In this article, we’ll understand the basics of crypto trading, get familiar with trading terms, learn about technical indicators & patterns, demo accounts, and finally jump into making an account on a crypto exchange. First of all, let’s get familiar with some commonly used trading terms.
Commonly Used Trading Terms
If you’ve ever stumbled upon a stock market TV channel while switching the channels, you must have heard of the terms such as bull or bear market, volatility, etc. So, what exactly these terms mean? Let’s find out.
It’s one of the most commonly used terms in the trading world. Bull market describes the market condition that is on rise. It denotes a rise in the price of assets showing the traders and investors have faith in the given asset or token.
Bear market is basically the opposite condition of the bull market and it denotes the fall. In a bear market condition, the prices of shares or cryptocurrencies start to fall often resulting in a downward trend.
Volatility means the degree of change in stock prices, or in this case, cryptocurrencies. High volatility means the degree of change in prices is higher in a given time. Cryptocurrencies usually carry high volatility compared to the traditional stock market and when it comes to altcoins, it’s not rare to see price fluctuations as high as 100% in 24 hours.
Liquidity simply means how easily you can buy or sell a share or cryptocurrency.
Trading volume of a stock refers to the number of shares or tokens being traded in a given time frame.
Resistance & Support Levels
Resistance & support levels refers to barriers that prevent the price of a share or token from getting pushed in either direction. Resistance occurs when an uptrend is prevented to cross a certain price point, whereas support occurs when a downtrend is paused.
An exchange can be defined as a platform where traders sell or buy the shares. Just like Amazon is an exchange for buying and selling goods, Binance is an exchange for buying and selling crypto assets.
All the Cryptocurrencies that came after Bitcoin are called altcoins. Most of these altcoins can be further segregated into Bitcoin forks and other tokens launched by a range of blockchain technology based projects.
Technical indicators are the tools through which technical analysis is done to predict the price movements. These indicators are basically mathematical calculations based upon historical data including price and volume of a given asset. Based on these indicators, Technical analysts make their trading decisions such as judging the entry and exit points for their trades. Although there are a range of technical indicators, here we shed a light on the three most commonly used technical indicators.
Relative Strength Index (RSI)
RSI is a momentum indicator that helps in predicting strength of a market trend and the chances of trend reversal. It’s plotted on a single line scale from 0 to 100 where reading close to any extreme indicates the trend reversal.
Moving averages is another technical indicator commonly used for technical analysis. Moving averages can be further divided into simple moving averages (SMA), exponential moving averages (EMA), and moving average convergence-divergence (MACD).
Fibonacci analysis is a study of finding the potential resistance and support levels based on the historical trends and reversal. It leverages the mathematical sequence developed by the Italian mathematician Leonardo Bonacci aKa Fibonacci.
Chart patterns are another aspect of technical analysis where traders try to find a distinct formation of a price graph that signals a trend reversal or continuation based on historical data. As a wise man once said, “What we call chaos is just patterns we haven’t recognized yet.” Not going further into chaos theory, let’s have a look at some of the easy to observe chart patterns.
Head & Shoulders
Head & shoulder is a chart pattern that can be noticed when a price graph shows 3 peaks – a larger peak with two smaller peaks on either side of it. It predicts a bearish market trend whereas the occurrence of an inverse head & shoulders pattern predicts a bullish market trend. It is one of the most reliable chart patterns that signals the trend reversal either upward or downward.
Cup & Handle
The cup and handle chart pattern signals a continuation of a bullish market trend with a formation of a price graph that looks similar to a cup-like rounding bottom with a handle like formation on its right side.
Ascending & Descending Triangles
The ascending triangle pattern refers to continuation of the bullish pattern whereas the descending triangle refers to bearish continuation. These triangles can be formed on a price graph by drawing a horizontal line and then drawing ascending or descending lines depending upon the trend direction.
Now that you’ve understood the basics of trading terms, technical indicators and observing chart patterns, it’s time to put your trading skills to use. Wait a second, how about doing some practise before investing your real hard-earned money. Therefore, it’s always better to start with a risk-free demo trading account where you can put these skills to test without the fear of losing real money.
There are a lot of simulator trading platforms that offer your up to $100,000 in virtual cash and a real life imitating full-fledged exchange. Listed below are one of the top simulator trading platforms for cryptocurrencies:
How to Start Real Trading
Once you get yourself acquainted with the trading world and feel confident enough to put your real money, you can start trading. To start trading, you need to first sign up on a crypto exchange, submit the required KYC, and transfer the funds from your card or bank account. Voila! Now you can start buying the coins of your choice.
When it comes to choosing the right exchange, it’s advisable to pick an exchange which has a higher number of trades in a given time. Hence, you can easily buy or sell a coin without waiting for a long time. Binance, Bitmex, and Coinbase are one of the leading crypto exchanges. However, you can learn more about these exchanges in depth on our dedicated cryptocurrency exchange section. Once you’ve set up your account, you can read our “How to Buy” section to learn step by step guide to buying any cryptocurrency.
Written by Narender Charan