all your trading tools including indicators that you use or even your strategy. Trading plans may also include your notes on this or that trading situation.

  2. Money management system. You need to calculate it in advance in order to not wasting your time for this when trading.

  3. Risk management. Once described in your trading plan, this aspect should be applied for your every trade.

Stay patient when trading

Patience is one of the key factors for traders to succeed. You need to be patient not only when waiting for an opportunity to open positions, but also after your trade is already in the game. Why is this aspect necessary?

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Let’s suppose you monitor BTC/USD looking for better price position in order to place an order. Most beginner traders hurry up to enter the market and do this even if there is no clear opportunity. Professionals are patient as they wait for the price to meet their trading strategy conditions before placing an order. What are those conditions? They may be the following:

  1. The price reached the resistance (or support) are and reversed. This is a signal that the price is able to move in the opposite direction in the nearest future. Beginner traders sometimes place orders when the price is close to those levels without knowing whether quotes will break out the area or reverse.

  2. Candlestick pattern (hammer, e.g.) appeared. Professional traders always wait until this bar closes as they need to know for sure that there is a hammer there. Newcomers sometimes open trades even if the bar is in progress. This is a big mistake as the situation may change by the end of the period of candlestick formation.

  3. RSI curve jumped into oversold or overbought area. This is not a signal as many beginners think. This is just an alert to prepare for trading. The signal appears when the curve leaves oversold or overbought areas.

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Those are not all the conditions, but just a couple of them. Newcomers make mistakes after they have opened positions as well. The biggest one is that they are impatient to hold their trades in order to let them bring more profit.

Some recommendations

Trading psychology is one of the most important section of your training. Once you understand yourself and learn how to control your emotions, you may have better results. We are going to give a couple of recommendations.

Trading is a long voyage

The majority of newcomers dream about millions and even billions of dollars the next day. They think that one year of investing may change their life forever. However, this is not true. Trading is a long voyage, which lasts for a lifetime.

Instead of dreaming about cars, girls, cocktails on the seashore, villas trader is better to set targets to himself or herself to reach in one month, six months, one year etc.

Stay fit

What is the connection between fitness and trading? An investor who places his orders a couple of times per day needs to be fit. Mentally exhausted or tired traders have fewer chances to make money in this industry.

Try to work when you are “fresh” meaning you need a clear head in order to make better market decisions. Exhausted traders have less chances to succeed as they make more mistakes during all trading stages including analysis, entry point finding, stop loss calculations etc.

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How to Trade Cryptocurrencies

Trading Guide
Eight steps to start cryptocurrency trading and how to avoid common mistakes
How to Trade Cryptocurrencies

Almost everyone has heard about Bitcoin, altcoins and the opportunities that they offer not only to those, who own them but also to those, who speculate or invest in cryptocurrencies. The number of traders is growing every day and the beginners want to know how to trade cryptocurrencies and to earn money in this industry. We have decided to create a guide for crypto traders with a step-by-step explanation of how to begin and what to do.

Step 1. Find an exchange

Ethereum752_CCN_12.14.2017

The first thing every trader has to do before starting his or her career is to choose a place where to place orders (to buy and to sell cryptocurrencies). There are several exchanges nowadays offering services to different types of investors.

How to find a good one? We are going to write a separate guide, but here we give you some key points. What aspects are important to pay attention to before creating an account? They are the following:

  1. Reputation of an exchange. When you find one, look for more information about its activities and reputation. Read traders’ testimonials. However, do not forget, that those testimonials may be bought by exchange or its competitors.

  2. Security level. Early exchanges like MT.GOX and the others had very poor security levels allowing hackers to breach their systems and to stole traders’ money. Nowadays many websites use hot and cold wallets, multisig and other serious methods to ensure the safety of investors’ funds.

  3. Trading conditions. This is an important factor as exchanges offer different commission plans for depositing and withdrawals, as well as for inner trading transactions. Some websites have no inner commissions at all (like Cobinhood, for example).

  4. Depositing and withdrawal methods. There are two main types of exchanges. First offers Bitcoin, Ethereum and several popular coins along with fiat money. You can use banking cards and some electronic payment methods to deposit and withdraw from there. Second offers hundreds of altcoins, but as for depositing and withdrawal, you can use cryptocurrencies only.

  5. Trading platform. Some websites offer Tradingview platforms with different types of analysis tools like indicators, lines, channels, Fibo and the others. On the other hand, some exchanges offer simple and primitive trading terminals with Japanese candlesticks and timeframes. There are no analysis tools there.

  6. Order types. Professional investors prefer websites with different types of orders including limit, stop losses, take profits and the others.

  7. Verification procedure. Privacy is the key advantage of the crypto industry. However, the majority of exchanges require verification.

Recommendation:

Before you take the final decision to start trading with one or another website, try to contact their support service. Pay attention to how fast and complete the answers are.

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Step 2. Create an account

When the first step is done, meaning you have found an appropriate exchange, your next step is to create an account. Almost all exchanges have a simple sign up procedure. You need to create a login, provide an email address and a password.

Registering procedure comprises email confirmation. Some websites recommend installing two-factor authentication in order to increase account safety level.

Recommendation:

You may be asked to complete the account verification procedure in order to remove the restrictions. We strongly recommend providing the exchange with correct personal data as you will be required to send your ID documents scan copy.

Step 3. Choose your coins

Choose your coins

Bitcoin is not the only one nowadays. There are hundreds of different altcoins that you may invest in or speculate on. Professional traders advice to choose a couple of coins to start. The wide range of cryptos is good for diversification. However, beginners are recommended learning more about each asset they are going to buy, especially when they are going to invest. Why is this necessary?

First, when you plan to buy a cryptocurrency in order to hold it for a long time, you need to understand what is behind its price. Every coin is not simply a currency, but a project using some technology and offering some benefits to the users.

Ethereum, e.g., is a platform for developing decentralized applications and smart contracts. The last serve to conduct any kind of business without intermediaries. Monero is a secure and untraceable cryptocurrency, allowing users to conduct transactions with a high level of anonymity.

In order to understand whether it is a good idea to invest in this or that coin, you need to analyze whether it is promising or not. Every project has its own website and whitepaper, which are a kind of a presentation. Moreover, you can find detailed coins’ reviews on our website, which facilitates forecasting procedure.

Second, you need to compare the price of the chosen cryptocurrency with its perspectives with regard to its technology. Some coins may grow for no apparent reasons. There are risks of a pump & dump manipulations in this case. Such cryptocurrency is not for long-term investors as once manipulators reach their goals, they will dump coin and its price is likely to fall towards the initial levels (before the pump and dump strategy was launched).

As for traders who speculate on coins in short term, they also need to learn more information about the cryptocurrencies they are going to trade. However, as they buy and sell currencies within a couple of hours or days, they are better to pay more attention to technical analysis.

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Step 4. Choose your amount to invest

Before you can start trading cryptocurrencies, you need to deposit some amount of money to your trading account. How much money to invest?

It makes sense to deposit as much as you can in order to earn higher profits. However, cryptocurrency trading is risky as any other type of speculations and investments. You may have significant profits there but also lose all your money (or part of your investments).

How to choose the right amount? There are several pieces of advice. Let’s go through some of them:

  1. The easiest way to determine how much money to invest is to understand how much money you can lose without any psychological consequences. The more money you put into your trading account initially, the more you will be under psychological pressure.

  2. Determine your trading goals. Sometimes it helps traders to understand how much to deposit.

  3. Never take loans or make debts to increase the amount of your trading account. Otherwise, you risk losing not only your money but also borrowed funds that you will need to repay later.

  4. Another advice is to avoid taking money from family’s budget. Trading funds should be free of any obligations.

Step 5. Analyze charts and events

Analyze charts and events

Before you take any trading or investing decisions, take a look at the charts in order to forecast prices. There are several tools that you can use in order to understand whether to buy or to sell a coin. You need to have a strategy, which will give you nearly exact entry points.

Is it enough to simply analyze charts? Naturally, you need to combine technical analysis with fundamental forecasting method. It is better to keep your ears open as technical analysis can’t show you the drivers that make prices go in this or that direction.

When you know the reason for fluctuations and trends, you have an important information that may help you not only to forecast future directions but also to understand their lifespan.

Let’s see South Korea bans crypto exchanges. What will happen next? Bitcoin and altcoins will probably suffer significant losses as South Koreans will eventually get rid of cryptos. This decision will also be a sign of another serious cryptocurrency crisis as coins will lose their credit among newcomers.

This is just an example of exchanges work in South Korea with no limitations in the moment of writing and it is unlikely they will be closed or banned in future. However, this example is a good one as it shows how the situation may change in case of similar events.

Is it possible to trade without any analysis? If you want to exchange one crypto on another in order to use coins to buy something or for other purposes, you may skip analysis as you need crypto in the moment of buying and you will not wait until it becomes cheaper to buy or more expensive to sell.

However, if you want to make a profit by buying one coin and selling another, analysis is the key factor of success as you need to forecast future prices.

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Step 6. Diversification

No matter what you are going to do– investing or trading, diversification is the key to successful market operations. What does it mean “to diversify”? When you buy one coin, you risk losing all your investments or a part of your funds in case if the price of this crypto falls down. When you buy several coins simultaneously, those risks are distributed between all your portfolio.

In case all coins fall down, you will lose all your investments or a part of your funds. However, if several coins hold their positions and even grow at the same time when the others fall down, you have a chance not only to save your money but even to make profits.

Diversification is rather hard as you need not only to buy different assets but look for the currency pairs that have no correlation (or minimum correlation). Otherwise, there is no sense in such activity. Let’s say you buy some amount of Bitcoin and Litecoin, two currencies that have almost 100 percent correlation meaning BTC and LTC have the same trends. When Bitcoin goes upwards, Litecoin follows it and vice versa, when BTC/USD falls down, LTC/USD does the same.

It makes no sense to buy both currencies to create a portfolio as they go in one direction in the majority of cases. Therefore, you need to find such cryptos that have no connection between each other.

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Step 7. How much to invest in a single position

Before you place an order, you need to calculate you single position amount. Many beginners having no skills or experience in cryptocurrency trading, put all their money into trading. Let’s say they have $1,000; they buy Bitcoin for $1,000 leaving no money in reserve.

This is a very poor money management strategy as when you invest all your funds in one single position, you leave no reserve behind you. If there is other interesting opportunity, you will have no money to open position.

It is better to trade using less than 5% of all your funds as this strategy reduces risks. Additionally, you have a reserve, which may be used later when other trading opportunities arise. Let’s say you have deposited $2,000 to your trading account. The amount of a single investment may be $100 in this case.

Why is it necessary to follow money management rules? They make a trader more disciplined and help to protect an investor from higher risks. Money management is a very important point, which is described in one of our next lessons.

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Step 8. Choose your order type

Several exchanges offer different types of orders nowadays. In addition to market orders, you may use the following types:

  1. Limit Order.

  2. Stop Market.

  3. Stop Limit Order.

  4. Trailing Stop.

  5. Fill or Kill.

  6. One Cancels Other.

Let’s describe all of them. Market order is the simplest way of cryptocurrency trading as you buy an asset at its current market price. Let’s say you want to buy Bitcoin. Its current price is $8,000. This price meets your requirements and you place market order. The system automatically matches orders and the transaction is conducted instantly.

Limit orders are executed at the desired or better price. This one is a bit harder as you need to forecast not only the market but whether the price is going to reach your Limit Order level as well (otherwise, you will not be able to open a position).

How does it work? Let’s say, Bitcoin price is $8,500. You want to buy BTC/USD but think that its price will fall down towards $8,000 before going higher. You can place a Limit Order in this case at $8,000 in order to “catch” the best possible price.

What will be next? Let’s see BTC/USD’s price falls down to $8,000. You Limit Order is executed and you are in the market. In case if the price falls to fall down to $8,000, your Limit Order will be suspended until the price touches the level.

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Stop Limit Orders are used when the market volatility is high. Let’s assume you want to buy BTC/USD. The price currently is at $8,000. You think that Bitcoin is able to fall significantly during the next fork. However, you don’t want to sell it now as it has perspectives to grow as well. What to do next?

You may place Stop Limit Order at $7,000 for example. If the price reaches this level, Stop Limit Order will become a simple Limit Order (sell). The same thing for situations when the price goes upwards. You can place an appropriate Stop Limit Order to buy an asset if the price starts an uptrend.

Those Stop Limit Orders are especially useful in situations when you work with levels meaning you think that BTC/USD will break through the next resistance level for instance. However, there is no entry point currently. You want to open a position only when the price jumps over the resistance line. You need to place a Stop Limit Order above this level.

Stop Loss Order is designed to reduce traders’ risks. When you place it at a certain level, you want your position to be automatically closed there. Stop Loss Orders are tools of risk management. Let’s assume you have placed a BTC/USD buy order at $8,000 meaning you think the currency pair is going to grow. In order to protect your position, you place also a Stop Loss Order at $7,500. If the price goes downwards and reaches $7,500, your position will be closed automatically. You lose $500 in this case, but if the price continues to fall down, your Stop Loss Order prevents you from further losses.

Trailing Stops is a kind of Stop Loss Order. It varies from standard SL as it will follow the price at a certain set distance once placed.

Fill or Kill is a Limit Order, which his to be completely done or canceled.

OCO (One cancels Other) allows placing a couple of orders. If one of them is done, another cancels automatically.

Conclusion

We have described the main steps of cryptocurrency trading. They are very important as trading success comprises many aspects including the right choice of exchange, analysis, rules of money and risk management.

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What If I Send Bitcoin to the Wrong Address?

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With increasing transactions, it is important to understand what happens if you send Bitcoins to wrong addresses. Ways to stay safe with your cryptocurrencies.
What If I Send Bitcoin to the Wrong Address?

An often-asked question, what happens if one sends Bitcoins to a wrong address? Let us first understand what we mean by sending a Bitcoin to a wrong address. We have the following scenarios:

1)     Trying to send Bitcoin to a different Blockchain, for instance, Litecoin

2)     While sending Bitcoin from your wallet to another typing the wrong wallet address

3)     Typing an address that appears to be valid but is not the intended address

We will take up each of the following cases individually. But first, let us understand how addresses work in a Blockchain and how likely it is for you to commit a mistake.

To start with, it is important to understand that in a cryptocurrency like Bitcoin, you are the sole owner and controller of your currency. This means that there is no higher authority to appeal to if you make a mistake.

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Case 1: Sending your Bitcoin to a differing Blockchain

This is nearly impossible as almost all wallet clients are implementing a checksum to validate a destination address. If you put say a Litecoin address as the recipient of a Bitcoin transaction, nearly every wallet will say it is an invalid address. This is because each Blockchain has its own way of building an address. Bitcoin wallet addresses start with a “1” whereas that of Litecoin start with an “L.”

Multi-signature wallet addresses are an exception to this rule, as Bitcoin and Litecoin multisig wallets often start with a “3.” In this particular case, an accidental cross-Blockchain transfer could really happen. If the Blockchain recognizes the address as a valid one, then it is difficult to trace the money. Once the transaction is confirmed by the network, there is no stopping it.

However, if there are no confirmations, one could attempt to resend the transfer to a different address by using the child-pays-for-parent method.

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Case 2: Trying to send a Bitcoin to a wrong address

We would like to establish a simple rule for your safety- Never type an “address” into any system! Always copy past the address while making a transaction.  

This said, let us now establish what happens if you type an invalid address into the system. As already discussed Bitcoin addresses are defined by a 32-bit checksum, which makes it almost impossible to type a valid address by mistake. The probability of doing so is about 1 in 4.3 bln.

What a relief! In actuality, a mistyped address will be caught by your own wallet or service way before people start taking a peek at the Blockchain.

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Case 3: Typing an address that passes the checksum

Now, this is the most typical case. You may think that this transaction may fail if there is no wallet created for the address. This is not true- the transaction can go through as the Blockchain does not know which wallet addresses exist. It only knows when valid addresses appear.

The scenario where you have sent Bitcoins to an address that appears to be right but does not belong to anyone would lead to a permanent loss for you. Technically the money is still there in the system, but no one has the private key to use this money.

One possibility to explore is to create a wallet that matched the receiving address. Unfortunately, this is impossible because wallets are created through a random one-way process.

Let me take the time to explain the magnanimity of the number of wallet addresses that can be created in Bitcoin. A wallet address is a string of 34 characters (letters and numbers) from the 10 digits and the 52 upper/lower case English letters. Only four are excluded to avoid entry errors (O, 0, I, L). This gives a total possibility of 1060 different addresses.

Put simply, this number is greater than all the atoms in our galaxy. Hope you can now visualize the complexity of trying to locate a wallet where the owner is not known.

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Cryptocurrency Trading For Beginners- Online Course For FREE

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From trading basics to tactics and strategies. With the 12-part course, you’ll learn the ropes of cryptocurrency trading
Cryptocurrency Trading For Beginners- Online Course For FREE

Many people nowadays want to try cryptocurrency trading. They create accounts on different exchanges, invest money, start trading. However, as statistics shows, only 10 percent of traders are successful. This is the main reason why we have decided to create our free online course on how to start cryptocurrency trading.

The main reasons why the majority of newcomers lose all their money or a part of their investments buying or selling cryptos are the following:

  1. Lack of basic knowledge about the structure and principles of financial market activity. The majority of beginner traders have little knowledge on how exchanges work and why the price changes.

  2. Wrong choice of cryptocurrency exchange. Those websites vary as they offer different trading conditions, types of orders, trading platforms, security level, quality of the support etc.

  3. Lack of understanding how to forecast price fluctuations. Most beginners don’t know how to predict price fluctuations and they place orders randomly, sometimes in the end of big tendencies.

  4. Absence of basic money and risk management rules. Newcomer traders often try to place orders, using all their means. They do not place stop losses and have no profit targets (which results in the absence of understanding where to fix positions).

  5. Lack of discipline. Beginners often take right decisions, but they are not disciplined to follow their trading systems.

  6. Absence of a strategy and trading plan. Professional traders always have a strategy, which helps them to find entry points. They have also a trading plan comprising their risks policy etc.

  7. Influence of different types of emotions. Novice investors are often affected by fears and greed. Those negative emotions lead them to defeat.

  8. Lack of money. This is also one of the reasons, why many beginners lose their investments. They put a small amount on their trading account, trying to increase it in a fast manner. However, they end up losing all their means as they have to break too many rules, including money and risk management to achieve their goals.

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How to get started in cryptocurrency trading

All traders have two ways to start cryptocurrency trading. The first is to open an account in any crypto exchange, to put money and to begin placing orders, looking at the charts. This way is the easiest one, but in most cases, it is a dead end scenario. Why?

Those investors have almost no chances to win as they have no skills, neither experience. There are some lucky guys, who catch serious tendencies accidently. However, they can’t earn money constantly and lose all their profit in the next trades.

Investors, who think about how to get started in cryptocurrency trading, may choose another way– meaning to begin their markets’ journey with proper education. This way is better as an investor will be prepared for different market situations and will be able to react appropriately to them.

For this purpose, we have prepared a special trading course for beginners. It includes several important topics related to trading and investments in cryptocurrencies. Here is the brief plan of what you can find there.

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Trading basics

Trading is not about winning a couple of times occasionally. It is a long-term journey with many obstacles along the way. The main task of every investor is to overcome them and to earn money. Sounds easy, doesn’t it?

However, as we have already mentioned above, only 10 percent of traders are successful as the others retreat at some point in their trading careers losing their investments. When you start you need some knowledge to understand the price fluctuations, the reasons why quotes go ups and downs, find entry points and protect your capitals.

In the beginning of their career some traders try to start with strategies as they want to reach their targets faster. However, this is a wrong way as strategies is a practical aspect already. Beginners need theory in order to understand how it works in general and what factors affect price fluctuations.

We start our free online cryptocurrency trading course with several articles on how to trade in general and what are the main factors, influencing the price of Bitcoin and Altcoins. The information in those articles may seem obvious and well-known. However, it is very important as here there are the basics of trading, how it works and the aspects that are worth your attention.

Trading financial markets and cryptocurrencies is like driving a car. You may know how to start the engine, to change gears or to steer. Nevertheless, if you don’t know traffic rules, you can’t drive safely. When you deal with financial markets, you have to know the main rules to better understand what’s happening around you.

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Analysis methods

Those who have already learned basic information about markets and cryptocurrency trading may take the next step. Market fluctuations look unpredictable at first glance as the price moves up and down. There are two main analysis methods helping investors to forecast the price– technical and fundamental.

The first one helps traders to predict price fluctuations via charts. There are several types of analysis tools that you may use in order to make market forecasts. They are the following:

  1. Indicators

  2. Candlestick patterns

  3. Graphic patterns

  4. Price action

Technical analysis is illustrative as you can see the price changes and all signals on the chart. This method is rather simple as it requires no special knowledge. The only thing traders need to learn is how this or that tool works.

Fundamental analysis is more complicated as it is not illustrative. In cryptocurrency trading, investors monitor the news and try to predict their influence on different coins.

Those are brief descriptions of those methods. In our complete cryptocurrency analysis methods guide, you will learn much more about those two forecasting techniques.

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Trading tips and tricks

Most beginner traders are looking for some Holy Grail when they start their career. They think there is some unique strategy or system, that will give profit in any situation. This belief leads some traders to significant losses as they try many systems and fail finally.

There are some trading secrets, that may help all newcomers significantly. We have prepared several articles on this subject. We are not going to give you a Holy Grail of trading as it doesn’t exist.  We will provide some useful advice that will help you in your everyday trading routine.

Money and risk management

There is a strong belief among beginners that a strategy giving 100 percent positive results can be found. However, professional traders know and understand that the outcome of every single position is random and can’t be predicted.

How do they make money, if they have not a 100 percent strategy to win? The secret here is proper money and risk management system. There are several ways to reduce risks in trading. We are going to provide you with some useful methods in our articles.

Money management may be compared to a family budget. Those who plan it monthly and yearly, make savings. Those who avoid to do it or fail to plan family budget properly, spend all their money and make debts.

The situation with trading is the same. An investor has to properly manage his or her money as it is his or her trading budget. If successful, he will increase his or her investments and will have an opportunity to reinvest them partially to increase his or her trading capacities. Otherwise, he risks to lose a part or all invested capitals.

As for the risk management, it goes hand by hand with money management. Remember the advice and rules that we suggest in our articles.

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Trading psychology

For some beginner traders, the psychology aspect sounds like chimera. They skip those long but interesting articles thinking that they have no useful information for them. However, the truth is that psychology plays the key role in trading.

What is happening when a trader places an order to buy or sell cryptocurrency? Several emotions affect his or her decision including fears, greed, excitement and the others. Those have ruined many trading accounts already as investors sometimes take  illogical steps influenced by his or her inner “enemies.”

Why is it very important to read those articles about trading psychology? They will help you to find out your inner “enemies” and to fight them to decrease their influence on your trading routine.

How do emotions affect investors results? Briefly, they make trader to breach self-discipline and to deviate from his or her trading system. Let’s say an investor has bought Bitcoin for $9,000. He conducted an analysis previously and found out that the price may rise towards $9,500. He sets this level as his or her target and places order.

Later, the price reaches this level, but trader becomes greedy, thinking he can earn even more. Instead of closing the position at a previously established level, he does nothing, waiting for more profits. Here there are two possible scenarios– the price may develop its progress further upwards or decline from those levels. What is the best idea here? To follow previously established trading rules.

Trading psychology articles will teach traders how to control their emotions and not letting them out in the moments of placing and closing orders.

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Articles on trading

Those who learn how to make money from cryptocurrency trading, may be interested in special articles, regarding trading plans, work on errors, trading systems etc. They are very important aspect especial for beginner traders as they need to follow their trading plan in every single position.

Trading strategies

Professional cryptocurrency investors use different strategies to increase their chances to get profit. Those strategies are sets of rules to find entry points. They are very important as those systems allow traders to place orders wisely and not randomly as most beginners do.

Here you can explore trading strategies from the easiest to more complicated. Those are the samples of what you can do for your trading routine. All the systems are adopted for cryptocurrency trading.

Vocabulary

It is a separate section with the most popular and commonly used trading terms. It is important to know them as those words can be found not only in our daily reviews and different articles including this cryptocurrency trading beginners guide but also on different forums.

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How to choose a cryptocurrency exchange?

This is an article, giving readers some tips to make their cryptocurrency exchange choice easier and more effective. We are going to give you complete guides on the most popular trading websites as well.

Conclusion

As you may see, this crypto trading guide for beginners covers different aspects of trading. You will be provided with all necessary theoretical materials. Have a nice practical journey upon completion of this course and do not hesitate to ask questions.

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CryptoTips: Centralized, Decentralized, Distributed Networks, Explained

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Decentralized isn’t always good enough; here’s the difference between centralized, decentralized and distributed.
CryptoTips: Centralized, Decentralized, Distributed Networks, Explained

CryptoTip #1

Centralized networks are controlled by a single entity, who can do absolutely anything. Such networks have a central point of failure and therefore are not fault tolerant. While people usually think of digital currency as being decentralized, that’s not always the case. There are some currencies, such as Ripple and Tether, that are controlled by centralized companies. More of these tokens can actually be created at any time, although the companies have rules about when and if they’ll actually do that.

CryptoTip #2

Decentralized networks rely on a hub-and-spoke model, where end users are connected to trusted nodes that are interconnected with each other. Certain “light wallets” work in a decentralized fashion, such as Electrum. Such a wallet doesn’t require the end user to download or verify the Blockchain; instead, users connect to one of many possible servers. These servers then communicate with each other.

CryptoTip #3

Most cryptocurrencies rely on distributed networks to function. Distributed networks are peer-to-peer (p2p), with each user being able to connect with any other user on the network. Such networks are the most fault tolerant of all, lacking any form of centralization. Some who criticize certain Bitcoin scaling solutions do so out of fear that such solutions will turn Bitcoin’s distributed network into a mere decentralized one.

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Bitcoin vs. Gold: Which is a Better Long-Term Investment Opportunity

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Do you want to touch and admire your assets? The choice is yours.
Bitcoin vs. Gold: Which is a Better Long-Term Investment Opportunity

In 700 BC, the Lydian merchants saw how gold could be used to make coins. This brought about heavy investment in gold and its value soared. To date, gold remains one of the most valued substances and it has enjoyed widespread adoption due to its aesthetics and other features.

Bitcoin, on the other hand, is one asset which is not tangible. It cannot be held or seen physically and it only appears on a computer screen. Even though it has only been around for less than a decade, Bitcoin has enjoyed a significant amount of exposure and acceptance.

Similarities between Bitcoin and gold

  1. Bitcoin and gold are both safe assets. Although the period of use differs widely, they both serve the same purpose.

  2. Also, they are both speculative. The value of Bitcoin and gold are not determined by external factors like the earnings or the interest to be paid. The values are very complicated to compute.

  3. They are both very similar in terms of value exchange. You can get different grades of gold, you can get different measurements of gold, and you can also exchange gold for an actual currency. All these can also be done with Bitcoin.

Bitcoin vs. Gold

The fundamental difference is that Bitcoin is digital while gold is physical. Gold is a metal which can be gauged and admired while this does not apply to Bitcoin.

There’s a limit to the amount of Bitcoin which can be in circulation. This figure is capped at 21 mln, although we have mined almost 17 mln at present. For gold, we cannot ascertain how much of this metal is still available. In fact, researchers are working on a way to mine metals from space. This means that gold will still be created for years to come.

The tenure of both assets can also be factored in. Gold has been available for over 3,000 years, Bitcoin was first mined in 2009.

Finally, gold is widely accepted as a commodity. Bitcoin, on the other hand, eludes description.

We can only have a more objective approach to this comparison if we consider some important factors. These factors are discussed below.

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Gold or Bitcoin- which currency is prone to inflation?

The supply level of Bitcoin is kept steady and immutable. The implication of this is that there’s no possibility of any inflation which might arise as a result of overproduction of Bitcoin. This is, however, one problem with gold, albeit not prominent.

Gold’s supply rate has increased by about two percent yearly for 100 years now. Although this is not enough increase to cause worry, it cannot be compared to Bitcoin. Asking the question whether to invest in Bitcoin or gold, Bitcoin’s infrastructure makes it prone to inflation as a result of excessive supply.

How long has Bitcoin and gold been in circulation?

Gold has been around for several years and this gives it the advantage of trust and reliability. Many people are of the opinion that any new tech innovation might easily displace Bitcoin as the ultimate cryptocurrency. There are also fears concerning the regulation of the government. Bitcoin is not regulated and if something isn’t done soon, it might be ruled against.

Gold has been around for at least three millennia. Bitcoin has not celebrated its 10th birthday. Who will you be more willing to trust? Also, gold has lasted through the thick and thin. Also, it is important to note that gold is not internet-controlled and cannot just be shut down by the government.

The elemental value of gold

Gold is an element that is immune to any form of tech disruption. It is an ingrained part of our societal values and cannot be eroded easily. In the comparison of Bitcoin and gold, Bitcoin has an advantage in this area. If Bitcoin is able to attract new users and ensure that the existing users are satisfied with the service, this might prove beneficial.

Are gold and Bitcoin complementary?

The question so far has been Bitcoin vs. gold, however, readjusting our lens to focus on Bitcoin and gold might just help our case. Can they both work together? Is Bitcoin out to unseat gold as the universal means of storing of value? A better question might even be to ask if Bitcoin is able to replace gold.

Consider the fact that we are shifting to a digital age where the Internet is a primary means of carrying out daily operations. There are serious issues to address before you consider investing in gold.

The points are well presented, evidence, both compelling and dismissible, has been considered, we can only propose some reasons to choose one over the other.

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Reasons to choose Bitcoin over gold

1. Bitcoin eliminates middlemen

With gold, you have to consult with dealers who probably consulted with dealers who also traded with dealers. This increases the price and makes you pay for what is not seemingly fair. However, with Bitcoin, there’s no human involved. Just smart contracts and automated operations.

2. Bitcoin is divisible

You can get a billionth of a Bitcoin just for the sake of purchasing Bitcoin. Can you get a hundredth of an ounce of gold? Maybe. Is the stress of getting this value worth it? Definitely not!

Reasons to choose gold over Bitcoin

1. Gold is easier to understand

Bitcoin is a concept which is not easily accessible to all. Even learned folks might still need to pick up books, settle down and seek professional help. With gold, you can start investing in days.

2. There’s no Internet fraud with gold

Phishing and cybercrime are prevalent issues with cryptocurrencies which are not experienced with good old gold.

Conclusion

Ultimately, it depends on you to make whichever decision you want to. Are you able to take risks? Do you want a more secure investment? Are you willing to diversify? Do you want to touch and admire your assets? The choice is yours.

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