In this 2nd publication of lessons to guide you on the path to success as a trader of cryptocurrencies, you will be giving practical advice related to the choice of the trading platform and the correct use of the same. As you know, to invest in assets such as cryptocurrencies, you need to choose a broker or exchange, where you offer products of the asset, or coins directly from the spot market.
There are 3 popular forms of trading, known as:
Scalping: Is the one in which the trader carries out inputs and outputs to the market in short periods of time, ranging from minutes to a few hours. Day trading: The trader carried out transactions in which enters and exits on the same day. Swing trading: This style is where the trader opens trades and closes at periods of time greater than a day. Each of these investment styles suited to the personality of the trader. And despite the fact that many people adapt to a specific style, others may simply diversify their activities among the 3 groups.
Trading and leverage
Trading is a form of active investing, where the person is covered by fragments of a trend, or momentum, in specific. Thus, it is possible that your capital is not enough to get profit from small fluctuations. For example, imagine you buy $ 100 in Bitcoin directly in the spot market, and the price of this increased by 5% in a day; then, if you’re doing day trading, you had to enter the market with $ 100 to get a gain of USD 5. What doesn’t make much sense, right?. But this is not a problem, because the trading platforms of cryptocurrencies that exist today, I will offer you leverage. And what is this? a tool of credit where you can increase your buying power by hundreds of times. In this way, a percentage change of 5% you could give 10,20,50 times more profits risking the same $ 100. But not everything is rosy, because despite the fact that this tool is a great advantage, it could be potentially dangerous for your capital. There are trading platforms for cryptocurrencies with a great reputation as Binance futures or Plus500, where you can open positions up to 125 times bigger than your initial capital. For example, with a capital of 1,250 USD you can buy the equivalent of USD 125,000 a derivative of Bitcoin. So think of that ocupaste all your available margin, the USD 125,000 in purchase units of the derivative crypto, and the price went up 10%, then you earned $ 1,250. But, what if the price went against you and you lost 10%?, we will really, you lost all your capital!, and probably the broker closed the position after your account reached the level of bankruptcy. And that’s the problem. Leverage must be used with great caution, and the margin available using this tool you should never use it in its entirety. As a trader of cryptocurrencies you must understand that not all trades will be winners, so you have to be willing to lose, and more important, to learn from them. As a general point of view, professional investors suggest that you should not risk more than 1-3% of total capital per trade. These two points we will see in following lessons dedicated to the very important psychology of the trader, trading plan and risk management; for now, let’s continue with the choice of the trading platform.
As you could discover by your own account, you buy units of Bitcoin on the spot market, little will serve to make trading of cryptocurrencies, unless you own a large amount of capital. Then, instead of using exchanges to buy cryptocurrencies real, you need brokers that offer leverage to obtain interesting benefits, for very small the fluctuation of the price. To choose a broker to a trader of cryptocurrencies, you should also take into account other important aspects, such as what are your trading style, commissions, forms of deposit, legality and reputation of the broker, derivative products that are offered. Each one of these points should be evaluated by your own account, as each situation is different from one person to another. However, to help you in the process, you can choose to review the list of exchanges to be reliable and with good service by visiting this publication.
Demo account and trader of cryptocurrencies
This is one of the main tools to achieve the confidence that will lead you to success as a trader. Never risk real money if you don’t have a bit of confidence in you. Test your strategy, observed results, be disciplined with a demo account like if was real, and he does a quick transition to working with your money, because it won’t be beneficial if it takes you too much time testing it in demo. Demo accounts are excellent tools for performing all sorts of tests, always and when you take it very seriously. However, you should move to a real account as soon as possible, no matter which risk very little money, as were not working the psychology if you don’t take this step so important. Use your demo account with discipline. Note all of the mistakes that you commit, take them down and make a plan totally structured, that can lead you to take timely decisions are not influenced by emotions. This latter topic will be expanding in the next lesson, so stay aware of our publications. I hope this has been of your liking and usefulness. Let us know your thoughts in the comments, we’re happy to answer you!. The following two tabs change content below. Creative editor and trader of cryptocurrencies, currencies, fiat, and commodities.