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The basics of crypto-trading: indicators, charts and trend lines
Halving on the Bitcoin network has become one of the key events in the cryptocurrency market, which has fueled the interest not only of long-standing players, but also has caused the release of new ones. This is evidenced by recent data on the growing demand for crypto assets on top cryptocurrency exchanges such as Bithumb Global. For those who are just getting acquainted with the crypto-market and want to try their hand at trading a new class of assets, we will tell you what tools crypto-exchanges offer and how to use them in crypto-trading.
To start trading cryptocurrencies, you must first select:
• Crypto-wallet — there are several types of crypto-wallets: hot, cold, desktop, mobile and paper. All of them provide different levels of security and convenience. At the same time, the best option for storing cryptocurrencies is the use of two different wallets — hot and cold. So do most large companies working with digital assets.
• Crypto-exchange is a trading platform that will allow you to exchange, buy and sell cryptocurrencies. Such platforms can be centralized (CEX), decentralized (DEX) or hybrid, combining the qualities of CEX and DEX.
• A crypto-portfolio is a collection of crypto-assets collected for profit. It is best to form it in three stages: part of the currency for long-term storage (from 1 year and longer), another part — a medium-term deposit (up to six months) and a deposit for trading for several days or a week. When starting crypto trading, it is advisable to diversify your investment in a deposit for trading, paying attention not only to the potential of a particular coin, but also to the ways of earning that the cryptocurrency market offers. Experts advise at the initial stages to choose assets from the top 10 rating by capitalization.
Terminology• Order — a trader’s request for a cryptocurrency transaction. Orders are divided into market orders — for purchase (Buy) or sale (Sell), and pending — requests for a transaction at a non-market price, waiting for it to be at the right level. Pending orders include:
⁃ Limit — for sale / purchase at a price higher / lower than the current market price
⁃ Stop loss — orders to limit the loss
⁃ Take Profit — Take Profit Order
• Market maker and market taker are market participants who create and accept orders. The market maker creates a new transaction request, increases the turnover of the exchange and raises the liquidity of the crypto asset, while the receiving market taker takes the asset out of circulation, lowering its liquidity. In this connection, different commissions are introduced on some crypto exchanges for makers and takers.
• Exchange Cup or Order Book — a table with limit orders, which displays the closest sellers and buyers, where sellers’ orders are marked in red, and buyers are marked in green. The columns of the table show the number of cryptocurrencies and the price at which they intend to sell or buy. At the junction of these tables, a spread is formed — the difference in the price of supply and demand. The lower the spread, the more liquid the cryptocurrency. The analysis of the stock market is a leading indicator of the state of the market, since it allows you to predict changes before they happen.
• Long and short positions (Long and Short) — the usual “mode” of trading. In the case of a long position, we buy cheaper and sell more. It is believed that the growth of assets in the market is a long process, therefore, work in this direction is also called long. The second option means a short position, that is, a game for a fall. The market believes that the decline in the value of assets occurs quickly, that is, in a short time. Therefore, this position is called “short.”
• Exchange chart — shows the change in the price of cryptocurrency over time and is the most important tool for technical analysis. Charts display price changes with a line, bar and candlestick.
• Bulls and bears — in the market so-called buyers and sellers. There is an analogy with the nature of animals: buyers always push the price up, creating a demand for something, and it turns out that the price seems to be pushed by horns. In this connection, bulls are optimists, they believe that the prices of the shares they bought will rise, and someday they will sell the asset more expensive than they bought. The bulls in the market are overwhelming (by approximate estimates, up to 80%), long investments are kept on them, and the bull trend means stable growth of stocks and general welfare. Bears, in turn, are sellers who have learned to capitalize on a falling market: they usually try to sell cryptocurrencies faster, often lowering the price of an asset. Concluding a contract for the sale, they fix its value, and then wait until the goods fall in price, close the deal and put the proceeds in their pocket. Bears are interested in a constant reduction in prices and achieve their goal, provoking an increase in supply: open short positions and sell until the price drops to the desired level.
• Technical analysis is a set of tools for market forecasting of prices based on the movement of value in the past. In technical analysis, the same tools can be used for different markets and trading pairs with a slight adjustment of indicators. Also, technical tools are equally successfully used on any timeframes — from a minute to a year.
• Fundamental analysis — this type of analysis is based on the consideration of financial and production market indicators that may affect the price of a traded instrument. The mood of market players, current and growing trends, indicators of production activity — all this information can give an extensive idea of the potential of the investment object in question. The main disadvantage of the fundamental analysis is that the information provided by him is insufficient to predict the movement of prices in some local areas. It is possible to determine a potentially good company that has excellent financial performance and has real prospects, but it will be impossible to determine the moment of entering a short-term profitable trade with a good indicator of risk to profit ratio.
• Pattern — behavioral model / trading setup / market pattern. Patterns are one of the most common methods for analyzing price movements. Each pattern is always based on a certain idea, the simplest and most understandable. There are a lot of trading models, but all of them are derived from the classical model of breakdown or rebound from certain significant price levels.
Basic cryptocurrency trading tools at Bithumb GlobalUsing the example of a centralized cryptocurrency exchange Bithumb Global, we will analyze the main elements that cryptotraders will encounter in the initial stages of trading. When choosing a cryptocurrency exchange, first of all, you need to pay attention to the presence of:
⁃ Convenient ways to deposit and withdraw funds
⁃ Fiat currency support
⁃ High number of trading pairs
⁃ Information on the current state of cryptocurrency rates
⁃ Cryptocurrency Rate Charts
⁃ Technical indicators
⁃ Different levels of user verification
⁃ Built-in cryptocurrency wallet
⁃ 24/7 tech support
On the Bithumb Global main page, a selection of top trading pairs is offered, where cryptocurrency tickers are listed, their price, exchange rate for the last day, daily trading volume and the asset quotes movement chart.
Top trading pairs at Bithumb Global. Source.
If you select a pair from this list, then Bithumb Global will automatically transfer the user to the Base Version of Spot Trading. Spot trading — the terms of the transaction with cryptocurrency, in which payment is made to both parties immediately.
Here the user can get acquainted with the latest price of an asset, the volume of transactions with it, data on transactions and the minimum and maximum prices for the last day.
Basic Version of Spot Trading on Bithumb Global. Source.
You can select another trading pair in the top menu by hovering over the corresponding button, but the easiest way is to find the desired pair through the search. At the same time, the Professional Version of Spot Trading opens up a wider set of tools for the user, which will be discussed later.
Trading Tools Professional Version Bithumb GlobalOn the Professional Version, users can use price charts in the form of Candles, which look like a series of vertical lines and display price changes, where the upper point shows the maximum that the price has reached and the lower one — the minimum. If the closing price is lower than the opening, then the candle will be painted red or black, and if higher, then green or white. Knowing the direction of the price movement (body color of the candle), we can say exactly where the closing and opening prices are.
Price chart in the form of Candles at Bithumb Global. Source.
Also in this version of Spot Trading, a price chart is available to users in the form of a Glass, where sellers ‘bids are marked in red and buyers’ bids are marked in green. The analysis of the stock market is a leading indicator of the state of the market, since it allows you to predict changes before they happen. If, for example, a large congestion of sales requests at the upper price limit can be noted, then as soon as the market reaches this limit, a recession will provoke, triggered by a large number of sales.
Price chart in the form of a Glass on Bithumb Global. Source.
Price charts also have different timeframes — from 1 minute to 1 week, which allows you to conduct a more in-depth analysis of the movement of quotes of the selected asset.
Bithumb Global price chart timeframes. Source.
Also in this version of Bithumb Global, various Indicators are available to traders. In total, the cryptocurrency exchange provides about 80 different indicators that will help in the technical analysis of the movement of crypto asset quotes.
Let’s analyze the main indicators available on Bithumb Global:
• Volume — allows you to track the number of transactions completed by traders over a specific time interval. Green and red bars are indicators of the volume of transactions: red signals a decrease in volume, green — its growth. By analyzing the volume of transactions against the background of the price movement chart, you can confirm the strength of the trend or reveal its weakness and predict a price reversal. If prices rise and trading volume rises, we observe a bullish trend. An increase in trading volume in the event of a decline in prices indicates a bearish trend.
• Moving Average (MA) is just as popular a tool as volume is. The indicator function analyzes the average prices for the selected time interval, which gives a relative idea of the general price trends. If the actual price of cryptocurrency for a long time keeps above the moving average, we can assume that it will continue to grow. Accordingly, a fall below MA is a signal to lower the price of an asset. For more accurate forecasts, it is advisable to use several moving averages based on different time intervals. Moreover, in case of disagreement, it is customary to consider the value of the average based on a longer period of time. If the signals from several moving averages coincide, we can talk about a fairly accurate forecast.
• MACD (Moving Average Convergence Divergence) — having trained on one moving average, we will move on to a comprehensive analysis of this indicator. The MACD tool analyzes the convergence and divergence of three moving averages and can signal the beginning of a new trend. MACD also works well on different timeframes and is a fairly simple and popular indicator of technical analysis.
• Zig Zag is an auxiliary indicator that analyzes the highest and lowest points of the cryptocurrency exchange rate and allows you to determine the correct entry points into the market. The plus of the indicator is that it eliminates the noise that can distort the forecast of the trend behavior. Minor fluctuations are simply not taken into account: lines connect the highest and lowest points of the price chart directly. The zigzag shows global market movements, but at the same time it only captures these changes in the past, without giving forecasts on the price behavior in the future.
• Relative Strength Index (RSI) — shows the greatest efficiency in a sideways trend. With active course dynamics, RSI may produce incorrect data. Such indicators of technical analysis are called oscillators, and they must be used with caution. The indicator’s algorithms analyze price changes and allow you to evaluate the oversold or overbought status of an asset and, therefore, predict the occurrence of a bull or bear trend.
• CCI (Commodity Channel Index) — The CCI or Commodity Channel Index, as well as the Relative Strength Index (RSI), helps evaluate overbought or oversold assets. This chart with values from minus 100 to plus 100 is displayed under the current price chart and can be applied on any timeframes. A CCI of more than a hundred means that the asset is overbought, and the price is about to fall, and on the contrary, a CCI below minus one hundred indicates the oversoldness of the asset and the likely increase in its price. This tool also refers to oscillators and is used during a lateral trend when there is no clear idea of how the price will behave in the near future.
• ADC and DI — the index of the average direction and direction of movement, signals a change in trend. It looks like three lines on the chart: red — bears, green — bulls, blue (there may be other colors on different platforms) — the strength of the trend. This indicator is fairly reliable on four-hour and day frames. If the trend strength line is within 10−20 points, this indicates that the trend is gaining strength, but if the indicators reach 60−80 points, you should wait for the trend correction. The green and red lines will show who sets the market mood — bulls or bears. If the green line crosses the red line, the trend becomes bullish, and vice versa.
Indicators at Bithumb Global. Source.
Another useful tool available on the Professional Version of Bithumb Global is Trend Lines. It allows you to demonstrate in which direction the price of an asset is moving. The Dow theory, which is the basis of all technical analysis, suggests that no matter how the price behaves, it will always be in a particular trend. If the price behaves relatively evenly and stays in the same range without showing either growth or decline, such a trend is called a side or flat trend.
A growing (“bullish”) trend is characterized by the appearance of a series of ascending highs, with each new peak must be higher than the previous one. Accordingly, the “bearish” downtrend shows points of failure (price low), each subsequent of which will be lower than the previous one.
A trend line can be built on two points of a minimum or maximum, and a third confirming one is mandatory. The more points form a trend line, the more confident and stable the trend itself. The construction points should not be too close to each other in the time frame, otherwise the direction of the trend will not be completely correct. Please note that the uptrend line is plotted below the chart, and the downtrend is above it. The slope on the trend line should also be taken into account — its constancy indicates the stability of the trend. The change in the angle of the trend line is called the acceleration or deceleration of the price movement. The larger the angle, the faster the trend.
A line through price lows is called a support line. As soon as the price reaches it, it finds market support there and, pushing off, again strives upward. The line connecting price highs is called the resistance line.This is the level above which the value of the asset has not yet risen. If the price breaks the support or resistance line, this is a clear signal for a trend violation and a change in trading tactics.
Trendlines at Bithumb Global. Source.
FinallyThe above are the basic trading tools available to traders of the Professional Version of the Bithumb Global crypto-exchange. They will help you figure out how to properly analyze the key metrics of cryptocurrency assets so that you can build the most advanced trading strategy. However, this is not the whole range of tools available to Bithumb Global traders. Follow DeCenter materials to learn about the intricacies of cryptocurrency trading on the advanced cryptocurrency exchange.
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First of all, let's clarify the basic concepts.
The trading strategy is a kind of trading operations in a market conjuncture.
Trading cryptocurrency strategies are methods of generating profit, independent of market circumstances, which enable traders to determine the favorable time for transactions.
In the arsenal of specialists there are several types of trading strategies:
This is such a trader on the exchange, where a trader conducts transactions within one day for profit in high-speed mode, using intraday price fluctuations. At the same time, after the markets are closed, all positions are removed, which removes unwanted risks. This strategy is not suitable for everyone, but for those who conduct transactions only in a certain period of time. In order for the strategy to work, the Specialist needs to constantly monitor the change in asset prices, liquidity, and trading volumes prior to their zeroing.
The type of day trading, which involves the commission of a significant number of transactions in a short period of time. Specialists in this type of trades are called scalpers. They make hundreds of transactions a day, and the time spent on transactions keeps score for seconds. Here it is important to consider the following, the investor should have a good knowledge of the market and be able to quickly adapt to it. Scalping is necessary when the market trends change abruptly, characterized by quick profit and minimization of losses. The shortcomings of this strategy include serious losses associated with payment of transaction fees.
It’s a type of trade, which became popular due to market disadvantages. There is an opinion that arbitrage can completely lose its relevance if the market of crypto currency can work synchronously, but today it is unlikely. The arbitrage strategy is profit on the difference in the assets and instruments of the money market. Arbitrage is the easiest way to trade, since it does not require special experience and specific knowledge.
Like scalping, it involves creating positions based on market trends. A distinctive feature of this strategy is the maintenance of profit at a high level due to the fixation of the open position. Within the framework of this strategy, a specialist can work both in a high-speed mode and for a long time. The use of this strategy requires a clear understanding of the impact of new economic events on market trends.
Swing-trading is based on fluctuations in the maximum and minimum prices. Thanks to swing trading, the probability of profit is increasing, but it is difficult to determine the price movement precisely, since correction is taking place before the next surge in price. When using the swing trading strategy for the long term, it is recommended to carefully study the market, its technological characteristics, as well as competitors. Swing trading requires attention to factors and indicators that affect the movement of markets.
With positional trade, the situation lasts more than one day, and the time of its implementation can drag on for several years. This strategy allows you not to follow the daily news, it is enough to use long-term trends (monthly and yearly). The position trader does not depend on the constant daily fluctuations of the rank, his goal is to make only two or three transactions with assets in a year, receiving sufficient income.
In fact, automated trading is the use of a computer program when executing orders. The trader completely determines the principles of the system. The use of such systems allows you to automatically monitor markets, opening and closing transactions at the most appropriate moments. The trader needs to establish strict control over the system, since any automated process can fail, which will cost a lot.
So, it's quite possible to earn money on digital assets trading if you use the spectrum of considered strategies correctly. Factors in the strategy choice are the features of crypto currency and time. Remember! The key to the success of the transaction and obtaining the expected profit is the acquisition of assets at an opportune time, at a bargain price, preferably minimal!
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i’m sharing it here because i’m sure that there are other people in my situation too and it will be great if i can help you exactly like how my friend helped me.
Here is what I wrote on my notebook while he was pitching the basics of crypto trading, I summarized it into few lists so it will be easier for you to follow:
General tips: 1. If your mom send you a message asking “how to buy bitcoin”? it means you need to sell yours (not to her of course :P)
- Don’t put all your money on the exchange (he lost in the past some money on mt.gox).
- If you’re too lazy to print a paper wallet or so cheap you can’t buy Trezor, so don’t cry if you make some stupid mistakes and lose your login details/ get hacked.
- Don’t be afraid from charts, After you will get into trading you will find technical analysis like a children’s game, you just need to look for shapes and mark a line to understand where the risk is and than use your instincts, your brain(he claimed i don’t have any) and some useful new resources (i share them later on).
- there is too much information, if you will try to focus everything it will kill you and you will spend most of your profits on Advil. arrange yourself a useful resources and a comfortable working environment.
- Listen to Lofi while you trade/make decisions.
- don’t join random telegram groups or pump and dump groups. no-one open a traders group and invite you just because you have a beautiful smile. 97% of them have hidden interest. Try to attend for a local bitcoin meet up in your hometown or near by and than meet REAL people and REAL traders. Ask them if they have a friends traders group and ask to join, If they don’t agree say the
resources: “Give a man a good signal and he made profit for day, Teach him how to trade and will make a profit for a day “ (I made it now… And I wonder why I got fired) :P He shared with me many of his resources and said that I need to check them to understand which one are useful for me and which isn’t.
- Altcoins - Vs. Bitcoin and Vs. USD: it's important to analyse the price against Bitcoin and against USD as well. Most major altcoins have huge USD trading
- What goes down – does not necessarily go up again: “I’ve seen Altcoins like Aurora which came down 99.99% of its record”
- Day trading is a job. Consider the time spending on it when calculating your gains and losees.
- Don’t put all of your eggs in one basket: Diversify your crypto portfolio, and it's not shame to hedge to cash sometimes
- don’t risk something you can’t afford to lose.
News & Educational Websites:
ICO’s - Before investing in ICO you need to check few things:
- CryptFlix - This site is a great way to learn about blockchain and the crypto market while watching videos. They have a cool UX that reminds Netflix and you will find it easy to spend few hours watching super cool and educating videos.
- Crypto Dictionary - In the crypto world there is a lot of terms https://www.mycryptopedia.com/encyclopedia/
- CryptoPotato - Great educational website for beginners and advanced. What I like the most about this guys is that they are doing market update each week, live technical analysis sessions (also answering questions) and it seems like they are super legit.
- Investopidea - I love this website. The are professional, keep it simple and clean. https://www.investopedia.com/
- CoinsCalendar - watch all upcoming coins events and updates. https://www.coinscalendar.com/
- Tradingview - Beautiful easy to use charts. You can also follow pro traders and learn from their analyzes. https://www.tradingview.com
- BitcoinWiki - It’s like wikipedia, but for bitcoins… https://en.bitcoin.it/wiki/Main_Page
- BadBitcoin - This website will help you to avoid fraud (My friend said the word fraud like 20 times in the last 1 hour, I think this market have many problems!). http://www.badbitcoin.org/
- The Age of Cryptocurrency: Recommended book. How Bitcoin and the Blockchain Are Challenging the Global Economic Order. I’m not sharing here a link so it won’t consider self promotion so just google the book name, it’s on amazon (the price is around 16$ but don’t be cheap on your education)
- CryptoPanic - This website will save you a lot of time by summarizing news from all over the internet and let you know the sentiment of each article/post/tweet
- Andreas M. Antonopoulos - This guy deserve a high five from satoshi nakomoto. He wrote the book “ Mastering Bitcoin” and dedicating his life to make the world understand bitcoin & blockchain.
- BitcoinWisdom - https://bitcoinwisdom.com/
- Coin360 - a beautiful unique way to have a overlook on the crypto market and find new opportunities every day. https://coin360.io/
- CryptoCoinChart - a cool alternative to coinmarketcap https://cryptocoincharts.info/
I checked few ICO’s since my friend told me how to recognize a high potential ICO and found it kinda easy to determine if an ICO is legit or not. I also saw that 90% of all the ICO’s I checked are completely scam. I’m not investing in any ICO yet but I will follow few companies to check if I was right with my judgment.
- Team (Who are they? do they have experience in the field of the ICO? They have linkedin, github, personal websites?)
- Technology (Are they here to stay? Do you see a real usage in their tokens? They solve any problem?)
- Social Media - do they have community of people that support them? Are they active on Facebook, Twitter, Medium, Telegram, Reddit?
- Whitepapaer- Before you buy electronic product on Amazon do you read about it? do you do the research? Do the same when you invest in ICO. Read the Whitepaper to fully understand the idea and the potential
Few companies I found interesting: - PolySwarm : They have an ambitious idea. Instead of bitcoin miners they want to have a community of cyber security expert that compete who best protect against threats. I listened to their CEO on youtube and this guys seems like he know the drill, Their team have an experience in the cyber security field so i think these guys know what they are doing. It’s too early to say if I will get involved or not but I will definitely keep them on my radar.
Amazon have a service called “Amazon Mechanical Turk” Which is basically a big market place where people can get paid for micro tasks. I didn’t knew but there are millions of people doing thousand of micro tasks at Amazon Mturk every day and getting paid few cents per task. Effect Ai want to decentralize it which is a brave thing to do. They compete with one of the biggest companies in the world and they don’t afraid to show it on their website. Besides that the team looks good and they are super active on telegram and twitter.
- Effect Ai - i love their technology. and they are challenging one of the biggest companies in the world, Amazon.
If I will see that the community find my post useful i will update in few weeks about my progress. Next week i need to have another crypto lesson, I hope to make some progress until than:) !
Wish you all a great weekend
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