Before exploring the inherent aspects of altcoin trading, it is important to understand the term “altcoin.” This term is used to refer to cryptocurrencies such as Ethereum, Loopring, and Ripple that are considered alternatives to Bitcoin.
Trading cryptos means exchanging one coin for another in exchanges such asBittrex and Binance. The exchanges charge users a fee for using their platform to trade coins. To help people make the right trading decisions, the exchanges provide advanced market analytics on listed cryptocurrency pairs.
To start trading cryptos, there are two main strategies you can adopt.
The Short-Term Trading Strategy
This is a method of trading in which traders buy altcoins but only hold them for a few minutes, hours, days or weeks. Holding the altcoins for a few months is also considered short-term trading.
One example of this strategy isday trading tokens. As the name suggests, this is a form of trading in which people hold altcoins for a short period, maybe a few seconds, minutes or hours, before selling them for a profit.
Day trading can be profitable if you think that the price will rise fast within a short time. Here are some pros and cons of day trading cryptos.
Advantages of Short-Term Trading Altcoins
The primary benefit of short-term altcoin trading is that traders have the opportunity to make high returns. Unlike traditional currencies in which price changes rarely go over 1%, altcoins can experience significant swings quickly. Prices can double in hours or overnight.
Another notable pro of short-term trading is that the crypto market does not follow thePattern Day Trading Rule. This is a rule applied in the United States to prohibit people with less than $25,000 in their trading account from making more than three day trades each week. With altcoin trading, you can trade with any amount all day for the entire week.
The Main Disadvantages of Short-Term Crypto Trading
Because of the high volatility of the crypto markets, the price of digital coins can swing very fast. This implies that to make a profit from short-cycle trading, considerable time will be required to analyze the market.
Another major disadvantage of short-term crypto trading is that traders have to make a large investment to get significant returns. However, many beginners lack this financial muscle or are not confident enough to pump a lot of money into trading cryptos.
Long-Term Trading Strategy
Long-term crypto trading means buying altcoins and holding them for a period of at least one year. A good example would be a person who bought Bitcoin in 2009 when the price was about $1 and sold in December 2017 when the price of one BTC had grown to more than $19,000.
Advantages of Long-Term Crypto Trading
The primary advantage of long-term cryptocurrency trading is that it is relatively easy and requires only a limited amount of time. All you need to do is hold onto the digital coins over a long period.
Unlike day trading altcoins in which a lot of time is needed to follow price changes, long-term crypto traders can check the price movement during their spare time. Once you have the coin, it is a matter of holding and waiting.
Another major advantage of long-term trading is that you do not need a lot of money to trade cryptos. You can progressively buy the altcoins and add them to yourcryptocurrency wallet when you want to expand your portfolio.
The Main Disadvantage of Long-Term Altcoin Trading
The main disadvantage of long-term trading altcoins is that you could miss opportunities for making quick gains when prices rise and fall within a short time. In some instances, an altcoin’s price respond to market forces and then falls back to the same position.
Important Things You Need To Know About Crypto Trading
The volatility of altcoins in the market can help you make profits, but also can cause you to incur losses. Therefore, it is important to understand the basics of altcoins and blockchain technology. Here are some other things that you need to know before starting to trade in the market.
Avoid Getting Influenced By Others When Trading Cryptos
One notable point about crypto trading is that you are not the only one trying to make a profit. Therefore, you should try toavoid being influenced by others especially non-experts who post content demonstrating how the price will perform at specific times.
Most of these videos and commentators are promoters interested in driving traffic but lack insights on altcoin trading. The best strategy is to do your own analysis and only make a move when you are convinced about the expected price shift.
Only Invest What You Have And Are Ready To Lose
This is a crucial rule of the thumb when it comes to crypto trading. Youshould not borrow money to invest in crypto trading because market swings could sink you into debt.
You should not use funds meant for other purposes such as rent, medical care, or school. Instead, consider planning appropriately by setting aside the money to invest in trading altcoins.
Do Not Invest Only In One Portfolio
Although you might have a preferred coin in the market, it is risky to put all your funds into it. Instead, you should diversify your portfolio by targeting multiple altcoins based on their performance and expected returns.
Make Sure To Effectively Manage Risks When Trading Tokens
To trade cryptos profitably, you need to understand the involved risks and use appropriate strategies to mitigate them. For example, although you might be expecting the price of the targeted altcoin to move up, it is important to use thestop loss tool to prevent an unexpected shift in the opposite direction.
How To Start Trading Altcoins
To start trading cryptos, you will need to select an appropriate exchange and fund it. Some of the exchanges you may consider include Bittrex, Binance,Kraken, and KuCoin.