Stable earnings at Bitcoin: where to start and what are the prospects?

The crypto market offers profitable opportunities every day, but most beginners start with losses. We asked traders and practitioners to share their experience and name key rules and strategies for successful trading.

Trading in the crypto exchange market is often associated with playing casino games. It's all about the strong volatility of the Bitcoin (BTC) and other coins, manipulation of major players and unpredictability. Sometimes quite unexpected events cause quotations to grow or fall. For example, in October, following the announcement of the Chinese President about the support of the BTC block-keeper, the price of BTC rose by 40% per day.

But the same laws and principles apply in the cryptocurrency market as in the stock market and technical analysis also works, says Senior Analyst of Changenow.io Jacob Thomson. This allows you to choose a winning strategy that allows you to make a stable income. However, according to the expert, one should take into account the risk of exchange rate manipulation due to lack of regulation.

It is possible to invest in cryptocurrency with long-term goals, but it is not always possible to try to derive the formula "invested and guaranteed to earn", the leading trader of United Traders John Podesta is skeptical.

Market traders told JJJ-Crypto what rules should be followed on the cryptocurrency market and when to start investing to minimize the risks of losing initial capital.

Where to start. Main rules

Every beginner trader, first of all, it is useful to postpone thoughts about making money and focus on not losing. Trading is a complex craft, and rarely begins with success. Therefore, it is recommended that beginners first develop a trading strategy: to determine the desired assets, as well as the prices at which they will necessarily exit them, both in case of growth and market decline. Whether it works or not can be tested on historical data. Only then can you move on to actual trades.

At the very beginning, it's important to calculate how cheaper it is to buy the cryptocurrency and do it reliably, says Thomson. You can borrow money directly from the bitcoin exchange or first replenish an electronic wallet. Another option is through an exchanger. In order not to lose a few percent of the capital only when entering the market, it is important to explore all options for deposit and withdrawal of funds and find the best one.

One of the options to reduce the risks is to divide the capital into several parts. If you trade the whole amount at once, there is a risk of "freezing" the funds in the asset due to an unsuccessful transaction. In this case you will either have to fix a loss or wait for the price to recover. Because of this, you may miss out on a lot of other opportunities that the market offers every day.

You can also use stop-loss orders: if you have bought an asset and have predetermined the price at which you will sell it if it goes down, you can place a pending order at this level. In this case, the system will automatically sell your cryptocurrency according to the specified conditions. This approach eliminates the need to constantly monitor the market and also helps to avoid emotions.

The first few steps, from which it will be useful to start getting acquainted with the cryptovalyte market, were listed by Markos Aloisio, analyst of Dendy Information Center:

1. Study a traded asset. Look for your favorite technical analysis figures on the chart. Perhaps, they will become part of a trading strategy.

2. Study the trading terminal: Exchange website, application on your smartphone.

3. Explore several market analysis methods and choose the one that suits you best.

4. Develop a trading strategy.

5. Learn how to draw up a trading plan and keep a trader's diary in order to identify trading mistakes in time.

6. Learn how to manage capital and calculate risks.

7. Decide to make your own decisions and observe discipline, and take responsibility for your actions only.

This last advice is especially important in crypt trading. Inexperienced users often, after the first losses, begin to look for help and seek advice in social networking channels. From there, beginner traders get financial recommendations, evaluating their quality, for example, by the number of subscribers. In fact, such instructions are quite controversial, and most importantly, their authors do not bear any responsibility for their ideas and your failures. Read more about this in the previous RBC-Cripto article.

It is important to think in advance how to act in case of a sharp collapse or rise in the price of cryptocurrency, warns Thomson. At such moments, traders succumb to emotions and can act impulsively, so you should determine in advance the reaction to emergency situations, indicating the levels of fixation of profit or loss.

The three main rules that are important for any trader, according to the leading analyst of 8848 Invest Victor Pershikov, are as follows. First, it is necessary to forget about the attempts of speculation on the exchange rate difference and focus on the "buy and hold" strategy. The second is to unconditionally follow the rules of risk management and not to risk in one deal more than 2% of capital. The third is to stay in a profitable trade for as long as possible.

Selecting time for start

In 2020, the cryptocurrency market showed significant growth. Bitcoin has risen by 55% since January and Ethereum by almost 200%. There may be a correction in the market, so now may not be the best time for the first practice. It is believed that it is much easier to train in a growing market rather than in a falling market. Pershikov, on the other hand, believes that now is a good time for a newcomer to enter the digital asset market. Falls are possible, but in the next 1-2 years the price is likely to continue to grow, he predicts.

The price of the cryptocurrency is "fairly stable" fixed at certain levels, supports Thomson. If there are no shocks in the markets, no serious correction will occur. It is impossible to predict how quotations of Bitcoin and other coins will fail, but on a year scale the market prospects are "very optimistic".

"The market of digital assets faces a new wave of growth, which I expect in 2021-2022, against the background of a large number of positive fundamental changes," Pershikov notes. - In case a novice investor in the crypto market is ready to wait for the results on the horizon of one or two years, now having bought a diversified portfolio of crypto assets, in the end he will be able to get a return significantly higher than the return from classic investment instruments".

Initial capital

There is an opinion that a significant amount of money is required for a confident and impressive earnings on cryptocurrency. This is controversial and largely depends on the chosen strategy, the ability to control risks and luck. The price of digital assets can rise and fall by tens of percent every day, which creates a lot of opportunities for earning. Aloisio is sure that you can start trading on the crypt market with a small amount, for example, from $10. Trading with such amount of money is a good training.

Thomson agreed that a small amount of money is enough to start working with the crypt currency, just like on the stock market. However, in such a case, the trader will face relatively high commissions. It is quite expensive to invest and withdraw funds from the exchange, but with large amounts it becomes invisible.

Otherwise, Pershikov believes. The size of the initial capital should take into account the volatility and high volatility of the digital asset market, so it should be higher than in the case of stock and commodity markets. The analyst "strongly" recommended to start investing in cryptocurrency with the amount not lower than $50 000. This will allow to maintain a balance between potential profit and risk of exchange rate falls, which, with proper risk management, will not be a problem.

The most popular strategies

Most novice users are advised to first diversify their investment portfolios, i.e. to invest in several assets rather than one. The optimal option for a beginner is to buy assets from the top 10 rating of the kryptor market and keep them as an investment within a year, Pershikov believes. Instead of wasting time studying the specifics of trading, investment and industry nuances, it is better to immediately place capital in the most capitalized and stable cryptocurrencies, and then patiently expect the prices to continue to rise.

But there are nuances here. On the one hand, diversification helps to compensate for the fall in the price of one asset by increasing the price of the others. On the other hand, in the cryptocurrency market, most assets repeat the fluctuations of the bitcoin rate, although this year's altcoins showed more impressive growth in value than BTC.

In this regard, Aloisio suggests diversifying the investment portfolio not only by means of cryptocurrencies, but also by means of assets from other markets: commodity currency, stock market. As for altcoin, there are two important criteria for their selection. First, it is desirable that the minimum daily trading volume exceeds $100 million. Second, it is important to study the specifics of each cryptocurrency. It is possible that in the future, for some reason, it may be removed from popular trading floors. Risk assets in this regard include anonymous digital coins such as Monero. Their use may violate the anti-money laundering rules that stock exchanges follow.

Thomson noted that despite the correlation between bitcoins and altcoins, there are still differences in their behavior. Therefore, diversification is the right strategy. The analyst suggested adding ETH (etherium) to the portfolio, which has recently been growing faster than the market on the background of the planned upgrade to the second version of the network. It is also possible to take a look at Chinese altcoins and DeFi-tokens.

"Such diversification will help to benefit from the maximum number of events on the market. But it should be remembered that this diversification is comparable to investments in different IT companies in the traditional market, respectively, if the whole industry starts to fall, this scattering of assets will not save from losses," the expert warns.

Podesta holds a similar position. According to him, now there is no such strong correlation between bitcoin and altcoin. The charts of the first cryptocurrency and tokens confirm it.