The Art of Trading vs How to Invest in Cryptocurrency

One of the most critical steps newbies take in their crypto journies is learning how to invest in cryptocurrency successfully. Seeing juicy plus signs on a graph can be both blinding and motivating. These plus signs act as a sugar coat on top of a deeply complex environment. Regardless of how tempting they might be, investment and trading should only be carried out with carefully considered research and thought.

Date: 
December 13, 2018
Read time: 
8 minutes

The Art of Trading vs How to Invest in Cryptocurrency

Author: Horace B.
Date: 
December 13, 2018
Read time: 
8 minutes

One of the most critical steps newbies take in their crypto journies is learning how to invest in cryptocurrency successfully. Seeing juicy plus signs on a graph can be both blinding and motivating. These plus signs act as a sugar coat on top of a deeply complex environment. Regardless of how tempting they might be, investment and trading should only be carried out with carefully considered research and thought.

One of the most critical steps newbies take in their crypto journies is learning how to invest in cryptocurrency successfully. Seeing juicy plus signs on a graph can be both blinding and motivating. These plus signs act as a sugar coat on top of a deeply complex environment. Regardless of how tempting they might be, investment and trading should only be carried out with carefully considered research and thought.

By studying different ways of investing in cryptocurrencies, you’ll grow a broad knowledge of the opportunities scattered around you, waiting to be taken.

In this article, we’ll be covering the differences between trading and investing along with some traits the two actions have in common. Trading and investing are terms thrown about carelessly and the two are often categorized as different lines of work.

Newsflash! Trading and investing belong under the same family tree. Just because you’re skilled at one, however, it’s not guaranteed that you have a knack for the other.  If you are here to learn how to invest in cryptocurrency or how to trade cryptocurrency, you will have a solid toolbox after reading this piece.
 

How to Invest In Cryptocurrency Successfully

Before you dive into any investment, you’ll want to have a comprehensive understanding of what you are getting yourself into. Are you looking to invest long-term or short-term? Are you keeping your options open? Why? How do the risks add up?

I will teach you the fundamentals of how to invest in cryptocurrency. In order to confidently minimize your risk and maximize your potential of a fat, juicy gain, there are five pointers which I recommend you acknowledge and use.

They are:

  1. Conducting appropriate research
  2. Understanding Initial Coin Offerings (ICOs)
  3. Understanding timing
  4. Finding alternative cryptocurrency exchanges
  5. Knowing how to let your ‘unicorn’ altcoin go

Don’t worry, I won’t leave you in the dark. Let’s go through these 5 points in detail.
 

Researching Cryptocurrency Investing In-Depth

Start simple and look for information which has proven to be successful for others. While it might sound dated and useless, learning how to invest in Bitcoin will be of great use to a new investor, whether you think you missed the Bitcoin train or not. Historical investment advice and data give you something which textbooks can’t: perspective. Additionally, investing in many altcoins requires you to invest in Bitcoin first.

By studying different ways of investing in cryptocurrencies, you’ll grow a broad knowledge of the opportunities scattered around you, waiting to be taken. Find the most current investment advice you can, but don’t ignore the old-school stuff, either.
 

Understanding ICOs - A Machine In the Cryptocurrency Trade

Imagine if someone looking to invest in a company came up to you and asked you what ‘going public’ meant. You’d likely refer them to a beginner’s investing book or perhaps a trusted broker. Unfortunately, we do not have the luxury of trusted brokers in the cryptocurrency trade just yet - we have to rely on crypto trading platforms. For this reason, you must learn as much as you possibly can about Initial Coin Offerings, known as ICOs.

ICOs are a form of fundraising that relies on soliciting money from crowds of cryptocurrency investors and enthusiasts. During an ICO a company or aspiring team pitches a project or product they are working on in exchange for a stake. That stake often comes with some interesting privileges that are attached to the coins you receive as your investment.

Source: elementus.io
 

Take a look at some recent ICOs, past ICOs, and future ICOs. When you look at past ICOs, focus on which were successful and which weren’t. Read their white papers and look at their roadmaps. Ask yourself what the correlation is between those who are successful and those who aren’t - the trends are there.
 

Building Professional Patience and Timing for Cryptocurrency Investing

This might be the most difficult of the five “how to trade cryptocurrency” pointers we are covering. In order to truly know how to invest in cryptocurrency, one must understand the importance of timing. Timing is part skill and part luck, though, so even the most skilled investors find themselves buying and selling at the wrong time. A lot of timing comes down to feel - which comes from experience. Of course, patience is key, too.

Having patience directly relates to the previous two points on research. Trusting your research, homework, and knowledge is vital. By arming yourself with as much information as possible, you can increase your chances of making correct decisions that will be more likely to result in gain than loss.
 

Spotting the Best Exchanges with Outstanding Rates

As a result of less liquidity in comparison to traditional FIAT markets, the continuum of exchange rates is much larger. With a couple dozen trustworthy exchanges, you have a handy basketful of sources to choose from when you decide to buy or sell your cryptocurrency. Your choice will depend on a number of factors, the most important of which will be if the coin you’re looking to trade is supported by the exchange, of course.

Knowing which exchanges to trust is key. Read reviews and see what real life users think. Some of my personal favorite exchanges include:

Lastly, find the best rate - that is a no-brainer. Learning how to trade cryptocurrency profitably requires paying the least fees possible.
 

Letting Go of The Unicorn Altcoin - Diversification

Anyone who deals with or has dealt with a single cryptocurrency trade or investment will have had this moment: You find your baby, your undoubted master discovery, the one who will not let you down - the mythical unicorn of an altcoin. You make a bunch of money, you hold on to it and maybe even buy some more. Unfortunately, the tides turn and your unicorn starts to fail.

The problem of holding on to a coin or token for too long is usually one caused by emotional investing. Often, objective analysis points to signs that an investment has gone from good to bad, but emotional investors grow attached to their favorite projects and refuse to give up hope. Emotional attachment and successful cryptocurrency investing do not go hand in hand. Be smart and rational. Know when to fold and give in when an investment is no longer profitable.

Ensuring that you have a target in mind - an ideal outcome - is a great way to protect yourself from irrational decisions in cryptocurrency investing.

How to Trade Cryptocurrency and Make a Living

Now that we have covered some investment pointers, it’s time to delve into the trading world. As I pointed out earlier, the two worlds aren’t so different. If you learn how to invest in cryptocurrency, you’ll have a good understanding of how to trade cryptocurrency, too. Regardless, there are subtleties that clearly distinguish trading from investing.

You could be a successful forex trader, stock trader, or a vintage baseball card trader. Regardless, one thing I guarantee is that you will still have to do some groundwork before learning how to trade cryptocurrency. When you want to learn how to trade cryptocurrency, you have a whole new ecosystem ahead of you. Entering a new environment means learning about new user behaviors, new trends, and new products. I am not saying that past trading experience is useless - but be prepared to adapt to a new class of assets.

Here are my five top tips of the cryptocurrency trade game:

  • Manage your risks with professionalism
  • Do not forget about fees
  • Pick the best crypto trading platform
  • Always have a target before a trade
  • Enter a cryptocurrency trade with a strategy
     

Manage Your Risks with Professionalism

Starting with risks, you must know your risks or at least have a good idea of what your chances of loss are. Regardless of how you get your data, it must be reliable and you must be sure of it.

How do we separate the professionals from the amateurs? It’s simple; professionals make a living from trading while amateurs dabble. Being professional means taking trading seriously and making successful cryptocurrency investing a primary goal in your life. You’re not going to make any real progress by spending a few minutes a week researching projects and reading news headlines. If you really want to make the jump from amateur to professional, you’ll need to be dedicated and motivated.
 

Don’t Forget About Fees

Whether we like it or not, cryptocurrency investing requires paying fees. Similarly to my investment point on selecting the best exchange, you will want to keep trading platform fees in mind. Trading altcoins - especially day-trading - will involve dozens if not hundreds of executed trades on a regular basis. Every trade has a fee and to remain profitable you’ll want to minimize fees to the best of your ability.

Simply create a spreadsheet and spend 20 minutes researching the trading fees of your chosen platforms. Once you have done so, whip up a quick comparison, do the maths and make a decision.
 

Pick the Best Crypto Trading Platform

As previously mentioned, fees and platforms go hand in hand. There are so many sucker platforms on the rise that offer binary trading. With binary trading, you don’t actually own anything you trade. The likes of eToro are a complete no go and were created to profit from the unaware.

Using platforms like the aforementioned Coinbase or Binance, you are able to trade real time, set real margins, and thrive in a trustworthy, structured environment with full efficiency. Another important factor to consider is the user experience and usability of your platform as you might be accessing it quite extensively.
 

Always Have a Target Before a Trade

Never enter a trade without a target. You do not have to have a rock-solid target which you must stubbornly aim for - even a vague idea of what you would like to achieve is helpful. Imagine going into a meeting thinking ‘I want to do well’ but with no metric for what ‘well’ means. It’s inefficient and illogical.

Ensuring that you have a target in mind - an ideal outcome - is a great way to protect yourself from irrational decisions in cryptocurrency investing. Targets give you a small barricade against intense emotions which may get in the way of rational decision making should a dangerous or overwhelming position arise.

Enter a Cryptocurrency Trade with a Strategy

The last thing you want to do is trade with no strategy. All the tips I have given you ultimately add up to this one mega-pointer, a cosmic lovechild of cryptocurrency trading tips. Strategy is the key component of knowing how to trade crypto coins.

Know what you are trading, know your designated platform, and most importantly, know the market you are entering. Have a trading plan in mind and be prepared for as many positions as possible.
 

Cryptocurrency Investing and Trading - What Can We Learn?

Hopefully, by now, you have a better idea of how to invest in cryptocurrency as well as how to trade cryptocurrency. Conclusively speaking, trading and investing share many common traits in the form of crucial, detailed preparation. Acquiring the correct knowledge from the correct sources will enable you to use that knowledge in the market you are looking to penetrate for maximum profits and minimal risks.

After all, that’s what all of us investors and traders are looking to do: Minimize risk and maximize profit potential.

To learn more about investing in cryptocurrencies, check out our brand new program named ‘Start Investing.’ This course is aimed at beginners interested in cryptocurrency investing. Whether you have traded before or not, our course will undoubtedly teach you something new to take out onto the battlefield.

Posted by Horace B.

Writer and entrepreneur with an on-going interest in developing technologies. Horace has run operations of multi-million dollar online companies and has worked with cryptocurrencies for 4 years.

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