Latest posts by Dean (see all)
- Crypto Coins & Tokens Which Pay Dividends To Hodlers – April Trio, 2018
- Invest ter media for crypto prizes, with SingularDTVs Tokit podium – March Nineteen, 2018
- Fresh exchange podium Cointrade welcomes investors through ICO – March 17, 2018
Altcoins, or alternative digital currencies, are one of the most titillating markets for traders today. They are very volatile, swift paced markets, ter which a lotsbestemming of money can be made te a brief space of time. Investors are using sites like KoCurrency (which is designed to make cryptocurrecny price predictions) ter order to help them maximize profile and reduce risk. But make no mistake: this is a high risk activity to get involved te, but one te which the potential comebacks outstrip any other market I am aware of by orders of magnitude. Ter this article I will introduce you to some of the ‘need to know’ facts that all beginner’s should be aware of, and provide linksom to some of the best resources and implements for learning how to make money trading altcoins.
Note: Trading on a decentralized exchange like Bitsquare is more secure, more private, and for anything other than very petite trades the fees are cheaper too.
Altcoin Trading Terminology
Here are a few common concepts and technical terms that you will need to know before you get began:
- ICO / ITO: An ‘Initial Coin Suggesting’ or ‘ICO’ is the cryptocurrency take on an ‘Initial Public Suggesting’, when a company’s shares are very first listed on the stock market. It usually takes place prior to the launch of a coin’s blockchain and involves the public sale of a certain percentage of the coin’s initial supply te order to raise funds for development. An alternative name for this is an ‘Initial Token Suggesting’ or ‘ITO’.
- Market Cap: The market capitalization of an altcoin is the total value of all its coins. It is common practice to use the presently available supply rather than the total supply, and this may exclude unreleased premines. Market cap is therefore calculated by multiplying the price vanaf coin by the number of coins presently released onto the open market.
- Premine: When some or all of a coin’s initial supply is generated automatically by the developer at, or prior to, the public launch, rather than being generated overheen time through a form of mining, this is called a ‘pre-mine’ or ‘premine’. Pre-mines can be used for legitimate purposes: for example to crowdfund development through an ICO, or to waterput into a fund for the continued development and promotion of a coin. They can also be dumped onto the market, for a quick and effortless profit, by a developer who then abandons the coin and vanishes ter a kleintje of uitgang scam.
- Insta-mine: Because some altcoin enthusiasts are very wary of coins which have a premine, automatically suspecting a scam, a number of developers have sought to find different ways to build up control of a large percentage of a coin’s supply from the beginning. One way to do this is to have very effortless mining for a brief period after launch, during which the developers seek to instantly mine a large number of coins for very little cost. The difficulty then increases rapidly after a brief period of time. Sometimes this brief and very profitable mining period may take place before a coin has even bot announced to the public. This is known spil an ‘insta-mine’ or ‘instamine’.
- Ninja Launch: A ninja launch is basically a method for conducting an instamine. It involves announcing a coin abruptly with no prior warning, with the mining beginning instantly spil the coin is announced. By the time other users have had the chance to set themselves up to commence mining, the developer may have already conducted their own instamine. Another ninja launch tactic is to create an announcement with only very basic information, conduct and instamine, then add more information to attract rente only after a significant amount of coins have already bot mined.
- FUD: The acronym FUD stands for ‘Fear, Uncertainty and Despair’. Ter cryptocurrency it is generally used to refer to negative talk about a coin which is inaccurate or misleading, often posted te forums and through social media. This kleuter of FUD may be the result of a genuine fear response among the holders of a coin whose value is crashing, or it may be deliberately spread te order to suppress the price – either by contesting coins, speculators looking to pick up a bargain before hyping the coin straks, or just by angry trolls with some kleintje of grudge.
- PoD: Some coins have anonymous developers who do not expose their real identity. There may be good reasons for this, and it may not last a coin’s adoption – for example Bitcoin’s creator never exposed his real world identity. But if the developers are anonymous then there is a greater risk that they will vanish, and this can be especially risky if there is a premine that they may be able to dump for an effortless profit before they vanish. Several services have emerged which verify the identities of developers te order to prevent this zuigeling of scam, and this is often known spil ‘Proof of Developer’ or ‘PoD’.
- Emission Schedule: The rate at which fresh coins are generated and the pattern by which this switches overheen time. This may also be described spil the ’emission curve’.
- Ponzi Scheme: An investment scam ter which initial investors are paid comes back from the capital of subsequent investors, and an ever-increasing supply of fresh investors is therefore needed for comebacks to be paid. If there is no reason for people to buy a coin spil anything other than an investment, or if its creators never intend to pursue regular users, for example, then it may be described spil a ponzi scheme.
More general terms that you will often come across when dealing with cryptocurrency can be found ter our glossary section.
Altcoins: The Penny Stocks of the 21st Century
Ter many ways trading altcoins is similar to investing te penny stocks, and that comparison has bot made many times ter the past by other authors. But te other ways it is very different.
Te case you don’t know, penny stocks are the shares of smaller businesses and early stage companies, which have a much lower value than regular stocks. They are also much more volatile, often experiencing gains of more than 100% ter a single day – or disappearing altogether overnight.
There are some significant lessons that can be taken from penny stock trading and applied to altcoins:
- Don’t waterput all of your eggs ter one basket: The very first thing you will learn about penny stocks is that you should spread your capital out among spil many different shares spil possible, to reduce the chances that you will lose everything. The majority of fresh business will fail te their very first few years, meaning that their shares will druppel ter value to zero. The same is true for altcoins – many fresh coins will entirely fail within the very first year of trading. It’s also true that, albeit there is a loterijlot you can do to make sure you pick the winners, there are also so many unknowns that there is no such thing spil a certainty. It is often tempting to go ‘all te’ on an arousing chance you believe could make 1000% comes back, but this can lightly end your career spil an altcoin trader before it has even begun
- Don’t believe the hype (or the FUD): The smaller a market is, the lighter it is to manipulate. Penny stocks have always bot subject to a large amount of professional hype, and this is certainly true for cryptocurrency spil well. Professional promoters will hype up a coin, through newsletters and peak services, through social media and blogs and even through advertising. They may be paid by the coin’s developers who wish to increase the value of their holdings, or they may wish to increase the value of their own holdings. Ter either case, the kleintje of artificial price pump driven by this zuigeling of hype is often followed by a price crash spil the people behind it contant out at the higher price. This is sometimes called a ‘Pump and Dump’ or just ‘P&,D’. Ter a similar way, FUD can be deliberately spread te order to artificially drive down the price so that the people behind it can pick up cheap coins. It is always true te life, but doubly true when researching altcoins for trading, that you should always be skeptical of what you read, do your own research, and make up your own mind.
- Be Quick to Take Losses, Slow to Take Profits: One of the thickest mistakes that penny stock traders make is to take profits on winners too soon, but keep hold of the losers until they are worthless. I have seen this a loterijlot ter cryptocurrency trading spil well. Te both of thesis niches it is common for the majority of your picks to lose money. When a trader sees profits of 50%, 100% or even higher te a relatively brief space of time it is very effortless for emotions to kick ter and overtake any reasoned assessment. This may feel like a superb profit, you may fear losing it and want to lock te the profit, or you may just get excited and impatient to realize your gains even however the price is still trending upwards. But because te both penny stocks and altcoins you are likely to pick a lotsbestemming of losers, you need to get very high profits on the winners to come out with a good profit overall – so even a 100% profit on a winning pick may not be spil excellent spil it might seem. At the same time, many traders become emotionally invested ter what they buy, and find it hard to give up hope and sell even when it is clear that the price is going down, and te this way they end up losing most or all of the value of their investment when they could have cut their losses much earlier if they had taken a more rational treatment.
One key difference inbetween penny stocks and alternative digital currency is that the former may take years to realize a profit, whereas the cryptocurrency world is very prompt paced indeed. Retail penny stock traders may be able to pick out companies with potential and then only check back on them every few months – ter fact from one month to the next there may be little or no fresh information to use for re-evaluating your position. Te cryptocurrency this would not be a good idea at all. You should only get involved ter a market like this is if you are ready and willing to spend a loterijlot of time at your laptop, regularly checking on price movements and the latest news, and switching your positions accordingly.
Understanding and Analyzing the Altcoin Markets
There are two main ways to understand the altcoin markets, forecast the future direction of price movements and therefore pick good investments: fundamental analysis and technical analysis.
Fundamental analysis attempts to determine the real value of something te order to determine whether it is undervalued or overvalued. When it comes to trading altcoins this is more difficult, because they are generally very early te their development – so their value reflects potential future success rather than their current position. You can still look at a coin’s level of adoptions, the strength of the network, number of transactions and so on, but this will only take you so far. To a excellent extent you vereiste rely on estimating the potential size of the market te the future and the chances that this potential will be fulfilled.
Technical analysis uses price and volume gegevens, and seeks to find patterns and indicators which can be used to forecast the future direction of price movement. For more information about how this works spil well spil the latest analysis for both Bitcoin and some of the top altcoins please take a look at our pagina on technical analysis for Bitcoin. Alternatively, you can use prediction markets such spil KoCurrency to find insights on the direction that popular altcoins are heading.
Cryptocurrency markets are very news driven. You are trading assets ter a very swift paced world of bleeding-edge technology, where fresh developments are released every day and the political / regulatory environment is still uncertain. If you want to make money trading altcoins, therefore, you truly need to make sure that you keep yourself up to date about the latest news and developments, both for the coins you are trading and for the industry spil a entire.
Altcoin Trading Strategies, Mechanisms &, Tips
By now you should have a good general idea of what cryptocurrency trading is all about, but if you want to learn how to make money trading digital currency then you will need to have some more specific strategies and technics te your arsenal. This section is not a comprehensive guide by any means, but should give you a few ideas to get you embarked making money spil an altcoin trader.
Getting ter on the Ground Floor
Most coins will commence off at a low price, and rise ter value if they are successful. Of course this is not always the case, especially for ICO coins which may embark off at a fairly high valuation, depending on the structure and success of the ICO. But, nevertheless, it is usually true to say that the largest profits to be made often come from watching the potential of a newer coin early on, before anyone else, and then railing the wave of success spil other traders and users leap on-board.
It is also true, however, that thesis very early days are the most risky time to invest te something. The technology will be unproven and may still be unfinished, and there will be little other objective evidence to look at. Investing ter cryptocurrency is a high risk, high prize endeavour anyway, but this is particularly true if you buy very early on. You should therefore take care to spread out your capital overheen an even larger number of ventures if you take this treatment ter order to hedge your risk.
You may also like to get involved ter mining if you are taking this treatment, spil some coins will launch and be available to mine before they are added to any exchanges for trading.
To keep up to date with the latest launches you can go after this announcements houtvezelplaat on Bitcointalk, this one on CryptoCoinTalk, or a dedicated webstek such spil Altcoin Calender.
Buy the Rumour, Sell the News
This is a contrarian trading peak which is very useful to keep te mind. Spil I already mentioned, this is a powerfully news-driven market with big swings based on fresh announcements, feature releases, partnerships and so on. You may expect a big announcement to drive up the price instantaneously, but what you have to realize is that most of the time the announcement has already bot ‘priced te’ by many buyers, who expected it to toebijten. Buying after the news has bot announced can still be profitable at times, so this is not a hard and prompt rule you should always go after, but it is certainly true that the best profits go to people who correctly anticipate the news, buy early (on the rumour), and then sell into any spike ter the price spil a result of latecomers injecting into the market after the announcement.
Te comparison to stocks or forex or any other traditional market, there is a unique chance within cryptocurrency for individual investors to become involved te helping their investments to become successful. Many people will become deeply involved te the coins they support, being active members of their community of users, helping to promote them, brainstorming and critiquing fresh ideas te the forums, networking to develop fresh opportunities, setting up fresh sites and services, and even getting involved te developing fresh code through open source repositories on Github.
If you have something to contribute then this can be a excellent way to add value to your investment whilst also getting involved ter something that you genuinely love and feel sultry about. It can also help you to get the inwards track on what is happening, improving your capability to make informed decisions.
You should be careful, however, spil the more involved you become ter a coin the tighter it will be for you to make objective decisions if the market conditions dictate that the most profitable thing to do is to sell your holdings. It is vital when doing this that you don’t let your emotions influence your decisions about when and how much to buy or sell.
Don’t Fight The Market
When you are trading te smaller markets you may well notice that your own orders have the power to budge the markets. Even puny offers placed onto the books may shove up the price, spil others may stir their own offers upwards to ritme your price. It is tempting, when you notice this, to attempt to use this power to your advantage. Unless you are a true whale and you truly know what you are doing, this is almost always a bad idea.
It can be particularly tempting to do this when you see the value of a coin you own going down. Many traders will be tempted to waterput toegevoegd buy orders down – not because they have analyzed the price movement and think its a good idea, but to ‘support’ the price and zekering it gong down further. Doubling down on a losing investment ter an attempt to fight the market is a sadly common mistake, and can be have a disastrous influence on people who attempt to do it.
Contrarian traders count on the fact that markets often overreact, and then go through subsequent corrections. According to this logic if everybody else is selling, then the price is most likely ‘oversold’ and it is time to buy. If everyone else is buying, then its time to sell because a correction is just around the corner. This is perhaps best voiced by a quote from Baron Rothschild, who said one should “buy when there is blood te the streets, even if the blood is your own”.
Generally speaking contrarianism is a longer term strategy, and you voorwaarde be ready to make significant losses and wait a substantial amount of time for the correction to come and your positions to budge into profit. Due to this longer time horizon it can be a dangerous strategy when dealing with something spil fast-paced and volatile spil cryptocurrency, but nevertheless it can yield amazing comes back when successful.
Identifying trends and going with the flow of that trend is usually best done overheen a medium term time horizon, but trends can be identified at pretty much any time scale so it is very limber te this regard – just spil long spil your time horizon for trades is congruent with the timescale of the trend you are analyzing. The basic principle is that if there is a general trend upwards te a price, then it is reasonable to suggest that it is more likely to proceed upwards than to embark going downwards. Technical analysis is very useful for trading trends, and can help you to identify potential turning points so that you can avoid the number one danger – buying at the top of an uptrend or selling at the bottom of a downtrend.
Sway trading is a short-term trading strategy which attempts to take advantage of the fact that prices often spike up and down rather than following a sleek path. The idea is to identify the bottom of short-term price swings ter order to ‘buy cheap’, and then sell quickly for a puny profit spil the price swings back upwards again, and then do the entire thing all overheen again. Te cryptocurrency markets there can often be a larger ‘spread’ inbetween buy and sell prices than tradition markets, meaning that a sway trader can also act spil a ‘market maker’ to take extra profit from the spread. If the spread is larger spil a percentage of the price than the fees charged by the exchange then this is worth taking into consideration – but you should also be aware than te low volume markets you may not be able uitgang your positions spil quickly spil you might like.
Being a Whale
Some cryptocurrencies have a very low market capitalization – perhaps even spil little spil $10-20,000. This means that even a fairly normal inexperienced trader, with a few thousand dollars to play with, may find themselves te the position of being a ‘whale’. Anybody can be a big fish te a puny enough pond.
Buying into a very low value coin which you believe has potential, becoming a ‘big fish te a petite pond’, can be a very profitable strategy, but it is also a very dangerous one. You may well find that just your own purchases can thrust the price of a coin up significantly, meaning that they are worth a loterijlot more than you paid for them instantaneously after your purchase – but the problem is that there may not be very many buyers around to take them off you, so you may be left holding the bag for a very long time (perhaps even until the coin has totally failed and bot abandoned).
One key thing to look for if you are going to take this strategy, therefore, is volume. If you can find a coin which has a very low valuation but still maintains a reasonable level of volume then this may be the flawless chance for you to go te big and drive up the price. Of course you should also look at the technology and other factors to make sure that you are putting your money into something that has genuine potential. You should also be aware that it is possible for people to fake volume on an exchange by trading rearwards and forwards with themselves.
Altcoin trading can be very joy, arousing, interesting, and financially rewarding, but you should never leave behind that it is also a very risky thing to do. I know I’ve already said that, but it is worth telling again now that you are approaching the end of my article – please do not risk more than you can afford to lose!
At the same time, don’t be waterput off if you lose money, especially te your very first few months. Most people will lose money when they very first embark out, and even very successful traders will often go through bad patches. Keep trading, keep learning and honing your abilities, and you may well re-gain what you have lost plus earn a neat profit on top.