Making Money Through Trading

• Allocating capital for trading

• The significance of personal preference for time

• Crypto trading strategies come in a variety of shapes and sizes.

Earning cryptocurrency necessitates a balance of risk, work, and anticipation. Trading cryptocurrency has the potential to yield large profits, but it also entails a great amount of risk and effort.

Many consumers will make the error of just opening a cryptocurrency exchange account, depositing cash, and placing trades without considering how those three factors interact.

What it takes to profit from cryptocurrency trading

It may sound like a no-brainer, but if you're thinking about getting into cryptocurrency trading, the first thing you'll need is a clear goal. That goal will be determined by two factors:

the amount of funds available and your expectations for it.

time you can devote to learning and managing your trades/investments

your risk tolerance

Trading Capital Allocation

The amount of money you can invest in cryptocurrency trading should be determined by your discretionary income, which is the money left over after paying all of your usual living expenditures and taxes.

If you want to increase your discretionary income, the conventional advise is to put the majority of your money in low-risk investments (pension, index funds, bonds, etc.) and a small percentage in high-risk investments (stocks, bonds, etc.).

Trading crypto, for example, is at the far extreme of that scale.

It's up to you what percentage you want to use, but 5% would be a good starting point. Trading with money you can't afford to lose or borrowing on credit cards, loans, or remortgaging should be avoided at all costs.

Whatever amount of discretionary income you're willing to risk, you should go into it knowing that it's money you're willing to lose.

Knowing how much money you have on hand is a critical metric against which you can establish a success goal.

If you're lucky enough to have six figures to invest, you have the luxury of adopting low-risk strategies that work with enormous sums:

• Low risk trading tactics using leverage

• Stomach high gas fees while receiving high APY from DEFI

• Interest bearing crypto banking, or CEFI.

The majority of novices to crypto trading do not have the luxury of playing with a large bank, but they begin with great expectations, pushing them further up the risk spectrum.

Preference in terms of time

If you want to make a big profit on a modest investment, you'll have to take risks, but how much risk you take and what kind of trading you conduct will depend on how much time you have.

Preference in terms of time People with a low time preference are willing to trade immediate benefits in exchange for future gains. When it comes to high time preference, the opposite is true.

Investing, often known as hodling, is a low-time preference technique to trading cryptocurrency. Fundamental analysis is devoting time to researching the coins and tokens you believe have long-term potential.

The more time you devote to your investigation, the more convinced you will become. Time spent on Learn Crypto will aid in the learning of crypto books and podcasts that are recommended.

Once you've come to a decision, all you have to do now is place a single entry transaction and you're done. Those with a low time preference have historically benefited from Bitcoin.

Alternatively, you can stagger your investment with tiny recurring amounts (known as Cost Averaging), which is still a low time preference, passive method with the added benefit of averaging some of the price volatility. It's a good idea to keep track of all DCA activity in a spreadsheet.

You're playing the long game with hodling and DCA, passively waiting for substantial upside down the road.

Articles that are related:

• DCA & Hodling

• Fundamental analysis and investing

• What is the best way to place a trade？

Trading and cost averaging

By changing the regular repeating investments based on an assessment of market conditions, the cost averaging, passive technique can become an entrée into full-fledged active trading.

If your analysis indicates that prices will rise in the long run, your goal is to buy the dips along the way, maximizing the efficiency of your entry points.

You stay to regular repeating buying points with DCA, but you can modify how much you buy each week/month dependent on whether the market is oversold or overbought at that fixed point.

The first step toward technical analysis, which is a key part of trading crypto and an alternative perspective to the investment philosophy of fundamental analysis, is to think in terms of oversold or overbought conditions - essentially, whether the market has become overly optimistic or pessimistic.

You can use indications or models to help you make a decision, but the more time you spend researching market circumstances, the more time you'll need to devote. You'll need to devote significantly more time to unpacking technical analysis and moving into active crypto trading.

In terms of the type of active trading you should use, time will effectively be a limiting constraint. Here's a rundown of some of the most prevalent, which are covered in detail in our section devoted to all elements of cryptocurrency trading.

Crypto Trading based on News/Information

Because most cryptocurrencies lack fundamentals, such as revenue streams, their value is largely on expectations of future worth. Because people's perceptions change in response to news, the crypto market is significantly influenced by information as it becomes available and is understood.

There is no easy way to stay on the right side of such news. Those who know are telling, and those who tell don't know, as the phrase goes. You may, however, put yourself in the greatest position to get breaking news as it happens by following people on social media who have a track record of doing so.

You must gather valuable news sources and position yourself in the best possible position to react before others.

For someone just starting started with news/information-based trading, focusing on a few specialized cryptocurrencies is the most productive strategy.

Dogecoin is a good example of this. Its price doesn't really represent usual core elements like development team or product pipeline, but celebrity endorsement, particularly from Elon Musk, has a major impact. In May, his presence on Saturday Live sparked a massive rally, with the expectation that he would mention Dogecoin. This also emphasized the company's policy of buying rumors and selling news.

All of the positive was in the run-up to Musk's presentation, when people speculated on what he would say or do. The sell-off was spurred by his real attendance and mention of Dogecoin.

Learn about the people behind certain initiatives by tracking down their social media profiles and paying attention to what they publish. You might just pick up some nuggets of information with enough lead time to trade that news, but make sure you know how and where to trade the currency, as well as whether there is enough liquidity.

Pros

• Finding news does not necessitate technological expertise.

• There are no explicit entrance requirements.

• Isn't always time consuming.

• Allows for specialization

Cons

• It's difficult to tell the difference between true news and rumor.

• Because markets move so quickly, it's difficult to predict when they'll rise or fall.

• It still takes a technical evaluation to determine how much a piece of news will impact the market.

Position/Momentum Trading

Momentum Trading, also known as Position Trading, is another crypto trading method that is suited for someone who is just getting started and may lack technical understanding and time commitment.

Momentum Trading is essentially a more advanced type of speculating. The only thing a hodler will do is buy and hold. Momentum or position trading will look for entry points in the market based on important points of market momentum change. This could entail determining the beginning and finish of specific cycles.

Bull/bear cycles and halving periods are the most obvious, but they can also include calendar-based cycles, such as the significance of March and the end of the financial year, or political cycles (owing to elections), weather, and its impact on hydro-electric mines.

Ark is a fantastic example of an investment firm that specializes in new technology investments.

Pros

• Possibility of a high rate of return on investment (ROI)

• Not time-sensitive/passive

• Fundamental analysis is more intuitive than tactics based on technical analysis.

Cons

• Requires monies to be held in escrow for long periods of time.

• There's a chance you'll lose a lot of money if you don't use a stop-loss strategy.

Trading on the day/swing

Day Trading is a term used in traditional stock markets to describe trading that takes place during defined hours when markets open and end. Of course, cryptocurrency markets are open 24 hours a day, 365 days a year, therefore the term “day trader” refers to someone who actively trades the markets on a daily basis, opening short-term positions based on technical analysis of price movement.

The goal is to profit from minor price swings that don't indicate fundamental market shifts, but rather movement within trends.

Swing trading necessitates a thorough understanding of technical indicators, well-defined trading plans, and the patience to wait for the appropriate opportunities rather than trading what is immediately available.

Pros

• It is suitable for hobby traders because it does not necessitate a long-term commitment.

• Focuses on tiny gains/losses to reduce the likelihood of being rekt.

Cons

• It is necessary to have a good understanding of technical indications and how to recognize them.

• It necessitates a great deal of self-control.

• Returns aren't going to be enticing.

You don't need a spreadsheet if you have €1,000 in your Hard Wallet, but as your trading frequency grows and the time your transactions are open for reduces, you'll need to put a lot more effort into preparing and documenting what you do.

As your trading skills improve, you should start keeping a Trading Journal.

What is the purpose of a trading journal？

A Trading Journal is both an objective and subjective record of your trading decisions (numbers and dates), as well as why you made them and how they turned out.

If you're serious about bitcoin trading, you'll need to keep a completely honest Trading Journal.

It's all too tempting to ignore the mistakes and focus on the wins, but that's a surefire way to get rekt.

Keeping a Trading Journal necessitates a methodical approach to each trade, divided into Objective and Subjective categories. The objective elements work well in a spreadsheet format, whereas the subjective elements are more akin to annotations.

A Trading Journal's Objective Elements

• Which currency pair do you trade？

• Your entry fee as well as the date and hour of your event

• Your exit price as well as the date and time of your departure

• The difference between your target exit price and the current market price Exit

• The longevity of the trade

• The type of trade: spot, limit, or long/short

• The magnitude of your trade and the percentage of your capital invested

• Profit or loss on a trade

• well-thought-out strategy for making the trade

• A risk measure/index and a confidence level/index

A Trading Journal's Subjective Elements

Subjective analysis of your transactions can be done in the form of annotations, which can include things like how you're feeling and how much sleep you got the night before, as well as notes about things you think you got wrong and trading skills you should acquire or improve.

When you keep a trading notebook, you're demonstrating that you have the discipline to take cryptocurrency trading seriously and that you're willing to be honest with yourself. It's pointless to only keep track of your accomplishments. Active crypto trading isn't for you if you don't want to keep track of your losses.

Most newbies make the mistake of believing that trading cryptocurrency is as simple as setting up an account and selecting from a vast array of coins. You run the risk of relying on your gut, pursuing pump and dump moves, reacting to 'experts' on Youtube, Tiktok, or Twitter, or simply trading based on your mood if you don't follow any trading method.

Trading without risk management is gambling, and the house always wins in gambling. Match a trading activity to the quantity of money you have, the amount of time you have available, and a realistic goal.