How To Become A Successful Crypto Trader In 2021

How To Become A Successful Crypto Trader In 2021

Crypto trading is the future, and the future is here. Although just a decade ago, the majority of traders were skeptical towards the idea of dealing with virtual money, today, the most influential market pros advocate for including crypto in your portfolio. Despite the deeply technical origin of all popular cryptocurrencies, trading crypto is available to anyone who's interested. With that said, you will still need to get a basic line of understanding how crypto trades work and what you have to do to benefit from them. So, today we will take a few minutes discussing the foundation and specifics of crypto currencies trading.


What Is A Crypto Trader?

To grasp the concept of a crypto trader, you have to begin by comprehending who are traders, in general. From the online trading perspective, a trader is an individual or sometimes a company that benefits from value fluctuations of various financial instruments. For instance, on Forex, traders aim to profit off the price differences between two currencies through an exchange. The whole idea is to either perform a series of short manipulations to gain a quick surplus or to invest in specific instruments with a plan to earn interest over time. 

Now, crypto trading is just that—the process of financially benefiting from price changes in various cryptocurrencies. But while the overall concept stays the same, the technicalities of a crypto trade versus a currency or a stock trade have several distinctive differences.

First, crypto is something you can't touch. Disregarding what paperback currency you trade online, you always have an option to withdraw the profits to your bank account and then convert them into cash. Cryptocurrencies, on the other hand, exist in a strictly virtual space. So, what—you might say—most of the transactions nowadays happen online anyway. And while that's true, the lack of physical body is just the surface of how trading crypto is different from dealing with other instruments.

Traditional money is issued by the National Banks of their respective holding nations. This means that the value of every specific currency will be affected by a variety of factors linked to the political and economic state of its country. Crypto currencies, however, are generated through code, meaning that there is no regulation of how they circulate whatsoever. For a crypto trader, this will translate into finding a more tailored approach to market analysis.

Finally, storing cryptocurrency requires an extra level of expertise and security. Being both non-physical and unregulated, crypto money is often stored in independent online wallets. Needless to say, there is a good deal of questionable activity around the matter. So, essentially, successful crypto trading is only achievable for those who are committed to investing adequate amounts of time and effort into their crypto careers.

Once you get into the right mindset for productive crypto currencies trading, your next question is—how. And there are two general paths to take when you are looking to trade crypto.


A Crypto Trader's First Option

The first approach to trading crypto involves the possession of actual crypto coins. As long as you own a certain amount of digital money, you will engage in the trading process by either exchanging them into any other currency and operate with higher numerical amounts or simply storing them idly while the value goes up over time. There are three main ways you can get your hands on an altcoin: mine, purchase, and earn.

  • Cryptocurrency mining is a process of adding a new block to the existing blockchain. Blockchain is an algorithm that ensures the coin's existence and allows the total amount to grow. To add a block, you have to solve a complex mathematical equation and do it rather quickly. This task can only be accomplished with the help of a sophisticated computer. And in the case of Bitcoin, for example, the machinery often costs more than the coin itself, making mining not only challenging but also not affordable for an average trader.
  • Buying crypto is perhaps the easiest and fastest solution to owning the digital currency. To purchase Bitcoin or any other altcoin, you first need to open an online wallet that supports transactions in the currency of your choice. Depending on your location, the digital wallet will ask for identification, so make sure you trust the wallet provider fully before you continue with the setup. You'll then have to connect a bank card you are planning to use to purchase crypto to the wallet. The final step is to head to one of the reliable exchanges to make a purchase. It's imperative that your Internet connection is secure as you do so because crypto transactions are always in an elevated risk zone due to their virtual nature.
  • You can also earn altcoins for crypto trading. One of the ways to make an income in cryptocurrency is to search for jobs and tasks posted by companies who pay in crypto. In the third decade of the 21st century, getting paid with virtual money is more common than you would think. A large scope of IT or otherwise tech-related enterprises advertise Bitcoin payments as one of the benefits of working with them, so why not use your skills and take advantage? Plus, you can always earn crypto money through trading. To do this, you will simply need to profit off trading any other instrument and withdraw your gains in a preferable crypto coin. Just make sure your broker allows crypto withdrawals to earn altcoins this way.


A Crypto Trader's Second Option

A Crypto Trader's Second Option

So, as you can see, there are several options to getting cryptocurrency to either trade with or invest in. However, this might not be ideal for everyone. You could feel uneasy about trusting your altcoins to an online wallet, or, perhaps, you simply don't wish to deal with crypto directly. Whatever is the case—you can always engage in crypto trading without owning altcoins, and the most popular approach in such scenarios is CFD.

A Contract For Difference, CFD for short, is a financial instrument that allows traders to speculate off the price fluctuations without owning actual assets. Essentially, a CFD is an agreement between a broker and a trader that bases on the unique characteristics of their relationship. Traders all over the world prefer CFD over a variety of other options for a number of reasons, such as:

  • Trades are processed very fast due to the lack of the physical aspect
  • CFD trading is highly cost-effective compared to other approaches
  • Every available asset at the market can be traded through CFD
  • You don't need to worry about storing and safekeeping the assets
  • CFD lets traders benefit from both upwards and downward price movements

Let's take a few extra moments on that last one. By definition, a successful investment implies the rise of a value over time. As simple as buying Bitcoin at $300 apiece in 2015 and selling it for $40k per token in early 2021. However, CFD crypto currencies trading doesn't base on the assumption that the value will go up, but rather that the value will change. Through market research and analysis, a trader will estimate the upcoming price move and bet on this estimation with the broker's help. Consequently, if the forecast is fulfilled—the trader gains profit. If it isn't—vice versa.

At this point, it is safe to say that planning the trade plays a tremendous role in a trader's success. Sometimes an action plan will actually matter more than an execution. So, in order to establish a profitable crypto trade process, you'll need to come prepared. In the next section, we will discuss how to be a successful crypto trader considering that a large portion of your success depends on the pre-trading stages.


How To Be A Successful Crypto Trader

A modern trader is well-equipped. Starting from the info sources and continuing to trading platforms and brokerage agreements—everything in your crypto trading has to be top-notch quality as well as match your individual preferences and requirements. But in case you don't have too much experience to effectively select proper tools or evaluate your trading taste, there are always rules you can follow. Below you'll find all the crucial aspects of crypto trader success.


Crypto Trader Success Tool 1: The Broker

The challenges of finding a good broker shifted over the last couple of decades. Before, you had to worry about things like speed, availability, and expertise. Now, as most of the trading takes place online, most brokers you'll find are equally fast, available around the clock, and have years of their own trading experience, making them more than capable of giving worthy market advice. But this doesn't mean that broker selection will be a breezy process.

For starters, there are just so many choices out there. No matter where you are in the world, you will experience an abundance of both locally-based and global brokerage firms. The sheer volume can easily confuse you and prompt you to make irrational decisions based on unrealistic promises, for example. That's why you should evaluate each broker through a carefully structured framework of standards. You can look at things like:

  • Regulation. Brokers handle large sums of money on a daily basis, and some of that money will be yours. Just as you would expect your bank to store your assets securely, you should go for a broker that provides a guarantee of financial safety. In most cases, such a guarantee is ensured by one of the regulating institutions. By making sure regulation is in place, you basically get a confirmation that your funds will be handled with care and also that you will have access to your gains at any point.
  • Instrument selection. Although the technicalities of crypto trading are very similar to those of trading any other instrument online, you need to make sure that the broker you laid your eye on deals with the instruments that match your expectations. This way, some brokers will only deal with stocks and shares, while others will focus on Forex and crypto. Luckily, the brokers are usually pretty clear about their scope of work, so just make sure to pay attention to details.
  • Relevance. The market is constantly evolving and so do the tools and techniques associated with trading. A good broker will always focus on providing the latest solutions to their clients. After all, if it wasn't for progress, we would still process trades by making phone calls to people in trading pits. That's why you will need to look for signs that the broker in front of you is embracing innovation. For instance, you can ask how often they update the trading platform or what's their outlook on the newest market trends.
  • Affordability. If you are not careful during broker selection, hidden crypto trade charges will creep in on you pretty fast. Your job is to look for a broker with a transparent and fair trading cost system. Now, it is important to understand that trading is not free. Brokers still need to get some sort of reimbursement for the services they provide. Usually, however, the broker would waive commission and only get you to cover trade processing charges such as swaps and spreads. The spread is the difference between the bid and ask prices, bid being the value you are looking to pay and ask—the price stated by the seller. If you trade highly liquid instruments during busy market times, you won't experience the spread charges as much. And the swap charge is the cost of simultaneously closing and reopening a position to carry it over to the next trading day.
  • Helpfulness. Last but not least, a good broker is the one who is willing to guide your way through the market at no additional charge. This includes frequent informational updates, tutorials, market analysis, a 24-hour multilingual support team, and a variety of solutions for your particular case. Both newbies and pros can benefit from an invested broker, as both a trustworthy source of advice and a much-needed line of moral motivation during turbulent episodes at the market.


Crypto Trader Success Tool 2: The Trading Platform

The trading platform will play a tremendous role in how your trades are processed. While the conditions of opening and closing positions still depend on your agreement with the broker, the technical aspect is linked directly to the trading terminal. The trading platform allows a crypto trader to analyze the market through a variety of tools and angles, plan every action ahead, set up automatic trade executions, and actually trade.

So, considering that most of what you do at the market will happen on the platform, you need to make sure that the platform is advanced enough to timely complete necessary tasks and you are absolutely comfortable with using it. And similar to the broker selection, your first challenge in finding a platform to trade crypto is variety. Of course, there are far more brokers than there are trading terminals, but you'll still need to navigate a little. In addition to a load of independent trading platform developers, many large broker companies actually come up with their own terminal solution, making it even harder to evaluate your choices correctly.

The good news, however, is that despite the overwhelming multiplicity, there is a trading platform that seems to notably stand out. Metatrader 4, also known as MT4, seems to be a go-to choice for brokers and traders alike. And there are several strong reasons behind that.

For one, the majority of top-rated brokers prefer MT4. This means that once you get comfortable trading through Metatrader, you won't have any adjustment issues shall you ever change your broker. It's also true that MT4 is easy to learn, even for those who have never traded before. The platform's developers specifically point out their devotion to maintaining a user-friendly, comprehensive interface. As long as you are comfortable using your PC, laptop, tablet, or smartphone—you'll have no issues adapting to how the platform operates.

Then, MT4 comes with a load of built-in handy tools. For example, the standard technical indicators can make your life much easier by extracting specific data from the chart and helping you predict the upcoming price movements. The same goes for the ability to add visualization elements to the chart and easily switch between time frames to see the full picture.

Finally, most brokers will also give you an option to customize the platform to fit your strategy and style. This way, you can rearrange the functions to have easy access to the ones you need the most. The same goes for hotkeys, chart design, and indicator parameters—you'll be free to experiment and find the best possible setup for your case.


Crypto Trader Success Tool 3: The Trading Strategy

If broker-platform selection is a decision you only have to make once, twice at the most, the real overflow of opportunities comes with choosing a trading method. Every successful crypto trader has a specific strategy in mind, with no exceptions. A trading strategy is basically an action plan that determines three foundational aspects of each trade: the why, the when, and the how.

  • Why? No matter how long you have been trading, you always need to have a specific reason for opening every position. Now, this isn't about your overall goal of gaining profit, but rather exact argumentation on why you think this trade is a good idea. Depending on your strategy and your analysis methods, you'll be looking for particular signals. For example, if you are using the technical approach, the good 'why' for opening a long position would be the price hitting the level of support and beginning to move back up. This, of course, is the most simplistic way to grasp the idea of motivation for each new trade. In reality, you'll most likely look at a variety of factors related to your instrument of choice.
  • When? The exact moment to open and then close your position is partially derivative from the 'why.' However, at times, you will have to locate a very distinct coordinate to process your trade with the most beneficial outcome. Pinpointing the tiny fractions of the chart is especially important in crypto day trading when the goal is to benefit from price swings over the course of one trading day. Essentially, the well-chosen or thoroughly-developed strategy will make this task a lot easier by outlining when it is a good idea to open/close a crypto trade and when it isn't.
  • How? And then there are just pure technicalities. As you have established what trading instrument you are using and why it's best to trade it at the moment, you will need to decide on a couple more things. Namely—using leverage, how large is the position you are planning to open, and how do you intend to address the risk factor. The good news is that a lot of strategies designed for crypto trades will suggest whether or not you should consider leveraging and how to approach risk management. And the size of the trade is something you will have to figure out based on your account balance and individual comfort limits.


What Do The Best Crypto Traders Have In Common?

What Do The Best Crypto Traders Have In Common?

Whether you are day trading crypto or investing in altcoins long-term, there is one particular quality that all the best crypto traders share—self-discipline. At times, everything will go according to plan. However, more often than not, especially when we discuss crypto currencies trading, the market will be full of rapid spikes and surprises. In order to always stay calm and make rational decisions, you will need to obtain the skill of keeping your emotions at bay and following pre-set rules no matter what.

As you begin trading with a new instrument, crypto, for example, take a good portion of your time to familiarise yourself with the typical market behaviors associated with that asset. You will most likely be able to notice specific patterns connected to the time of the day or the year, certain reactions to scheduled and unexpected events. The more you pick up on, the better. Then, decide on your position towards each of these observations. Will you be trading at the beginning of the session or at the end? When sudden trends arise, will you ride them or wait for them to settle down? To what extent will you account for the market sentiment, and so on.

Now, of course, there will be times when the chart is expressing an unprecedented situation, and your job is to think on the spot. Such ability comes with experience. The more you trade, the better you'll get at making decisions fast. However, for all other cases, make sure to stay true to your initial beliefs and techniques to deliver uniform results even in the hardest of scenarios.


The Risks Of Trading Cryptocurrency

Just before we wrap up, it would make sense to take a moment talking about the potential risks of crypto trading. Since there are two general approaches to trading cryptocurrencies—owning and spread betting, the risks also divide accordingly. First, here are the risks of trading with crypto that you own:

  • No regulation. While the lack of regulation makes altcoins highly attractive for discrete online purchases and money transfers, it adds a bit of hesitation to the trading process. Neither governments nor central banks have power over crypto money, other than maybe owning a certain portion of some tokens. This leads to a variety of questions, such as how to classify cryptocurrency and how to ensure transaction safety outside of the coding mechanisms.
  • Volatility and hacking. Human factor affects crypto trading on several levels. For one, the strong spikes in market sentiment have a history of rapidly driving the price of altcoins in either redirection. And while there are ways to assume how the market will feel next, there is no knowing for sure. Plus, the human error, the chance of hacking, and the technical glitches just make trading crypto a bit extra nerve-wracking.
  • Hard forks and discontinuation. Cryptocurrencies might be discontinued or transformed through a hard fork. Both these events will make the crypto in your possession virtually worthless almost immediately. So, make sure to closely watch the latest updates in your chosen crypto's development in order to avoid unnecessary disappointments.

As for crypto trades processed through spread betting and CFDs, the risks lay in a slightly different sector. One of the most severe threats is gapping. Sometimes, the price makes a move so rapid and intense that the chart forms a literal gap. For anyone who has placed a stop-loss within that range, the trade will be executed under much more unpleasant conditions. Combined with a potentially escalated trading cost, this can make a crypto trader face many challenges on their way to success. However, as we are learning today, with careful planning and in-depth market analysis, most of the situations in the market can be taken under control.


Why Be A Cryptocurrency Trader With Adrofx?

Looking to trade crypto? Start with AdroFX! We take extra effort in finding the best possible solutions for each and every client. No matter the instrument and the strategy—you'll always have lots of tools, info, and support to achieve your goals. And for crypto traders, we've arranged convenient altcoin CFD accounts for Bitcoin, Litecoin, Ripple, and Ethereum with spreads as low as 3 pips on ETH and XPR. Start trading today with AdroFX and grow into a profitable, successful trader!