Enter the world of cryptocurrency trading – Cryptocurrencies are now part of the financial landscape. Indeed, Bitcoin adoption is continuing, and the king of cryptocurrencies is attracting interest from certain countries. BTC has become legal tender in El Salvador, and other countries could follow in the coming years. Also, institutional players are increasingly interested in this asset. In fact, 2023 saw a lot of speculation surrounding Bitcoin spot ETFs. The world’s largest asset manager, Blackrock, has filed for a Bitcoin spot ETF. The cryptocurrency sector has established itself in the financial world, and many operators now want to trade digital assets.
The cryptocurrency sector is still in its infancy. It’s worth remembering that Bitcoin’s market capitalization is very small compared to gold. For this reason, traders must contend with significant volatility, significantly higher than indices like the S&P 500 or the NASDAQ.
Crypto trading can be lucrative, but it requires technical knowledge, iron discipline, patience, and courage. Many traders lose their money in the financial markets, and very few survive. This guide is designed to help beginners take their first steps in trading. Before you get started, it’s important to understand the different aspects of cryptocurrency trading and be aware of the risks. Let’s get started!
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Trading is an activity that involves buying and selling securities (assets) with the aim of making a profit . There are different financial instruments on which a trader can speculate such as:
The trader has the option to choose between different trading methods. Scalping is an intervention technique that involves holding a position for a very short period of time (a few seconds to a few minutes). The trader will take advantage of small fluctuations to generate profits. Be careful, however, as transaction fees can quickly become a hindrance when using this technique.
Then there is day trading . This type of trading is suitable for traders who want to operate over a longer time horizon than scalping , but which often remains less than 24 hours. Finally, swing trading allows a trader to spend less time in front of the screen. Positions can last for several days .
Cryptocurrency trading has some unique features. First, you need to understand that you need to open an account on a centralized platform (CEX) like Binance, Bitget, Bybit, or Kucoin, or on a decentralized platform (DEX) like Uniswap, dYdX, or PancakeSwap. Once this is done, a trader has access to cryptocurrency trading .
Today, most transactions are conducted using stablecoins. To purchase a cryptocurrency, you’ll need to hold USDT (the US dollar’s stablecoin), USDC, or another stablecoin offered by the platform.
Unlike other markets, it is possible to speculate at any time since the market is open 24/7. The cryptocurrency market is a decentralized network that operates on a peer-to-peer basis . The blockchain is an open ledger that allows all transactions to be recorded in an unalterable manner. Also, registrations do not require an intermediary.
Several cryptocurrencies have successfully weathered the various bear markets the sector has experienced. These include Bitcoin (BTC), Ethereum (ETH), Litecoin (LTC), Monero (XMR), Dash (DASH), and XRP (XRP).
Logo of different cryptocurrencies
How to get started in crypto trading:
Understanding the specifics of cryptocurrency trading
Before you start, you need to know and understand the risks associated with cryptocurrency trading . This is a nascent sector that relies heavily on Bitcoin . It is important to understand that Bitcoin is considered a risky asset by traders. As a result, altcoins are even riskier assets than Bitcoin . Thus, during bearish phases, altcoins tend to fall more sharply than Bitcoin. However, during bullish excesses like in 2021, altcoins can outperform BTC.
Bitcoin and altcoins have relatively low market capitalizations compared to other financial assets. To put this into perspective, Bitcoin has a market capitalization of $800 billion, while gold has a market capitalization of over $10 trillion .
Therefore, volatility is much higher in cryptocurrencies than in other markets. Also, as explained above, the cryptocurrency market has the unique feature of being open every day, at any time of day.
How to Open Your First Position on an Exchange Platform
To be able to trade cryptocurrencies, you must register on an exchange platform . The operator will be able to choose a CEX or a DEX based on certain criteria such as validating the KYC process . Then, you will have to choose your exchange platform based on:
- The security it offers (avoiding having your funds stolen).
- Deposit and transaction fees applied
- Of the proposed liquidity
- On the quality of customer service
Once the platform has been carefully chosen, the trader will need to choose the asset to trade . Let’s say we want to trade Bitcoin, it is possible to place different market orders . These include:
- Market orders : These are orders that you want to execute immediately . The price moves in a location that suits you, and you execute. You are then considered a taker, and you will have to agree to pay higher fees .
- Limit orders : In this case, you want to wait for the price to reach a specific location . The trade is triggered when the price reaches this pre-determined target. This time, you are considered a maker because you have created liquidity. The fees will be lower .
The trader has the option to buy (long) or bet on the downside (short) depending on market conditions. Most traders also use stop losses and take profits . In concrete terms, these orders allow you to limit your losses in the event of a scenario being invalidated, or to take profits if the scenario is validated.
Essential tools for beginners in crypto trading
Analysis methods and technical indicators
A crypto trader absolutely must have in-depth technical knowledge before starting. Before embarking on a trade, he will be able to analyze the technical or fundamental situation, or even use on-chain analysis . The objective will be to find one or more indicators that will allow for a robust strategy . Among the multitude of indicators available, some are well-known and recognized by market operators, such as:
- Moving averages
- Momentum indicators (RSI/MACD/stochastic)
- Bollinger Bands
Of course, there are many other indicators like Ichimoku, VWAP, etc. There is no point in looking for the perfect indicator, because it does not exist. However, the novice trader will have to find the indicator (or indicators) that will suit him .
Combination of two moving averages (SMA 50 + SMA 200). Source: Tradingview
Whether you are in the traditional market or the cryptocurrency market, the market evolves according to three configurations. The price evolves in an upward trend , a downward trend or without a trend (range) . You will have to be able to detect these different configurations to adapt your strategy according to market conditions.
There is never anything certain in trading, it is all about probabilities . Therefore, it is more interesting to take long positions in an uptrend, because in these conditions, the probability of an increase is higher than the probability that the price could decrease.
Expert analyses
With the advent of the internet, financial experts are used to posting analyses on X or another social network. While their analyses can be interesting when learning , you should be wary of them as a trader. Indeed, it can be interesting if an expert posts an analysis that validates his bias . This can affect psychology when entering a position, to avoid changing your mind and changing your plan .
However, an analysis posted by an expert may call into question their plan. This can lead to doubts, changes in their plan , and the trade may go wrong. Once your strategy is backtested, you sometimes need to know how to isolate yourself from social media. Following a plan and sticking to it is extremely important in trading .
Crypto Trading and Risk Management
Traders often spend a lot of time improving a strategy , but sometimes too little time managing its risk . Let’s face it, it’s not the most interesting part to work on, but it’s essential .
Risk per trade
The concept of risk per trade is extremely important in trading. How much should you risk in a trade? Most of the time, seasoned traders and trading manuals explain that you should not exceed 2% per trade . However, you will have to adapt this risk to your profile . Indeed, a scalper who will take several trades per day will have to drastically reduce his risk. On the other hand, in swing trading, you can risk slightly more. It is important to understand that once again, the risk depends on your trading style, but also on your behavior towards the determined risk .
Let’s take a concrete example. If I decide to go for 2% risk per trade , but I realize that I have difficulty holding a position . I will then have to decide to lower this risk so as not to be emotionally affected by potential losses . Losses are an integral part of trading; there is no strategy that gives 100% success .
To understand why it is essential to know how to manage your risk, it is interesting to understand that the greater the loss, the more difficult it is to return to balance :
Table of the percentage to be obtained to return to breakeven depending on the capital loss. Source: FTMO
As you can see from the table, the more capital you lose, the harder it is to recover . This is why you need to be careful about the risk taken per trade.
The risk/reward ratio
The risk/reward ratio (RR) is very important. It allows you to know the success rate you need to have to be profitable.
For a 1:2 RR, I risk 1 to win 2. For this RR, it will be enough to win 34% of the time. Again, each trader must find the risk/reward appropriate for their strategy and profile . Some use fixed RRs, others prefer to modify it depending on market conditions.
There is no single best RR. Depending on your profile, you can adjust your RR. For example, if you tend not to tolerate losses, it is better to lower your RR and try to have a better win rate (rate of winning positions).
Losses are part of trading
When you start trading, you want the probability of a losing trade to tend towards 0. However, this is completely impossible. Here is a table that shows the probabilities of having X consecutive losing trades based on your win rate :
Table showing the probability of X consecutive losing trades as a function of its win rate over 50 trades. Source: FTMO
Concretely, if a strategy is winning 50% of the time, there is a 100% probability of having two losing trades in a sample of 50 trades. On the other hand, there is a 2% chance of having a series of 11 losing trades.
It’s not about finding a strategy that wins 95% of the time, but about understanding that losing streaks are a fact of life for a trader . A great trader knows that these are probabilities, and that once the storm has passed, their strategy will be able to work again.
Trading vs. Investing
Trading and investing can be complementary . Indeed, the analyses can be similar for investing and for trading. However, in trading, it will be necessary to determine an invalidation level in your scenario to position a stop loss , and also place a take profit . Trading allows, if you are profitable, to make regular profits more or less quickly. On the other hand, investing is a strategy that is based on the long term .
Cryptocurrency trading in some examples
In this example, we’re trying to ride the current bullish trend in Bitcoin. To do this, we’ll use three moving averages: the 100 SMA , the 50 SMA , and the 20 SMA :
Example of trades taken using moving averages on Bitcoin
When the SMA 20 is above the SMA 50 and the SMA 50 is above the SMA 100, the trend is considered bullish . In this case, we will try to take long positions . When the price returns to the SMA 20, a position can be taken. In this case, we will position the stop loss below the last low . A risk/reward of 2 is used in this example. The first trade and the third trade are winning, but the second trade is losing.
To improve the strategy, it is possible to filter out false signals with other indicators such as RSI, MACD, etc. It is also possible to add support and resistance zones so that the probabilities are higher. Also, it is possible to filter the trend on a higher time unit . Once the trend is determined, the trader should only take trades that go in the direction of the trend to put the probabilities on his side.
Conclusion: Leave well equipped for crypto trading
To begin trading cryptocurrencies, you need to understand the specifics of this sector . Cryptocurrencies are booming, and altcoins remain relatively correlated to Bitcoin. The low capitalization of cryptocurrencies means that volatility is high.
Losses are part of a trader’s life . This is why it is absolutely essential to have impeccable risk management. Indeed, the trader should not be right every time, but he should win more when he is right than when he is wrong. A trader can be profitable while losing most of the time. The choice of strategy, risk/reward, and risk per trade must be made according to his profile. There is no miracle recipe; the trader must find a way to be comfortable with his strategy and risk management.
Psychology is a key element in manual trading, as the trader is left to make his or her own decisions. You must avoid being too affected by losing streaks and avoid being too euphoric during winning streaks.
This is why it can also be interesting to work with trading bots. In fact, the entire strategy is established in advance, and the bot has no feelings. The recent explosion of artificial intelligence could transform the stock market landscape.
Source: journalducoin.com
Before you start, you need to know and understand the risks associated with cryptocurrency trading . This is a nascent sector that relies heavily on Bitcoin . It is important to understand that Bitcoin is considered a risky asset by traders. As a result, altcoins are even riskier assets than Bitcoin . Thus, during bearish phases, altcoins tend to fall more sharply than Bitcoin. However, during bullish excesses like in 2021, altcoins can outperform BTC.
Bitcoin and altcoins have relatively low market capitalizations compared to other financial assets. To put this into perspective, Bitcoin has a market capitalization of $800 billion, while gold has a market capitalization of over $10 trillion .
Therefore, volatility is much higher in cryptocurrencies than in other markets. Also, as explained above, the cryptocurrency market has the unique feature of being open every day, at any time of day.
To be able to trade cryptocurrencies, you must register on an exchange platform . The operator will be able to choose a CEX or a DEX based on certain criteria such as validating the KYC process . Then, you will have to choose your exchange platform based on:
Once the platform has been carefully chosen, the trader will need to choose the asset to trade . Let’s say we want to trade Bitcoin, it is possible to place different market orders . These include:
The trader has the option to buy (long) or bet on the downside (short) depending on market conditions. Most traders also use stop losses and take profits . In concrete terms, these orders allow you to limit your losses in the event of a scenario being invalidated, or to take profits if the scenario is validated.
A crypto trader absolutely must have in-depth technical knowledge before starting. Before embarking on a trade, he will be able to analyze the technical or fundamental situation, or even use on-chain analysis . The objective will be to find one or more indicators that will allow for a robust strategy . Among the multitude of indicators available, some are well-known and recognized by market operators, such as:
Of course, there are many other indicators like Ichimoku, VWAP, etc. There is no point in looking for the perfect indicator, because it does not exist. However, the novice trader will have to find the indicator (or indicators) that will suit him .
Combination of two moving averages (SMA 50 + SMA 200). Source: Tradingview
Whether you are in the traditional market or the cryptocurrency market, the market evolves according to three configurations. The price evolves in an upward trend , a downward trend or without a trend (range) . You will have to be able to detect these different configurations to adapt your strategy according to market conditions.
There is never anything certain in trading, it is all about probabilities . Therefore, it is more interesting to take long positions in an uptrend, because in these conditions, the probability of an increase is higher than the probability that the price could decrease.
With the advent of the internet, financial experts are used to posting analyses on X or another social network. While their analyses can be interesting when learning , you should be wary of them as a trader. Indeed, it can be interesting if an expert posts an analysis that validates his bias . This can affect psychology when entering a position, to avoid changing your mind and changing your plan .
However, an analysis posted by an expert may call into question their plan. This can lead to doubts, changes in their plan , and the trade may go wrong. Once your strategy is backtested, you sometimes need to know how to isolate yourself from social media. Following a plan and sticking to it is extremely important in trading .
Crypto Trading and Risk Management
Traders often spend a lot of time improving a strategy , but sometimes too little time managing its risk . Let’s face it, it’s not the most interesting part to work on, but it’s essential .
Risk per trade
The concept of risk per trade is extremely important in trading. How much should you risk in a trade? Most of the time, seasoned traders and trading manuals explain that you should not exceed 2% per trade . However, you will have to adapt this risk to your profile . Indeed, a scalper who will take several trades per day will have to drastically reduce his risk. On the other hand, in swing trading, you can risk slightly more. It is important to understand that once again, the risk depends on your trading style, but also on your behavior towards the determined risk .
Let’s take a concrete example. If I decide to go for 2% risk per trade , but I realize that I have difficulty holding a position . I will then have to decide to lower this risk so as not to be emotionally affected by potential losses . Losses are an integral part of trading; there is no strategy that gives 100% success .
To understand why it is essential to know how to manage your risk, it is interesting to understand that the greater the loss, the more difficult it is to return to balance :
Table of the percentage to be obtained to return to breakeven depending on the capital loss. Source: FTMO
As you can see from the table, the more capital you lose, the harder it is to recover . This is why you need to be careful about the risk taken per trade.
The risk/reward ratio
The risk/reward ratio (RR) is very important. It allows you to know the success rate you need to have to be profitable.
For a 1:2 RR, I risk 1 to win 2. For this RR, it will be enough to win 34% of the time. Again, each trader must find the risk/reward appropriate for their strategy and profile . Some use fixed RRs, others prefer to modify it depending on market conditions.
There is no single best RR. Depending on your profile, you can adjust your RR. For example, if you tend not to tolerate losses, it is better to lower your RR and try to have a better win rate (rate of winning positions).
Losses are part of trading
When you start trading, you want the probability of a losing trade to tend towards 0. However, this is completely impossible. Here is a table that shows the probabilities of having X consecutive losing trades based on your win rate :
Table showing the probability of X consecutive losing trades as a function of its win rate over 50 trades. Source: FTMO
Concretely, if a strategy is winning 50% of the time, there is a 100% probability of having two losing trades in a sample of 50 trades. On the other hand, there is a 2% chance of having a series of 11 losing trades.
It’s not about finding a strategy that wins 95% of the time, but about understanding that losing streaks are a fact of life for a trader . A great trader knows that these are probabilities, and that once the storm has passed, their strategy will be able to work again.
Trading vs. Investing
Trading and investing can be complementary . Indeed, the analyses can be similar for investing and for trading. However, in trading, it will be necessary to determine an invalidation level in your scenario to position a stop loss , and also place a take profit . Trading allows, if you are profitable, to make regular profits more or less quickly. On the other hand, investing is a strategy that is based on the long term .
Cryptocurrency trading in some examples
In this example, we’re trying to ride the current bullish trend in Bitcoin. To do this, we’ll use three moving averages: the 100 SMA , the 50 SMA , and the 20 SMA :
Example of trades taken using moving averages on Bitcoin
When the SMA 20 is above the SMA 50 and the SMA 50 is above the SMA 100, the trend is considered bullish . In this case, we will try to take long positions . When the price returns to the SMA 20, a position can be taken. In this case, we will position the stop loss below the last low . A risk/reward of 2 is used in this example. The first trade and the third trade are winning, but the second trade is losing.
To improve the strategy, it is possible to filter out false signals with other indicators such as RSI, MACD, etc. It is also possible to add support and resistance zones so that the probabilities are higher. Also, it is possible to filter the trend on a higher time unit . Once the trend is determined, the trader should only take trades that go in the direction of the trend to put the probabilities on his side.
Conclusion: Leave well equipped for crypto trading
To begin trading cryptocurrencies, you need to understand the specifics of this sector . Cryptocurrencies are booming, and altcoins remain relatively correlated to Bitcoin. The low capitalization of cryptocurrencies means that volatility is high.
Losses are part of a trader’s life . This is why it is absolutely essential to have impeccable risk management. Indeed, the trader should not be right every time, but he should win more when he is right than when he is wrong. A trader can be profitable while losing most of the time. The choice of strategy, risk/reward, and risk per trade must be made according to his profile. There is no miracle recipe; the trader must find a way to be comfortable with his strategy and risk management.
Psychology is a key element in manual trading, as the trader is left to make his or her own decisions. You must avoid being too affected by losing streaks and avoid being too euphoric during winning streaks.
This is why it can also be interesting to work with trading bots. In fact, the entire strategy is established in advance, and the bot has no feelings. The recent explosion of artificial intelligence could transform the stock market landscape.
Source: journalducoin.com
Traders often spend a lot of time improving a strategy , but sometimes too little time managing its risk . Let’s face it, it’s not the most interesting part to work on, but it’s essential .
The concept of risk per trade is extremely important in trading. How much should you risk in a trade? Most of the time, seasoned traders and trading manuals explain that you should not exceed 2% per trade . However, you will have to adapt this risk to your profile . Indeed, a scalper who will take several trades per day will have to drastically reduce his risk. On the other hand, in swing trading, you can risk slightly more. It is important to understand that once again, the risk depends on your trading style, but also on your behavior towards the determined risk .
Let’s take a concrete example. If I decide to go for 2% risk per trade , but I realize that I have difficulty holding a position . I will then have to decide to lower this risk so as not to be emotionally affected by potential losses . Losses are an integral part of trading; there is no strategy that gives 100% success .
To understand why it is essential to know how to manage your risk, it is interesting to understand that the greater the loss, the more difficult it is to return to balance :
Table of the percentage to be obtained to return to breakeven depending on the capital loss. Source: FTMO
As you can see from the table, the more capital you lose, the harder it is to recover . This is why you need to be careful about the risk taken per trade.
The risk/reward ratio (RR) is very important. It allows you to know the success rate you need to have to be profitable.
For a 1:2 RR, I risk 1 to win 2. For this RR, it will be enough to win 34% of the time. Again, each trader must find the risk/reward appropriate for their strategy and profile . Some use fixed RRs, others prefer to modify it depending on market conditions.
There is no single best RR. Depending on your profile, you can adjust your RR. For example, if you tend not to tolerate losses, it is better to lower your RR and try to have a better win rate (rate of winning positions).
Losses are part of trading
When you start trading, you want the probability of a losing trade to tend towards 0. However, this is completely impossible. Here is a table that shows the probabilities of having X consecutive losing trades based on your win rate :
Table showing the probability of X consecutive losing trades as a function of its win rate over 50 trades. Source: FTMO
Concretely, if a strategy is winning 50% of the time, there is a 100% probability of having two losing trades in a sample of 50 trades. On the other hand, there is a 2% chance of having a series of 11 losing trades.
It’s not about finding a strategy that wins 95% of the time, but about understanding that losing streaks are a fact of life for a trader . A great trader knows that these are probabilities, and that once the storm has passed, their strategy will be able to work again.
Trading vs. Investing
Trading and investing can be complementary . Indeed, the analyses can be similar for investing and for trading. However, in trading, it will be necessary to determine an invalidation level in your scenario to position a stop loss , and also place a take profit . Trading allows, if you are profitable, to make regular profits more or less quickly. On the other hand, investing is a strategy that is based on the long term .
Cryptocurrency trading in some examples
In this example, we’re trying to ride the current bullish trend in Bitcoin. To do this, we’ll use three moving averages: the 100 SMA , the 50 SMA , and the 20 SMA :
Example of trades taken using moving averages on Bitcoin
When the SMA 20 is above the SMA 50 and the SMA 50 is above the SMA 100, the trend is considered bullish . In this case, we will try to take long positions . When the price returns to the SMA 20, a position can be taken. In this case, we will position the stop loss below the last low . A risk/reward of 2 is used in this example. The first trade and the third trade are winning, but the second trade is losing.
To improve the strategy, it is possible to filter out false signals with other indicators such as RSI, MACD, etc. It is also possible to add support and resistance zones so that the probabilities are higher. Also, it is possible to filter the trend on a higher time unit . Once the trend is determined, the trader should only take trades that go in the direction of the trend to put the probabilities on his side.
Conclusion: Leave well equipped for crypto trading
To begin trading cryptocurrencies, you need to understand the specifics of this sector . Cryptocurrencies are booming, and altcoins remain relatively correlated to Bitcoin. The low capitalization of cryptocurrencies means that volatility is high.
Losses are part of a trader’s life . This is why it is absolutely essential to have impeccable risk management. Indeed, the trader should not be right every time, but he should win more when he is right than when he is wrong. A trader can be profitable while losing most of the time. The choice of strategy, risk/reward, and risk per trade must be made according to his profile. There is no miracle recipe; the trader must find a way to be comfortable with his strategy and risk management.
Psychology is a key element in manual trading, as the trader is left to make his or her own decisions. You must avoid being too affected by losing streaks and avoid being too euphoric during winning streaks.
This is why it can also be interesting to work with trading bots. In fact, the entire strategy is established in advance, and the bot has no feelings. The recent explosion of artificial intelligence could transform the stock market landscape.
Source: journalducoin.com
The risk/reward ratio (RR) is very important. It allows you to know the success rate you need to have to be profitable.
For a 1:2 RR, I risk 1 to win 2. For this RR, it will be enough to win 34% of the time. Again, each trader must find the risk/reward appropriate for their strategy and profile . Some use fixed RRs, others prefer to modify it depending on market conditions.
There is no single best RR. Depending on your profile, you can adjust your RR. For example, if you tend not to tolerate losses, it is better to lower your RR and try to have a better win rate (rate of winning positions).
Losses are part of trading
When you start trading, you want the probability of a losing trade to tend towards 0. However, this is completely impossible. Here is a table that shows the probabilities of having X consecutive losing trades based on your win rate :
Table showing the probability of X consecutive losing trades as a function of its win rate over 50 trades. Source: FTMO
Concretely, if a strategy is winning 50% of the time, there is a 100% probability of having two losing trades in a sample of 50 trades. On the other hand, there is a 2% chance of having a series of 11 losing trades.
It’s not about finding a strategy that wins 95% of the time, but about understanding that losing streaks are a fact of life for a trader . A great trader knows that these are probabilities, and that once the storm has passed, their strategy will be able to work again.
Trading vs. Investing
Trading and investing can be complementary . Indeed, the analyses can be similar for investing and for trading. However, in trading, it will be necessary to determine an invalidation level in your scenario to position a stop loss , and also place a take profit . Trading allows, if you are profitable, to make regular profits more or less quickly. On the other hand, investing is a strategy that is based on the long term .
Cryptocurrency trading in some examples
In this example, we’re trying to ride the current bullish trend in Bitcoin. To do this, we’ll use three moving averages: the 100 SMA , the 50 SMA , and the 20 SMA :
Example of trades taken using moving averages on Bitcoin
When the SMA 20 is above the SMA 50 and the SMA 50 is above the SMA 100, the trend is considered bullish . In this case, we will try to take long positions . When the price returns to the SMA 20, a position can be taken. In this case, we will position the stop loss below the last low . A risk/reward of 2 is used in this example. The first trade and the third trade are winning, but the second trade is losing.
To improve the strategy, it is possible to filter out false signals with other indicators such as RSI, MACD, etc. It is also possible to add support and resistance zones so that the probabilities are higher. Also, it is possible to filter the trend on a higher time unit . Once the trend is determined, the trader should only take trades that go in the direction of the trend to put the probabilities on his side.
Conclusion: Leave well equipped for crypto trading
To begin trading cryptocurrencies, you need to understand the specifics of this sector . Cryptocurrencies are booming, and altcoins remain relatively correlated to Bitcoin. The low capitalization of cryptocurrencies means that volatility is high.
Losses are part of a trader’s life . This is why it is absolutely essential to have impeccable risk management. Indeed, the trader should not be right every time, but he should win more when he is right than when he is wrong. A trader can be profitable while losing most of the time. The choice of strategy, risk/reward, and risk per trade must be made according to his profile. There is no miracle recipe; the trader must find a way to be comfortable with his strategy and risk management.
Psychology is a key element in manual trading, as the trader is left to make his or her own decisions. You must avoid being too affected by losing streaks and avoid being too euphoric during winning streaks.
This is why it can also be interesting to work with trading bots. In fact, the entire strategy is established in advance, and the bot has no feelings. The recent explosion of artificial intelligence could transform the stock market landscape.
Source: journalducoin.com
For a 1:2 RR, I risk 1 to win 2. For this RR, it will be enough to win 34% of the time. Again, each trader must find the risk/reward appropriate for their strategy and profile . Some use fixed RRs, others prefer to modify it depending on market conditions.
There is no single best RR. Depending on your profile, you can adjust your RR. For example, if you tend not to tolerate losses, it is better to lower your RR and try to have a better win rate (rate of winning positions).
When you start trading, you want the probability of a losing trade to tend towards 0. However, this is completely impossible. Here is a table that shows the probabilities of having X consecutive losing trades based on your win rate :
Table showing the probability of X consecutive losing trades as a function of its win rate over 50 trades. Source: FTMO
Concretely, if a strategy is winning 50% of the time, there is a 100% probability of having two losing trades in a sample of 50 trades. On the other hand, there is a 2% chance of having a series of 11 losing trades.
It’s not about finding a strategy that wins 95% of the time, but about understanding that losing streaks are a fact of life for a trader . A great trader knows that these are probabilities, and that once the storm has passed, their strategy will be able to work again.
Trading and investing can be complementary . Indeed, the analyses can be similar for investing and for trading. However, in trading, it will be necessary to determine an invalidation level in your scenario to position a stop loss , and also place a take profit . Trading allows, if you are profitable, to make regular profits more or less quickly. On the other hand, investing is a strategy that is based on the long term .
In this example, we’re trying to ride the current bullish trend in Bitcoin. To do this, we’ll use three moving averages: the 100 SMA , the 50 SMA , and the 20 SMA :
Example of trades taken using moving averages on Bitcoin
When the SMA 20 is above the SMA 50 and the SMA 50 is above the SMA 100, the trend is considered bullish . In this case, we will try to take long positions . When the price returns to the SMA 20, a position can be taken. In this case, we will position the stop loss below the last low . A risk/reward of 2 is used in this example. The first trade and the third trade are winning, but the second trade is losing.
To improve the strategy, it is possible to filter out false signals with other indicators such as RSI, MACD, etc. It is also possible to add support and resistance zones so that the probabilities are higher. Also, it is possible to filter the trend on a higher time unit . Once the trend is determined, the trader should only take trades that go in the direction of the trend to put the probabilities on his side.
To begin trading cryptocurrencies, you need to understand the specifics of this sector . Cryptocurrencies are booming, and altcoins remain relatively correlated to Bitcoin. The low capitalization of cryptocurrencies means that volatility is high.
Losses are part of a trader’s life . This is why it is absolutely essential to have impeccable risk management. Indeed, the trader should not be right every time, but he should win more when he is right than when he is wrong. A trader can be profitable while losing most of the time. The choice of strategy, risk/reward, and risk per trade must be made according to his profile. There is no miracle recipe; the trader must find a way to be comfortable with his strategy and risk management.
Psychology is a key element in manual trading, as the trader is left to make his or her own decisions. You must avoid being too affected by losing streaks and avoid being too euphoric during winning streaks.
This is why it can also be interesting to work with trading bots. In fact, the entire strategy is established in advance, and the bot has no feelings. The recent explosion of artificial intelligence could transform the stock market landscape.
Source: journalducoin.com
Source: journalducoin.com
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