How To Become a Successful Crypto Trader in 2023
Cryptocurrency trading has gained significant popularity in recent years, with traders aiming to profit from the volatile price movements in digital assets. Understanding the fundamentals of crypto trading is crucial for aspiring traders looking to navigate this dynamic market successfully. This article provides an overview of what a crypto trader is, the different approaches to trading cryptocurrencies, and the risks associated with it. Additionally, it explores the advantages of trading cryptocurrency CFDs with a regulated broker like AdroFx, highlighting key factors such as regulation, margin trading, favorable trading conditions, and a diverse range of cryptocurrency CFDs. By gaining insight into these aspects, individuals can make informed decisions when entering the world of crypto trading.
What is a Crypto Trader?
A crypto trader is an individual who aims to make a profit from short-term fluctuations in cryptocurrency market prices. They focus on taking advantage of price movements in various cryptocurrencies.
Crypto traders can choose to specialize in a specific coin or pairing, such as Bitcoin (BTC) paired with USD (BTC/USD) or EUR (BTC/EUR). Alternatively, they may trade multiple major cryptocurrencies like Bitcoin and Ethereum, paired with either USD or EUR.
In the crypto market, there is a term called "alts," which refers to alternative cryptocurrencies that are typically smaller in market capitalization compared to major coins. Some traders may focus exclusively on trading alts and not involve themselves with the main cryptocurrencies. The choice of strategy depends on individual preferences, risk tolerance, and overall goals.
When considering how to become a crypto trader, it is essential to understand two primary scenarios:
Buying and Selling Crypto on an Exchange
One approach is to purchase the desired cryptocurrency directly from a crypto exchange, which means you own the underlying asset. This option is more suitable for long-term holding rather than short-term trading.
While there are advantages to this option, such as ownership of the cryptocurrency, it also carries risks.
Traders using this option will need to provide the full value of the position and store the cryptocurrency in a secure wallet until they decide to sell it for a profit or loss. Storing crypto directly in the exchange is not recommended, emphasizing the long-term nature of this strategy.
This option is comparable to an investor purchasing shares of a publicly-traded company and holding them with the expectation of long-term appreciation. However, in the crypto market, the high volatility of prices over the long term often attracts traders who prefer short-term trading over long-term investment.
Trade Crypto CFDs
Another option for crypto traders is to engage in trading cryptocurrency Contracts for Difference (CFDs) with a regulated broker. This option is particularly suitable for short-term strategies, which are typically more viable in the trading space.
When trading crypto CFDs, traders can utilize leverage, which allows them to open positions with a small deposit relative to the full value of the position. Leverage amplifies potential gains or losses, and it is important to understand the benefits and risks associated with using leverage.
One advantage of trading crypto CFDs is the ability to profit from both rising and falling markets. Traders can take advantage of price movements in both directions by "shorting" or "selling" cryptocurrency CFDs. This flexibility allows traders to potentially benefit from both uptrends and downtrends, as illustrated by the Bitcoin vs. US dollar chart mentioned earlier.
It is important to note that trading CFDs, including crypto CFDs, also carries risks. Rapid market changes can pose a risk to capital, and traders must closely monitor market conditions. Liquidity risks should also be considered, as market conditions can change rapidly, and existing contracts may become illiquid.
A recommended first step is to practice trading in a risk-free environment by utilizing a demo account. Crypto CFD traders can test their trading ideas and strategies in a virtual trading environment without risking real capital. This allows traders to gain experience and understand the dynamics of trading cryptocurrency CFDs before engaging with real funds.
Becoming a successful crypto trader involves understanding the right tools, trading strategies, and investment products that align with your specific goals.
When comparing trading cryptocurrency CFDs to buying cryptocurrency through an exchange, there are several advantages to trading CFDs. However, this is just one factor to consider. Let's explore other essential concepts for aspiring crypto traders.
Is Crypto Trading Profitable?
Trading cryptocurrency CFDs carries risks, as with any trading instrument, due to the constant high volatility in this market. However, if you have a well-designed trading strategy in place, trading cryptocurrency CFDs can be highly profitable. As the saying goes, higher risks can lead to higher rewards.
If you are willing to put in the effort, develop a solid strategy, and understand the tools that can aid your success, there is a chance for you to thrive as a crypto CFD trader.
How Much Do Crypto Traders Make?
It's challenging to estimate the exact profits made by full- or part-time crypto traders. Many individuals trade crypto CFDs to grow their portfolios and reinvest their profits into future moves. This means that many crypto CFD traders may not rely solely on trading as their primary source of income.
However, there is a noticeable trend of people, especially Millennials, leaving their jobs to focus on crypto trading. Unfortunately, there isn't enough publicly available data to provide a realistic salary range for full-time crypto traders at this time.
How to Become a Crypto Trader: The Basics
Success as a crypto trader varies for each individual. It could mean making a profit on a live account by trading from the 30-minute chart or generating profits from shorting cryptocurrency CFDs. Ultimately, success hinges on earning a profitable return on the capital you risk.
Like any business, the tools and information you utilize greatly impact your overall success. Here are some fundamental aspects to consider, increasing your chances of long-term success as a crypto trader:
- Choose the Right Broker
To trade cryptocurrency CFDs, you need a reliable broker to facilitate your trades. Selecting the "right" broker can be challenging, given the numerous options available. It's crucial to ensure they are regulated, preferably by multiple jurisdictions. Regulatory oversight provides security and safety. Checking the broker's reviews on platforms like Trustpilot is highly recommended. AdroFx, for example, offers a significant advantage with its negative balance protection policy, safeguarding your account balance from falling below zero in volatile markets like cryptocurrency CFDs.
- Select a Reliable Trading Platform
Your trading and charting platform allows you to view historical price charts of the instruments you trade and provides order tickets to place and manage your trades. While some individuals use separate charting and brokerage platforms, modern trading technology offers integrated solutions like the MetaTrader suite. AdroFx provides various trading platforms, including MetaTrader 4, Multiterminal, and Allpips web terminal. These platforms grant users access to various cryptocurrency CFDs and a wide range of other CFD markets such as stocks, indices, commodities, and forex.
- Choose Your Crypto Trading Strategy
Trading in the crypto market involves making decisions on whether to buy, sell, or hold positions. Successful traders often rely on trading strategies or methodologies to assist them in their decision-making process.
Trading strategies help streamline the information processing involved in trading, including when and when not to trade, which timeframes to focus on, which technical indicators to use, and how to enter and exit positions, among other factors.
The choice of tools will depend on your preferred trading style, which is the first aspect to establish when learning to be a crypto trader. For example, if your goal is to day trade cryptocurrency CFDs on an hourly chart, aiming for short-term profits and closing positions by the end of the day, analyzing the long-term weekly chart may not be very useful.
Here are a few crypto trading styles to consider:
This style involves buying and selling multiple times a day, typically exiting positions by the end of the day. Day traders primarily rely on technical analysis tools, such as trading indicators and chart patterns, to make trading decisions. Considering cryptocurrency CFDs can be beneficial for day traders as they require the right tools to navigate different market conditions, including both rising and falling markets.
Swing trading involves buying and selling positions to hold them for several days or even weeks. Traders utilizing this style often employ a combination of technical and fundamental analysis, analyzing developments in blockchain technology to aid their trading decisions.
Copy trading, although not new, is gaining momentum as a trading style. It should not be overlooked when considering how to become a crypto trader. With copy trading, you have the option to mimic the trade positions of experienced traders while maintaining control over your copy ratio and other settings. Our detailed guide on copy trading provides comprehensive information on this style. This option is particularly suitable for new traders or those new to the crypto market, as various copy trading portfolios are available to provide exposure to this market.
Risks of Trading Cryptocurrency
Trading cryptocurrency comes with several risks that individuals should be aware of. Here are some key risks associated with cryptocurrency trading:
- Volatility: Cryptocurrencies are highly volatile assets, and their prices can fluctuate dramatically within short periods. This volatility can lead to significant gains, but it also exposes traders to substantial losses. Sudden price swings can result from various factors, including market speculation, regulatory announcements, technological issues, or media coverage.
- Lack of Regulation: The cryptocurrency market is still relatively new and lacks comprehensive regulation in many jurisdictions. The absence of a centralized regulatory authority can make the market vulnerable to fraud, market manipulation, and scams. Traders should exercise caution and perform thorough research before engaging in any cryptocurrency transactions.
- Security Risks: Cryptocurrency exchanges and wallets are targets for hackers due to the digital nature and potential anonymity of cryptocurrencies. If a trader's exchange account or wallet is compromised, they may lose their funds with little to no recourse for recovery. It is crucial to use reputable platforms, employ strong security practices such as two-factor authentication, and keep wallets secure.
- Regulatory Changes: Governments and regulatory bodies worldwide are still grappling with how to address cryptocurrencies. Regulatory changes or government actions, such as imposing restrictions, bans, or taxation policies, can significantly impact the value and usability of cryptocurrencies. Traders should stay informed about regulatory developments and be prepared for potential changes in the legal and regulatory landscape.
- Emotional Bias and Lack of Experience: Trading cryptocurrency requires discipline, knowledge, and emotional control. Emotional biases, such as fear of missing out (FOMO) or panic selling, can lead to poor decision-making and substantial losses. Lack of experience and understanding of market dynamics can also contribute to trading mistakes.
Why Trade Cryptocurrency CFDs with AdroFx?
Trading cryptocurrency Contract for Difference (CFDs) with AdroFx offers several advantages. Here are some reasons why you might consider trading cryptocurrency CFDs with AdroFx:
Regulation: AdroFx is regulated by the Vanuatu Financial Services Commission (VFSC). The regulation provides an added layer of security and ensures that the broker adheres to certain operational standards, protecting the interests of traders. It helps to establish trust and transparency in the trading environment.
Margin Trading: AdroFx offers margin trading for cryptocurrency CFDs. Margin trading allows traders to amplify their market exposure by trading with leverage, which means they can control larger positions with relatively smaller capital investments.
Advantageous Trading Conditions: AdroFx aims to provide favorable trading conditions for its clients. This includes competitive spreads, fast order execution, and access to a wide range of cryptocurrency CFDs. Tight spreads reduce trading costs, and fast execution ensures that trades are executed promptly, minimizing slippage.
Range of Cryptocurrency CFDs: AdroFx offers a diverse selection of cryptocurrency CFDs, allowing traders to access various digital assets without owning the underlying coins. This provides the opportunity to speculate on price movements and potentially profit from both rising and falling markets.
Established in 2018, AdroFx is known for its high technology and its ability to deliver high-quality brokerage services in more than 200 countries around the world. AdroFx makes every effort to keep its customers satisfied and to meet all the trading needs of any trader. With the five types of trading accounts, we have all it takes to fit any traders` needs and styles. The company provides access to 115+ trading instruments, including currencies, metals, stocks, and cryptocurrencies, which make it possible to make the most out of trading on the financial markets. Considering all the above, AdroFx is the perfect variant for anyone who doesn't settle for less than the best.