(Updated 20220101) Cryptocurrency is still the main killer app for blockchain tech, many projects been trying hard to build new business case with it, but still ended up just dancing around with tokenomics. Stop wondering if bitcoin is just a fad, try it out. It’s easier than getting a bank account! Can start with just a few bucks or even for free. Why not? Dive right in, you might end up understanding how powerful blockchain can be and appreciate how it created a decentralised market place worth billions quicker than Facebook and Google did.
Just using this article to share some notes about cryptocurrency trading. It’s easy to get into crypto trading, just need to register an account with one of the crypto exchanges, spend a little money on your credit card (US$10 or so, that’s the minimum trading amount on Binance, there will be small fees here and there.) to get some crypto currency transferred into it and then you can get started. Use this link to register for a Binance account (I will get some referral fees at no cost to you). There are other big crypto exchanges you can use, they should all have similar referral or their own tokens for fees, etc.
Or better still, just download Brave Browser, use it for a few months, wait until you have 25 BATs (should be about 3–4 months of work hours), then start trading on Binance. Read my article about how (or why) you should use Brave.
- Crypto currency is just funny money, it’s not real, it’s called Virtual Currency for a good reason. Don’t be emotional. Only trade with money you can afford to lose, or make some free BAT for trading. This is an often ignored advice on all trading, investment, business. It is very much about confidence. Whilst most crypto trading platforms won’t have margin accounts for you to go truly broke with huge debt, be ready for a token to just disappear and be worthless within days or months. Binance often delist tokens and it can drop 50–90% on such announcement.
- On Binance, buy some BNB to pay for fees first, it saves you 25%! Understand the fees and try hard to optimise it. 0.1% doesn’t seem like a lot, but when you buy and sell, that’s already 0.1% twice. You might be surprised, doing a few hundred round-trip trades, you would have spent more than your original capital on fees. Being tiny percentages of the total value, you don’t actually “feel” it. Now just buy some BNB, you get a 25% discount on the fees when you have BNB in your account. I don’t trade that often, but I have saved nearly 200 bucks by doing this. (Same principle applies to most exchanges, there are ways to optimise fees.)
- Buy low, Sell high. Sound simple, right? In Warren Buffett terms: “Rule №1: Never lose money. Rule №2: Never forget rule №1.”. Unless you bought into a true crypto scam, or right at the beginning of the listing. Most of the time, you can wait it out and make your money back. But of course, it’s not that simple, it’s just funny money, there are times when you should cut your losses and try another trade. You will lose money, you will have bad trades, you will get better at it.
- Be good with numbers, particularly very small numbers and percentages. Don’t just estimate, calculate and tabulate them. Learn how to use Excel. Crypto can go 18-decimals, you can’t really do the numbers in your head. With the fees being 0.1% for each transaction, you can be making money if you can keep buying low and selling high with a 0.2%+ changes. You can download the template below to play around with in Excel.
- Remember to spend time to understand the trading interface. There are many many features and will take your hours and hours to get comfortable with it. But a special reminder, the percentage change you see on most of the listings are price changes in the past 24 hours. It’s a rolling number. Be careful with this. Unlike normal stock trading which is compared to opening price of the day and remain the same for the whole trading day, it means that crypto percentage change can fluctuate a lot more, make sure you remember what price you traded at.
- Trade count matters. Don’t just buy and hold, that’s like buying an antique and keeping it for value to appreciate. Yes, it is a kind of investment and can sometimes be more profitable. But trading is about buying and selling, many times. Try to avoid losing money on each trade but there will be times when you have to cut your losses, get back your capital and make a better trade next time. It is about experience. Professional traders can buy and sell without much emotions.
- 24/7/365 Continuous trading, it’s not like day trading. Some compare crypto trading with day trading by just looking at the speed/frequency of trades, but it can be very different. Continuous trading requires very different strategies and tools. It’s less about reaction to news and rumours, speculating about what will happen in the next session, but much more technical reaction speed covering all hours. Automated trading is common and there are many tools and services you can buy to help you with that. But I don’t recommend it at the beginning, just learn to do it manually first with small monies. If you are a good programmer, try out writing your own bot with the APIs.
- To be more precise about this, just look at the trading hours. Typical stock market trades for 250 days a year 6 hours or so each day, that’s 1500 hours a year. Crypto trading is 24 hours for 365 days a year, that’s 8670 hours. That’s roughly 5.8x more trading hours. Of course, that is not considering trading volume, volatility, etc.
- Crypto market is very similar to stock market, if you zoom out 10x or so. If you look at the charts below, you will see that since 2017 or so of crypto market is very similar to early years of stock trading up to 1950s. Probably because at the end of the day, it is still being traded by people (until the day comes when everything is priced and automatically traded by AI, then you won’t need any “markets” as we know it).
- Learn about stocks and forex trading online. Plan it ahead. Before you buy, work out the price you will sell or stop-loss. And try your very best to keep to it. There are many common strategies out there. Try them out. Check out the few links I included at the bottom.
- Be very careful when you trade derivative products on Binance, including Binance Leveraged Tokens BVLT and futures, study the terms, and read more about how best to trade them. Remember that Binance take a cut no matter if you make or lose money from your trades, they just need products that are appealing to you, particularly to your greed. For example, don’t just hold BVLT, they are intended to be traded very short term for quick hedge.
- Unless you have a crystal ball to know exactly the peaks and troughs, the odds are against you. Whichever price you choose to buy and sell are likely to be “wrong”, could have made more if you waited longer, should have sold earlier if you knew it was going miss that price. Stop worrying about the could haves and should haves. What’s another half a point if you are already setting prices properly? Experienced or professional traders have no time for regrets (sure, learn from your mistakes if you can), they just focus on the next trade.
- It’s not easy to get crypto out into cash. Expect to “lose” 5–10% or more on charges if you want to get cash out from crypto. For a few thousand dollars, not a problem. It’s now easy to put money in, but still rather hard to get it back into cash. Some countries won’t allow it officially and you will have to do it P2P which can be a risk. So if you plan to make millions from it, have a plan on how to get the money out.
- After a while, you will notice some patterns, typically, BTC and ETH are kind of related as money flows into BTC means less for ETH and vice-versa. Likewise for ETH and all the altcoins, when BTC is up, all altcoins are down, etc.
- It’s now illegal to trade if you are in Mainland China, regardless of nationality. Binance, Huobi and other big exchanges will even stop you from trading if you registered with your mainland Chinese ID. In a twisted way, it is well balanced. Just as El Salvador became the first country to use Bitcoin as legal tender, China is the first to do an outright ban on all non-government crypto. The truth is, crypto volatility is often driven by such legal uncertainty. One day, when US and other large economies make up their mind, the crypto market will eventually stable down. Will be less fun.
- But interestingly, there is Defi which no government can easily shut down or block out. Charges might be higher, but can still trade.
- Remember that there are scams everywhere. If it is too good to be true, it probably is. Even in crypto, there is no “free” lunch. Even some tiny bits of crypto can be a scam https://www.gemini.com/cryptopedia/crypto-dusting-attack-bitcoin. Don’t be greedy.
- Keep trading. It’s about practice. The principles are not difficult understand, but get started and try it out!
A few sites and links useful for background reading or research, etc.
- https://bitcoin.zorinaq.com/price/ — all BTC daily price, most sites don’t keep these as there is no definitive daily price as such, it depends on which exchange you look at. But this site is good for looking back at past trends.
- https://coinmarketcap.com — to look at current crypto market stats. Generally, I use Dogecoin as the cut-off for serious token projects. Ignoring stable coins as you can’t really trade them. Reminder that CMC is owned by Binance.
- https://cointelegraph.com — for crypto news. If anything, just enjoy their illustrations.
- https://coin360.com — a very nice chart (i use the whole site for just this chart) to show BTC dominance. I am waiting for ETH to pass BTC.
- https://chainlist.org/ — very useful for adding different chains to your metamask wallet.
- https://www.cryptodatadownload.com/ — If you have an idea to build. your own AI trade bot, you will need to get data.
You should also spend some time to learn about typical trading mistakes too, they are more or less the same on crypto (if anything, only worse because of the 24/7 trading, you don’t get “time off”).
Yes, they are usually about discipline, making plans, don’t sell too early, don’t buy too late, etc. They are easier said than done. Also, most of the time, it is because that it is your own money, you give yourself more excuses to break your own rules. You are too kind to yourself.
Like most articles I write, I will keep updating it. I use Medium like an online notepad to share my thoughts. Welcome to comment and contact me for if you have questions. I am not a full time trader, not even a good trader, but I have strong views about blockchain and AI. Tokenomics can be great for users if you are a solid product or service.
Now go and make it profitable!