How to trade cryptocurrencies (Cryptocurrency for Beginners - Episode 4)

One of the most used method to earn profit by the cryptocurrencies is the TRADING.

What is the trading?

In simple words, trading means buy or sell currencies to earn a profit from the variations of value (price) during a certain period of time.

IMPORTANT: The first thing to know is the different between “Investor” and “Trader”

The Investors spend their money to earn a profit in a long-time range (usually 6-12 months) because they think that the currencies where they’ve invested will grow significantly after a period in which the technology, the marketing, the importance or the dissemination of the currency could determine a sensible increase of the price.
In the real world, who has invested in Ethereum last year and keep it on his wallet till now should have earned a big amount of money (+1900%!!!).

Instead, the aim of the trading is different! Traders invest their money to make a profit in a short-time period (sometimes within the same day). Technically the traders buy an amount of currency when it is in a dip situation (e.g lowest day or week quotation) with the hope that the value will raise till the highest day quotation within few hours. A trader is happy when earn a good profit in 2-3 hours, so he could reinvest the money earned for other transaction. The most important rule for a traders is: BUY LOW AND SELL HIGH!

If you want make trading you can transfer your currencies in many web platforms.
The most famous exchange platforms are Bittrex, Poloniex, Bithumb and Bitfinex.
Personally, i use Bittrex. You need to register your account and set your data (email, password and security mode – e.g. strong password or 2AF Authentication).

Inside a trading platform you can trade different currencies: the site will show you the trend of the currencies, the 24h% variation, the candlestick (green or red) and the order book. It’s time to talk about these notions.

• A candlestick shows the trend of the currency, if it’s green means that the value is growing, instead if it’s red the quotation is decreasing. An expert trader is able to analyze the short range trend and he knows when it’s the right time to buy (usually when the candlestick is red);

• The order book shows how many people want to buy and to sell the currency. The shape of the wall it’s very useful to understand where the price will go. For example, if the wall should show that the potential buyers (green section) are more than the potential sellers (red section), it means that the price could go up. It’s like the law of supply and demand.
  More demand = price go up - Low Demand = price go down, because the sellers have fear that their currencies will lose value.
  An important function inside the trading exchange platform is the Buy/Sell stop. It means that if i’ve purchased a currency at low price and i think that it will grow till a certain value, i can set the sale for the price i think the currency will reach. For example, if i had bought 10 NEO at 0,00500000 BTC/each and i think that the price will go up till 0,00540000 BTC/each, i can set the automatic selling of my NEOs, so when it’s happen i will earn my profit without the need to stay in front of my computer till the price reachs the value!

Rules to observe:

• Make trading without the right information is VERY DANGEROUS and you should lose much money! So, before you buy or sell a currency, you should analyze the trend, look at the stability or volatility compared tothe rest of the market ;
• Usually is a best practice to buy when the price is low, so you can hope the price will go up later;
• If your investment doesn't make an immediate profit KEEP CALM and don't enter in "panic sell mode": every currencies has a profit period and a loss period. Sometimes a little bit of patience can help you to earn profits or cut the losses;
• Sometimes in trading market you will see irrational movements. This happens when someone wants to hype the real value of a currency by a great investment with the aim that the little investors follow him. It generates a classic situation of "PUMP AND DUMP", it's usual for the ICO that have a low marketcap. The big investor or a group of them (called "whales") pump the price till the little investors notice the incredible value reaches by the unknow currency.
  At this point, a big amount of little investors have spent their money on the ICO, so the whales can begin to sell to earn huge profits! BE AWARE OF THIS SITUATION (search the "ChainCoin case" to understand what i mean).

Next time i'll talking about Mining (Hardware and Cloud).

Thanks for the attention!