The Ebb & Flow of Cryptocurrency | Altcoin Trading for Newcomers.
Hello all,
As a relatively new Altcoin trader myself I thought I would put together a short guide detailing some of the more likely errors to be made when getting into this highly volatile but exceptionally rewarding enterprise.
I will constantly update this thread with new sections, so it will grow with time but for now let's start with some ground rules; these apply to all trading but with the volatility of Cryptocurrency, they are vital to keep in mind at all times:
Firstly, follow this rule for infinity ∞ BUY LOW, SELL HIGH
- Choose your purchases wisely and with purpose.
When you invest in any given Altcoin, do not copy what the market is doing. Research each Altcoin you find interesting and try to find at least one feature of said coin that differentiates it from the rest of it's competitors. Ensure the Team behind the coin actually exists (many don't) and make sure they have a clear roadmap as to where they are going to take the product moving forward.
Invest in coins that have purpose in the world, that have been utilised in real world applications, no matter the legality of said application. Monero for instance, is used on Darknet markets as a purchasing/payment option. This is valuable. Regardless of what you think of the legality/morality aspect of this, it does not change the fact that this coin is in use and therefore has value.
- Do NOT panic sell if you have followed point # 1.
A panic sell is most likely the result of a poorly informed purchasing decision, very rarely does some unforeseen circumstance shoot you in the foot as opposed to rushing in get in on the action.
- Understand the Ebb & Flow between Bitcoin/Altcoins & Fiat currency.
It is vitally important to understand how money moves from the traders initial first investment right down the the trader "cashing out" into fiat currency (Dollars/Pounds/Etc) as this very often causes the new trader to fall victim to panic selling or writing off the whole exercise as too risky.
Here's how it works:
A) Traders buy BTC with their Fiat currency.
B) While BTC is stable and not shooting up in price; traders will use that Bitcoin & to buy and sell Altcoins, this allows the Traders to make profits while there is little opportunity to trade profits from the stable price of Bitcoin.
C) As the price of Bitcoin shoots up, traders will sell their profitable Altcoins and cash their Bitcoin out into Fiat to take advantage of the price hike and get more Fiat for their BTC and it is at this point that Altcoins give the appearance of crashing and it is very important not to panic sell here because...
D) As the price of Bitcoin settles down or drops a little, traders will take some or all of their Fiat, buy Bitcoin and then re-invest in Altcoins to make profit once more.
Rinse and Repeat A to D, and you have a clear picture of the reasoning for the volatility of Altcoins & once you understand this loop the process becomes much less intimidating.
So, I hope this helps to give a clearer picture to new traders, these are certainly mistakes I have made in the past and there seems to be very little information out there in terms of understanding this ebb and flow; so I truly hope this helps people out.
I welcome questions, suggestions & indeed corrections & please look forward to the next section over the course of the next few days.
All the best folks, Mantrid.