You go to a shop. The shopkeeper hands you some chocolate in exchange for money. This is a trade. Later on, you give those chocolates to your friend in exchange for copying her homework. This is also a trade. By definition, trading is the exchange of assets. It can be done with a medium of exchange like money in the case of the shopkeeper, or it can be done through the exchange of goods and services like in the case of the homework. Cryptocurrency trading works in a similar fashion. You can use fiat currency (regular money like dollars and rupees) to buy and sell crypto or you can exchange one cryptocurrency with another.
So how do you start trading?
Since there are a million and one ways to go about trading, the best way to start is to create a trading strategy. A trading strategy is a framework that will guide you in your trading activities. It generally lays out the following details:
- What you are trading
- How you are trading it
- The entry and exit points of the trade
Sounds simple enough, right? You might be thinking that these decisions can be made on the fly, but trust us when we say a strategy will make your life much easier. Because crypto markets have a tendency to suddenly change, a strategy will help you be prepared for any scenario. With a good set of rules and regulations, you will never find yourself having to make an impulsive decision. A few basic strategies to get you started are range trading, scalping and swing trading. Let’s walk you through each of them.
Range trading refers to trading when an asset’s price fluctuates between a specific range. Think of it as a ball that is continuously bouncing between the ceiling and floor. The ceiling indicates the asset’s highest price (known as the resistant band) and the floor stands for the lowest price (known as the support band). It is crucial that these two levels remain consistent for a certain period of time, creating what is known as a sideways market. A good way to gauge a situation like this is to wait until the price has bounced between the resistant and support bands at least twice. This way you can make sure it isn’t just a temporary phase.
Once you have identified the range, you can start trading by taking advantage of the predictability of the range. So you buy when the price is at the support price and sell when it is at the resistant price. Of course, the market isn’t going to stay at this stage forever. So it’s important to keep an eye out for bigger changes that might cause the asset to ‘breakout’ from this range. Accordingly, you can set your exit point for the strategy.
Those looking for a slightly more adventurous kind of trading can opt for scalping — one of the fastest moving strategies. Scalp traders usually try and generate profit from small price movements instead of larger trends. They open and close positions within just a few seconds and the small profits eventually add up to a substantial amount. Experienced traders often stake larger amount of funds while scalping. This way, even a small percentage of returns can lead to a higher profit.
To find the best conditions for scalping, look for assets which show high volatility in a short amount of time as well as high liquidity. While the constantly shifting crypto market is ideal for such a strategy, the high reward comes along with a high risk. However, with a good understanding of the market and some quick decision making, you can keep yourself well protected.
Swing trading is a strategy that focuses on riding waves of large price movements that occur over a longer period of time — from a few days to several weeks. As opposed to range trading, your focus should be on trending markets. For example, you choose an undervalued asset that is predicted to rise in value. You make the purchase and a few weeks later sell it when the price has risen high enough.
Swing trading is an ideal strategy for beginners as it takes place over a relatively longer period of time and doesn’t require you to make decisions on your feet. It can also be an easy way to observe and learn more about crypto market trends.
While strategies have mostly to do with your financial decisions, there’s no reason you can’t use them to find a sense of balance in other parts of your life. Some people assign specific days for trading while others try and close everything before the weekend. This way you avoid any unnecessary stress from constantly worrying about your crypto. A steady mind makes good decisions, so why not personalize your strategy and make your life that much easier?
Now that you’re familiar with a few trading strategies, it’s time to choose one. You can select one (or more) based on a few things like how much money you can expend, how much time you can invest, and what your cryptocurrency goals are. And with ZebPay right at your fingertips, you don’t need anything more to get started.