Profiting from a cryptocurrency exchange

How to make money on cryptocurrency trading?

Cryptocurrencies shook the financial world up: they changed the way people look at investing, and proposed a truly fabulous in terms of profits method of capital growing: while interest rates on bank deposits are lower than 10%, cryptocurrency prices increased by 1700% on average. This rapid development of the crypto market gave us a new way of profit making—crypto trading. In this article we are going to dive into how you can make money on a cryptocurrency exchange.


A trader's workplace

How it all began

In the beginning stages of the industry’s development the only way to get you hands on cryptocurrency was natural “hand to hand” exchange as in the notorious bitcoin pizza case: one user bought pizza from another and paid 10000 BTC.


Bitcoin pizza

Demand for cryptocurrency was growing, so was the need for more convenient ways of exchange. This need was satisfied when the Mt.Gox exchange came into being in June 2010. Soon after that the exchange was purchased by a Japanese company and the price of Bitcoin reached $1. Cryptocurrency was being bought for British pounds, Brazilian reals, Polish zlotys, dollars and euros. People realized that cryptocurrency mining was profitable and started buying graphics cards like crazy. The price went up.


Mt. Gox logo

However, on June 19, 2011, Mt. Gox got hacked, the price of the cryptocurrency was pushed all the way down and the hackers bought all of it. As the result, the price and trust in Bitcoin plummeted. A year later it recovered, but then fell again. Those fluctuations started attracting professional traders and paved the way for a massive onslaught of cryptocurrencies on a global scale.

Trading in theory

Cryptocurrency trading ins and outs

Stock market, Forex and crypto trading are pretty much the same thing. Successful trading requires the following:

  • Basic trading skills, ability to foresee, situational analysis, fast buying and selling decision making.

  • Buy cheap, sell expensive.

  • Patience, because giving into panic and dropping assets when the price is falling is the road to losses.

  • Calculate commissions and profits every step of the way to avoid surprises.

One should take into consideration the fact that cryptocurrency trading means higher volatility in comparison with foreign currency or stock exchange. This is why being on high alert is always advised.


Cryptocurrency price fluctuations

Choosing a strategy

There is no one single right strategy. Everyone has an opinion on trading: some people use technical analysis while keeping an eye on fundamental, others ride impulses, reversals and breakouts.

One frequently used strategy: tracking the price dynamics of a selected cryptocurrency on 5-30 minute graphs. If the price goes down less than 20%—buy, if it goes down more than 20-30%—don’t buy because the price may not recover. If there are many buy orders, the price may skyrocket, and, conversely, if there are many sell orders—fall dramatically.

Orders

These are bids to buy or sell. Displayed in the order book. It is really important to not confuse one with the other. An order states the amount and the cryptocurrency price that will trigger the order’s completion. After an order is created, it is added to the order book.

Analysis of order lists is advised since it helps understand which direction the price will go in because trends are dictated by big players who command massive capitals, and, thus, can influence price movements.


Orders

Trading in practice

Choosing a cryptocurrency exchange

This kind of trading platforms is a controversial topic. In some countries they are legalized (Japan, the US, Belarus), and banned in others (Ecuador, Bolivia, Nepal). In the rest of the world they are neither legal nor illegal.

When choosing an exchange, it is extremely important to avoid unreliable services that operate for a couple of months and then close down. This is the reason why you should choose a more established platform.


Cryptocurrency exchange

You should use the following criteria when evaluating an exchange:

  • Jurisdiction of the exchange;

  • Amount of commission;

  • Number of currency pairs;

  • Reputation among users;

  • User identity verification.

Some of the most famous exchanges: Kraken, Poloniex, Coinbase, EXMO. They offer roughly the same range of options, just take a look at each of them and choose the one you like the most.

Consider EXMO because:

  1. It is a world-renowned exchange;

  2. British jurisdiction;

  3. Great track record, glitch-free;

  4. Massive turnover;

  5. Interface in 11 languages;

  6. Great range of deposit and withdrawal methods;

  7. Affordable prices and commissions;

Preparation

Just like anywhere else, you have to register first: login, email, password and press the register button:


Registration

Then funnel starting capital—fund your account on the exchange: “Finance”—”Currency”—”Deposit”:


Choose a currency

Account funding

Profits

Since cryptocurrencies are volatile and the prices invariably go up in the long term, you can go 2 ways:

  1. Buy some cryptocurrency and hold on to it. For more security withdraw and put it in a “cold wallet” (a special device used for offline storage of cryptocurrency).

  2. Buy some cryptocurrency to trade daily and extract profits from price fluctuations. If you do everything right, you can make quite a lot of money.

Either way, buy some cryptocurrency first. Choose a currency pair. If you fund your account with dollars, choose the BTC/USD pair, for example:


Trading

Create a buy order specifying price and bitcoin amount. Orders’ position in the books is determined by price advantage: more advantageous price elevates the order.


List of orders

In order to lock in profits, create a sell order.

Alternative

The other way of buying and selling cryptocurrency—electronic currency exchanges. It is possible to make money with exchangers too, but less so, however, they are a lot easier to use and offer more options.

Finding the right services and the best offers is easier with exchanger monitors, OKchanger, for example. For a comparison, choose PayPal USD to BTC in the table on the left-hand side of the main page, and OKchanger will display a list of services that convert those currencies.


PayPal USD to BTC exchangers

When the time to lock in profits comes, the monitor will help once again:


BTC to PayPal exchangers

Conclusion

Anybody can trade on cryptocurrency exchanges, the most important thing to do is to understand this way of money making. When understanding comes, then comes your own strategy and crypto intuition. Calculate every move you make and never make rash decisions—trading requires caution, mindfulness and strategy.

Posté sur
10 août 2018