Crypto Trading: Strategies, Analysis, and Common Mistakes to Avoid

StealthEX.io
6 min readApr 21, 2023

Back in 2017, the world’s interest in cryptocurrency skyrocketed. Some individuals had already profited handsomely from their investments, while others were just starting to learn about blockchain technology. The inherent risks of cryptocurrency’s high volatility are ever-present, but as the saying goes, “No risk, no reward.” In this article, StealthEX will introduce you to the basics of cryptocurrency trading strategies and offer insights into crypto price analysis.

The very volatility of cryptocurrencies has made crypto trading popular, as skillful handling of price fluctuations can often lead to profits. However, to prevent the loss of all your savings in the crypto market on day one, a solid foundation in both theoretical and practical knowledge is essential.

Successful trading of any asset follows a simple rule: buy low and sell high. Cryptocurrencies are no different. In contrast to investing in crypto, where profits are anticipated in the long run, trading requires predicting price changes over shorter timeframe.

Getting Started with Crypto Trading

Crypto trading involves the purchase and sale of cryptocurrencies through a crypto exchange, with the aim of capitalizing on market price fluctuations to generate profit. To start trading in the cryptocurrency market, you’ll need both a crypto wallet and a crypto exchange platform.

Forecasting Crypto Prices: Fundamental vs Technical Analysis

There are various methods for forecasting cryptocurrencies prices, but the main methods are the following:

Fundamental Analysis

Fundamental analysis is a valuation method employed by stock analysts to ascertain if an asset is overvalued or undervalued by the market. This approach takes into account the economic, market, industry, and sector conditions in which a company operates, as well as its financial performance. We have a separate article comparing fundamental and technical analysis. In essence, fundamental analysis involves:

  1. Assessing the intrinsic value of a cryptocurrency by considering factors that impact its value. This requires a thorough examination of the crypto project, its mission, uniqueness, technical aspects, team, and roadmap.
  2. Conducting a comprehensive analysis of the crypto market. Keep in mind that the prices of major cryptocurrencies like Bitcoin and Ethereum are correlated with the overall market condition.
  3. Monitoring news related to government regulation of cryptocurrencies. Restrictions and prohibitions can significantly influence the value of crypto assets.

Technical Analysis

The technical analysis method involves identifying patterns and trends in prices by creating mathematical models, with the aim of predicting the most probable price change scenarios. Technical analysis is founded on three key assumptions:

  1. The market discounts itself. This principle suggests that all factors that could impact a crypto’s price are already incorporated in its current price. Thus, there’s no need to consider the fundamental factors affecting a crypto asset when determining its price movements. For example, if a crypto asset’s price is declining, you can use chart information like candlestick patterns, the extent of the price drop, and other technical data to determine if it’s the right time to invest in that coin.
  2. Price moves in a trend. Price movements consistently exhibit trends, even amid seemingly random market fluctuations, regardless of the timeframe used. Green and red candlesticks indicate the trend pattern and direction of the price. Future price movements are more likely to adhere to an established trend. In the example below, you can see a real-world crypto trend, where the blue trendline serves as support during an uptrend.
  3. History tends to repeat itself. The repetitive nature of the crypto market suggests that analyzing past patterns can aid in predicting future market movements. Market participants typically display consistent reactions to market events over time. Therefore, chart patterns from the past remain relevant as they may reoccur.

Numerous traders rely on technical analysis for making trading decisions, with some even exclusively believing in it. Nevertheless, integrating both technical and fundamental analysis is deemed a more logical approach to trading.

Both methods — fundamental and technical — hold importance and are essential. When purchasing a new cryptocurrency, focus on fundamental analysis. If the coin has been in circulation for a while, consider delving deeper into technical analysis. It’s also crucial to acknowledge the effects of exceptional events on the market, such as the recent coronavirus pandemic.

Cryptocurrency Trading Methods

Day trading — gaining profits from multiple short-term transactions throughout the day. In this approach, traders open and close all orders within a single daily session to minimize the risk of volatility between sessions.

Scalping — executing hundreds of transactions daily with minimal price fluctuations to reduce risks. In this strategy, traders place numerous small orders rather than betting big. While the profit for each transaction may be minimal, the overall outcome can be substantial.

Swing trading — capitalizing on price volatility over a longer period. In this method, investors buy cryptocurrency and wait for its price to increase before securing profits.

Common Mistakes in Crypto Trading

Entering the crypto sphere is a risky endeavor, particularly for newcomers to trading. In many respects, it represents unknown terrain. The largely unregulated nature of the crypto industry further complicates matters, with numerous scammers seeking to exploit inexperienced individuals. Due to their limited knowledge, some novice traders commit avoidable errors that lead to financial losses. Here are some of the most critical mistakes a beginner might make

Take a Greater Risk than You Can Afford

Avoid investing your entire savings or taking loans for trading crypto. Hasty decisions can result in losses, so only invest what you’re willing to lose.

Failing to Diversify Your Portfolio

New investors often make the mistake of not diversifying their investments. This is risky as one asset’s failure could lead to significant losses. To mitigate this, diversify your portfolio across various asset classes, including a mix of established and emerging investment options. This strategy not only spreads the risk but also provides opportunities for early investment in promising projects with potential for substantial returns.

The Lack of Plan and Strategy

Learn and adhere to your strategy, even when others hastily sell falling coins. Successful traders often admit to losing savings initially before mastering proper trading techniques.

Give In to Emotions (Fear, Greed)

The Fear Of Missing Out (FOMO) is a psychological force that drives impulsive decisions in crypto trading, pushing investors to buy assets during price surges. Even experienced investors struggle to control emotions, as most trading mistakes stem from panic, fear, or greed. It’s better to wait for price corrections and focus on a long-term investment strategy with quality assets, while being mindful of risks in new crypto projects.

Investing Without Doing Any Research

Before investing in any asset, especially complex and volatile ones like cryptocurrency, it’s crucial to educate yourself. Understanding the project, the team, market opportunity, and competition helps you make informed decisions and avoid losses. Taking the time to learn ensures better investment choices.

If you are wondering how to buy a cryptocurrency for trading, you can always use the user-friendly and non-custodial StealthEX crypto exchange platform. You can purchase crypto privately and without the need to sign up for the service. Our crypto collection has more than 700 different coins and you can do wallet-to-wallet transfers instantly and problem-free.

Just go to StealthEX and follow these easy steps:

  1. Choose the pair and the amount you want to exchange — for instance, BTC to ETH.
  2. Press the “Start exchange” button.
  3. Provide the recipient address to transfer your crypto to.
  4. Process the transaction.
  5. Receive your crypto coins.

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Don’t forget to do your own research before buying any crypto. The views and opinions expressed in this article are solely those of the author.

Originally published at https://stealthex.io/blog/cryptocurrency-trading-for-beginners/ 👈

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