How to Trade Altcoins for Profit? Simple Guide

Trading altcoins is gaining in popularity every day. If you want to know how to trade altcoins for profit, this article is for you. Besides the answer to the question “how to trade altcoins for profit”, in this guide, we will cover the points such as

What are altcoins – a closer look at altcoin trading
What are the best day trading strategies for beginners when it comes to altcoin trading?

A closer look at altcoins

Altcoins refer to any digital currency – or cryptocurrency – inspired by Bitcoin. The term literally means “alternative to Bitcoin”.

Altcoins can offer operations inspired by that of Bitcoin with a few variations, for example, with new consensus rules. Still, they can also offer a completely different one by starting from scratch. While some altcoins are attempts whose sole purpose is to enrich their founders (via dodgy ICOs) and offer little new, many alternative cryptocurrencies have found niches.

Since the creation of Bitcoin, more than 500 altcoins have been created.

Among the most popular are Litecoin, Ethereum, Bitcoin Cash, Ripple or even Monero, Dash and Zcash (these last three aim for total anonymity of transactions).

The list of “altcoins” is constantly evolving (since anyone can create one via an ICO).

The largest ones are listed on the CoinMarketCap site.

Short-Term Crypto Trading Speculative Strategy

Some traders prefer the thrill of short-term trading adventure or speculative trading. Others like to invest for the long term, sit back, relax, get peaceful nights’ sleep and let the markets do their thing. With that in mind, there are many fans of short-term trading strategies.

Although the basics of short-term trading are very similar for different assets, crypto trading requires you to consider a few extra parts of the process to stack the odds in your favour.

Short-term trading is also popular under the name of aggressive trading. Why? Because you take more risks in the hope of making more profits. Investing requires a constant balance and trade-off between risk and return. To earn more return, you need to take more risks. When you want to make money in the short term, you have to be prepared to lose your investment in that time frame, especially in a volatile market like cryptocurrencies.

All over, the shorter the trading time frame, the higher the risk associated with that trade; the following outlines the three most common short-term trading timeframes for cryptocurrencies.

How to trade altcoins for profit: Define Crypto Trading Sessions

altcoin

Since cryptocurrencies are traded internationally without borders, one way to define a trading day is to go through the trading sessions in the world’s financial capitals like New York, Tokyo, the euro area, and Australia.

This method follows trading sessions similar to those in the foreign exchange (forex) market. Certain sessions may offer better trading opportunities if the cryptocurrency you plan to trade has higher volume or volatility during that time. For example, a China-based cryptocurrency like NEO may see more trading volume during the Asian session.

Be aware that day trading cryptos are different from other day trading assets.

While day trading traditional financial assets such as stocks or forex, you can follow fundamental market movements that have already been established, such as the next a company’s profits or a country’s interest rate decision.

The crypto market, for the most part, does not have a developed risk event calendar. This is why conducting fundamental analysis to develop a day-trading strategy is much more difficult for cryptos.

How to trade altcoins for profit – Set aside enough time for the trade

Depending on your personal schedules, you may want to consider scheduling a specific time frame of the day to focus on your trades.

The aim of being able to trade around the clock is pretty cool in theory. You can simply access your trading app for an all-nighter and start trading. But that flexibility can backfire when you start losing sleep.

Staying alert during day trading, or night trading for that matter is very important as you need to develop strategy, identify trading opportunities, and manage your risk multiple times throughout the trading session. For many people, having concrete discipline pays off.

How to trade altcoins for profit: Start small

Day trading involves many risks. So, until you get used to it, start with a small amount and gradually increase your capital as you gain experience. Some brokers even allow you to start trading with a minimum of $50.

If you start trading small, be sure not to use margin or leverage to grow your trading potential. Leverage is one of those risky tools that is projected as an opportunity.

It allows you to manage a larger account with small initial investments by borrowing the rest from your brokers. If you’re just trying to test the water by starting with a small investment, using leverage will defeat that purpose.

How to trade altcoins for profit: Don’t take too much risk

Most successful day traders don’t put a large chunk of their account – 2% at most – into each trade. In case you have a $10,000 trading account and are willing to risk 1% of your total capital on each trade, your maximum loss per trade is $100 (0.01 × $10,000). You should therefore ensure that you have this money available for potential losses and that you don’t take more risks than you can afford.

How to trade altcoins for profit: Secure your crypto wallet

crypto wallet

A major issue with day trading cryptos is securing your crypto wallet. The least secure crypto wallets are online wallets.

Because you are going to need your capital throughout the whole trading day, you may have no choice but to leave your altcoins on your exchange’s platform online wallet, which may expose you to the risk of hacking.

One way to improve your safety here is not actually to buy and sell cryptocurrencies but rather speculate on the price action and movements of the crypto market using brokers that facilitate these services.

How to trade altcoins for profit: Stay away from scalping

Scalping is the short-term trading strategy chosen by some traders. This basically means jumping in and out of trades frequently, sometimes within seconds.

If you pay a commission fee for each trade, you expose yourself to many market risks when scalping, but you can also run out of fees before you make a profit. Individual traders rarely achieve profit scalping.

If you are part of a company with access to discount commissions and huge trading accounts, the situation may be different.

Profit in a couple of days

If you want to trade in the short term but don’t want to stick to your computer all the time, this period may be right for you. In the traditional trading world, traders who hold their positions overnight are classified as swing traders.

The most usual trading strategy for swing traders is range trading, where instead of going up a trend, you look for crypto whose price has bounced up and down in both prices. The purpose is to buy low and sell high.

You can also go the other way. To identify a range, you need to master tech analysis. A number of tech chart patterns and indicators can help you identify a range.

If you choose swing trading over day trading, one of the downsides is that you might not be in a position to get an optimized tax rate created for day traders in some jurisdictions.

Swing trading is in the grey area of taxation because if you hold your positions for more than a year, you also benefit from an optimized tax rate. If you’re trading cryptocurrency market moves without buying them, make sure you’re not paying any commission fees to hold your positions overnight.

Profit in weeks

profit This time frame falls into the category of position trading in traditional markets. Even shorter than a long-term investment strategy but longer than day trading, this type of short-term trading can be considered the least risky form of short-term trading.

You can identify a market trend for this type of trade and move it up or down until the price hits resistance or support.

As explained in more detail here, a resistance level is a psychological market barrier that prevents the price from rising. A support level is the opposite: a price at which the market is struggling to “break below”.

To hold your positions for weeks, you must keep your crypto assets in your exchange’s online wallet, which can expose you to additional security risks. You may be better off using a broker that provides price speculation services for this type of trading strategy not to have to own the cryptocurrencies.

A popular position trading strategy involves the following steps: Identifying a trend (using technical analysis). Wait for a withdrawal. Buy at the pullback in the uptrend. Take profit (sell) at resistance. Sit back and relax.

We hope this guide to altcoins trading will be useful to you. The most important thing is to enter the market with sufficient knowledge, start small and manage the risk properly. We wish you good luck in your trading adventure!

The post How to Trade Altcoins for Profit? Simple Guide appeared first on FinanceBrokerage.