Cryptocurrency Trading Guide

Cryptocurrency Trading Guide
By the members of Crypto Traders Room

DISCLAIMER:

Trading is not for the faint hearted.
I take no responsibility for any losses you may incur.
Do not trade more than you can comfortably lose.
Trading can be addictive, like gambling, try to control your impulses.

Preface
This guide is not intended to be complete by any means. It's intended to help you get started in learning about how to trade and analyse charts. If you have questions, corrections or things to add the post here or ask in the discord

Trading Terminology>

Exchange - This is a platform that people can trade currencies on. The best exchanges for our purposes at time of writing are Poloniex, Bittrex, Kraken

Position - A position is the amount of a security, commodity or currency that is owned (a long position) or borrowed and then sold (a short position) by an individual, institution or dealer ( investopedia.com is great )

Long - When you go 'long' on a currency you believe it will go up in value. To go long you buy some amount of the currency and hold on to it, you plan to sell it when it is higher

Ex: John thinks BTC will rise. He buys 2 BTC when the price is at $500. The price rises to $1000. John sells his BTC and makes 2*$500 = $1000 profit.

Short - When you go 'short' on a currency you believe it will go down in value. To go short you borrow some amount of the currency from the exchange and sell it instantly. Then when the price is lower you buy that same amount you borrowed and give it back to the exchange ( with fees ). The exchange handles most of this but it’s nice to know what is actually happening.

Ex: Mark thinks BTC will fall. Mark opens a short position of 2 BTC when the price is at $500. The price drops to $250. Mark closes his short position and makes 2*$250 profit.

24 Hour Change - This is the percent change in a currency in the last 24 hours, usually given as a percentage.

High - Highest price in last 24 hours

Low - Lowest Price in last 24 hours

ATH - All Time High. The highest price the coin has ever been.

Trade Volume - This is the amount of trade done on a currency in the last 24 hours, often shown in BTC. High volume is good, low volume bad. It is an important metric as it can show you the amount of interest there is versus other coins. It also shows that trade is actually being done with the currency, there's no point buying a currency if there's no one to buy it from you later.

Bullish - The investors believe the price will go up

Bearish - The investors believe the price will go down

Bull Trap - A bull trap is an inaccurate signal that shows a decreasing stock is going to stop declining and go up when in fact it’s going to continue to decrease. It is called a trap because a bullish investor fooled by it will buy bad stock that will continue to decline.

Bear Trap - A bear trap is an inaccurate signal that a rising stock is going to stop increasing and start decreasing when it is actually going to keep rising or stabilise. It is called a trap because a bearish investor fooled by it will place shorts on the stock stock that won’t decrease.

Crowdsale/ICO - ICO stands for Initial Coin Offering. They are the cryptocurrency equivalent of an IPO. A large amount or all of the currency is sold at a certain time to raise money for development. Other rules and things apply and it varies from ICO to ICO. Be wary of ICOs, many ICOs have little to no work done yet and don’t deserve your money - please do a proper assessment before buying in to an ICO.

Margin - Margin trading is essentially trading with borrowed funds. Exchanges vary in how they handle this and how much money you can trade with on loan but the basics of it are usually the same. You must have a certain amount of money on your account as collateral, the more collateral you have the larger the loans you can take. If you make a loss you lose some of your collateral ( or all of it if you get liquidated ).

The advantage of margin trading is that you are able to trade with more than you have but you can also short a currency, you wouldn’t be able to have a short position without doing a margin trade.

Liquidation - Most exchanges employ a policy of forced liquidation in the event your collateral does not cover your current loss on margin trades. What this means is that your loan/margin will be closed and the collateral is used to pay the loss. You don’t want to get liquidated, if you’re worried about it happening avoid margin trading until you are more experienced.

Volatility - This refers to how often the price of a currency is changing. The opposite of volatile is stable. If a coin is very stable then the price stays the same and there is not much profit to be made from it ( I'm looking at you LTC ). Therefore a coin must have some volatility to be worth trading.

Weak Hands - This is a condition that predominantly affects newbie traders. They buy a currency and it suffers a small dip, they see it and they panic-sell all their coins (often at a loss). Later that day the price of the currency increases. If they hadn't been so nervous they would have profited. A lot of people have weak hands, this can sometimes lead to a currency plummeting from only minor dips in price.

FOMO - Fear of missing out. Wikipedia describes it as "a pervasive apprehension that others might be having rewarding experiences from which one is absent". In the context of trading it can mean making bad decisions from fear of missing out on an opportunity eg. buying a currency at its peak instead of earlier, this will often result in loss.

FUD - Fear Uncertainty and Doubt. People spread FUD to lower the price of something or to encourage people to use a competitor instead.

Trolls/Shills - People who spread a biased opinion because they have a vested interest. More common on smaller cryptocurrencies that have less activity but also at times when a currency has a lot of movement. Do your own research, make your own decisions.

Ex: Mary has 10 BTC she bought at $500. She goes on forums and chatboxes telling people to buy BTC because "big news is coming" and "it’s going to go to the moon". Mary doesn't care about you. People buy BTC based on what Mary said, BTC goes up to $700 and she sells. She makes $2000 profit, price falls because of her sale.

Whales - These are traders with a lot of money and coins. Because of the small market size of some currencies they can have a huge effect on the currency.

Pump and Dump - This is a method whales can use to manipulate a specific currency.

The Pump - They buy a lot of the currency, hype it up, some may even inflate the volume by doing trades with themselves.
The Dump - Then when the coin is significantly higher they sell (dump) all their coins. They profit from the increase and the price plummets.

You do not have to be "in on" a pump and dump to profit from one if you recognise it happening. If you think the coin isn't worth its current price then short it. If you see a dump happen and you think the coin will go back up then buy it while it's cheap.

Arbitrage - The practice of taking advantage of a price difference between two or more exchanges. There is a lot of arbitrage strategies but here is a simple one for the sake of explanation:

Ex: Exchange A prices a certain currency at 10$ per coin. Exchange B prices it at 20$.

The trader buys the currency at exchange A and sells it quickly at exchange B.

There are risks involved in this form arbitrage but some strategies are almost risk free. In the example if the trader fails to move his currency between the exchanges fast enough the prices may change and he may make a loss.

Blackbird is an interesting project based on arbitration on cryptocurrency markets: https://github.com/butor/blackbird

Graphs and Charts

To be a good cryptotrader you have to be able to read the graphs and charts. I’ll be using a few different sites in my examples.

Open High Low Close (OHLC) / Candlestick Chart

This is the most common chart you will see. The X-axis (from left to right) represents time, the Y-axis (up and down) represents price. The vertical bars are called candlesticks.

As you can see, the green sticks appear at a time when the price is going up, red when it’s going down. The taller the stick the bigger the change. Open means the price at the start of the hour (or whatever each stick represents), close means the price at the end of the hour.

The high and the low as explained previously are the highest price and lowest price within the hour.

Market Depth

The market depth graph can help visualise the demand for a currency and where the price might be headed. The X-axis shows the price or the currency, the Y-axis shows the amount of the currency.The green represents the buy orders and the red represents the sell orders. I got this graph from Poloniex, other places might have different colours.

If there is a lot of buy orders the green part of the graph will be bigger and we can say the price may rise. If there is a lot of sell orders the red side will be bigger and we can say that the price may fall.

This graph can be misleading however. For example, say a currency is worth 20$ and Mr Whale wants it to look like there’s a load of demand. He can make a huge buy order at 10$, this will make the green side look bigger but his buy order won’t go through unless people actually sell to him at the price of 10$ which won’t happen, if he already has holding in the currency he can wait for the price to rise, cancel his buy order and dump his holdings.

How To Run A Pump and Dump

This is just explaining how one would go, I do not endorse PnDs. It’s just good to understand so you don’t get caught up in such schemes.
Credit to James Logan for some of this:

Step 1 - Choose a coin
Checklist:

Read whitepaper
Is crypto premined or not?
Is crypto manipulated in some way?
Is crypto copycat or offers original features?
Does crypto offer new features, how substantial are they?
Are the developers active and competent?
Does currency have a cap?
Is the currency actually being used?
Does the crypto have vulnerabilities?
Is the currency relatively unknown to greater public?
Is the currency underpriced?
How easy it would be to hype it?

Step 2 - Develop your shilling arguments
If you are going to shill a coin you need to prepare some reasoning as to why it’s going to go up. Talk about how great the developers are, shittalk coins that compete with them, argue about how the features the coin provides are the future. Try to make your arguments as persuasive as possible. It might also be worth making a weak point, getting in an argument then backing up your weak point with a stronger one you have prepared.

Step 3 - Buy in a way that makes the stats look appealing (pump)
What I mean by this is buy and sell repeatedly to increase volume. You can have one big buy and then keep buying and selling with the other small amount, just don’t do it in a way that you make a loss

Step 4 - Shill coin (pump)
Shortly after your initial investment in a coin you should start doing this.

Coordinate reddit / subreddit posting and upvoting on the coin (cross posting in other subreddits, so you compare the coin to other ones)
Upvote each other, so it gets more noticeable
Bump and post on bitcointalk forum crypto subreddit
Shill on /biz/
Shill on trollbox on Poloniex
Forums like Blackhatworld and HF

Step 5 - Gradually sell your position (dump)
I say gradually because for maximum profit you want to sell as much of your coin as possible at a high price, if you dump all your coin suddenly you may not get the optimal profit. You should be doing it once you think your shilling is getting closer to a peak.

Step 6 (Optional) - Short the coin
Since you are aware that the coin is now overvalued, and you’ve dumped your position you can short the coin and profit from its fall as well. You might also benefit from counter-shilling (shilling for the price to go down)

Links and Resources

I highly recommend reading the guides on the exchanges you choose to use, they are often really good and detailed. Be aware that not every market operates the same.

Kraken: https://support.kraken.com/hc/en-us/categories/200187143-Kraken-Trading-Guide
Poloniex: https://poloniex.com/support/
Bitfinex: https://www.bitfinex.com/support

Cryptowat.ch is what I use for live charts: https://cryptowat.ch
If you do a lot of trading I've heard a lot of good things about Coinigy's platform: https://www.coinigy.com

CoinMarketCap is a good site for looking at different currencies: https://coinmarketcap.com
It highlights the total market capitalization but also has historical price data.

CoinGecko is also good for comparing currencies, also has stats for social popularity of a currency. https://www.coingecko.com

The Blockfolio app is handy for keeping track of your holdings: http://www.blockfolio.com

Coinigy Youtube Videos: https://www.youtube.com/channel/UCdaJtMEVnuhTXSsSwA93sGA
They have videos on various aspects of TA and a bi-weekly podcast on the state of cryptos.

Google Talks on Investment: https://www.youtube.com/playlist?list=PLGGpadyh0wS53HdovgrEgRwEqHcWrJwgP

Fiat leak: http://fiatleak.com
Just fun to watch really, shows investment to BTC from traditional currencies

Price Comparison Tool: coinstaker.com/buy-bitcoin/

Ethereum explained: