Trading cryptocurrencies is an exciting and volatile endeavor. You can be swiftly rewarded, or kneecapped in the most sobering ways. Subscribe for more like this, and read on further for a crash-course on what it takes to trade crypto and not lose it all.
Must Knows
Day 1 stuff is what everyone should know going into a new unknown wilderness. Crypto trading is certainly a wilderness to new initiates, especially those new to investing. If you’ve never invested, purchased stock, or are starting out with a limited understanding, please learn, and learn a lot.
Investopedia has plenty of tools, and information to help teach you about trading stocks, but many of these rules are also applicable to cryptocurrencies as far as mechanisms, the vocabulary for trade systems, and the general lay of the land. Cryptocurrency markets themselves are vastly different, and do not behave the same way as most traditional markets.
*Please use these tools to learn without losing money.
Cryptocurrency is a great place to make gains quickly, it is also a great place to lose it all.
Do:
Define your goals (swing trades, DCA/dollar-cost average long-term, day-trading etc.)
Make a plan to follow, this is helpful to keep you focused when you become emotional (and you will)
Learn how to operate safely and securely in cryptocurrency wallets etc.
Start with BTC/USDT or some other high-volume pair.
Make small trades to learn
Invest only what you feel comfortable losing (once you develop skill this may not be as true)
Develop your own insights and tools for technical analysis, performance indicators, and the like.
Don’t
Don’t leave too much of your assets on the exchange, this is like giving out private keys
Don’t allow emotion, FOMO, or panic to cloud your judgement (follow the trade goals and planning)
Don’t listen to FUDsters or market shills (yes they may be right, but they’re just as likely wrong)
Don’t start buying everything, or every coin that is in the red or suddenly rocket-shipped. ($h|tCoyns are very real and cost dearly)
Don’t blame others for your losing trades
Don’t go all in, market dips happen and you’ll want to soak them up
**List non-exhaustive
The secret to investing in crypto is to learn by experience as inexpensively as possible. Don’t turn $1 Million of luck-money into $10,000 of hubris.
Trade Mindset/ Investor Mindset
We’ve discussed this topic before, but it is worth publishing again. There are really two mindsets that I have when I am investing/trading.
Investor Mindset - Build your sovereign treasury
There are some exciting and world-changing projects in this space, and I believe that the future will be more decentralized, which is a good thing. It is for this reason that there are some projects that I simply will not sell (HODL - Hold on for dear life). Have I covered my initial investment, yes.
Because I want to support and be in these projects for the long haul, they represent my values, and principles. They are the “purpose” that our article “The Decade of Disruption” focused on.
I am not looking for a daily percentage gain, but rather to hold these until some undetermined point in the far off future. I admire the projects and I think there is more to come.
Some projects are too valuable to simply put a cheap percentage on at this stage.
Trader Mindset - Add to the sovereign treasury
Trader mindset often earns more consistent gains, but it must remain focused on bagging a percentage, and diligently keep up with market conditions.
Traders must be even less emotional than in the Investor mindset, and are loyal to just the percentage. The resources of value, principle, and purpose have no power with this mindset, this is simply about the figures and percentages.
In the aforementioned article “The Decade of Disruption”, we said “Trade for a percentage, but build towards a purpose.”
The percentage gain is the reason most people enter the space, but much of the resource gained in this industry will not be from a simple trade plan and doing trades on volume spikes, or trend reversals.
Having a good balance of both mindsets is a great strategy. Some of our team are traders every day, some of us haven’t traded for months and simply work to develop and hodl while making cool artwork.
Exchanges
CEX
Centralized exchanges CEX are companies who have built a platform for you to trade assets. Think of robinhood, webull, binance, and bittrex as CEX. Centralized exchanges provide services like fiat to crypto onramps like Gemini, Kraken, Coinbase, and others. They also might not offer fiat conversion and require only cryptocurrencies for trading.
Most of these are bound by jurisdiction and regulation, so it depends on where you live, and if you are permitted access to them.
The security of your assets while in the custody of the exchange is up to the company. You will not have access to the private keys, and therefore will not control the wallets (or your money) unless they want you to. With concerns about total supply versus traded supply, and hacks or other technical glitches, be very cautious when leaving assets on exchange.
DEX
These are the bread and butter of cryptocurrency trading in Defi. While DEX’s are primarily for use with smart contract blockchains like Ethereum, and Polkadot (as well as others I am sure). These decentralized exchanges offer the ability to use smart contracts as the intermediary in order to relieve the strain on a central authority, as well as maintaining the security of your assets while removing the need to trust a company with your assets.
**We will be releasing a metamask, and uniswap guide in the coming weeks for those who are interested in learning to use DEX’s more efficiently.
Security
A word about security. If you don’t have the private keys in your possession, you don’t own the assets.
Please learn how to operate within blockchain environs. Most requests to our team for assistance recovering funds are because of operator error or misunderstanding cryptocurrency.
Many goof-ups happen as a result of copying the wrong address, sending the wrong coin to the wrong blockchain, being a victim of scams, and losing private keys. All of these are human error, not blockchain insecurity. Many of them will not be recovered.
**Our coming ETH/ Metamask course dives into how to secure your keys, and operate safely by working through the process.
Final Thoughts
Cryptocurrency is about becoming your own sovereign treasury, being responsible for your own assets and their security. This is quite a difficult idea for individuals who have a shaky understanding of the inner-workings of traditional money and finance.
Start small, simple, and focused. Find the right resources to provide the macro-view and specialized materials to help you delve deeper, and stack higher.
A few more reads on the topics:
Set Goals, Pay Attention, Purge the Emotion