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Beginner's Guide To Crypto Trading

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446 views6 pages

Beginner's Guide To Crypto Trading

xasds

Uploaded by

Ramo Khan
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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https://www.babypips.

com/crypto/learn/crypto-trading-for-beginners

Beginner's Guide to Crypto Trading

process is discretionary
trading strategy focused on
medium-term to longer-term
timeframes.
Use fundamental analysis to help you find crypto assets that are potential trade ideas to “ go
long” (buy) or “ go short” (sell).

Once you’ve determined your directional bias (long vs. short), you will use technical analysis
(TA) and price action (PA) to look for potential entry opportunities.

Develop a risk and trade management plan that includes at what prices you will enter and exit,
position sizing, and how you will handle different market scenarios.

Maintain your trading journal before, during, and after the trade. Review your notes and see if
there are any lessons to be learned or adjustments to be made in your trading process going
forward.

Fundamental Analysis to
Generate Crypto Trade Ideas
Fundamental analysis (FA) is an approach used in financial markets to determine the “intrinsic
value” of an asset,

This is done by researching all the underlying information about a crypto project (its
“fundamentals“)
formation is taken into account and used to determine whether a crypto asset is “expensive” or
“cheap” compared to its current market price.

The general assumption is that an asset will gravitate towards its “intrinsic value” over time, so if
after performing fundamental analysis, you believe that the current market price should be higher
(or lower), then there’s a potential trading opportunity!

At a minimum, crypto projects should demonstrate:


 A unique solution to a real-world problem.

 A clear roadmap that includes a timeline of how the solution

will be built.

 An experienced team of developers that are capable of

executing the roadmap.

 Sound tokenomics (overall economics of a specific crypto

asset such as how it will be allocated and distributed, how

much supply will be created, incentives for holding it, etc.)

After you’ve done the initial research, you can then begin the
process of tracking the project/token regularly. You should maintain
routine checks of the media channels mentioned above (daily or
weekly), as well as crypto news sites.

Also, get a gauge on broad crypto sentiment by checking out news


and price action in the two biggest crypto assets: bitcoin
(BTC) and ether (ETH).

don’t forget to check in on top-level macro themes like global


growth and inflation outlooks, monetary and fiscal policy outlooks
from global central banks, as well as consumer/business sentiment
data to get a feeling for overall market sentiment. Major geopolitical
risks like war or pandemics may be worthy of note as well.

What is a trade idea?


fter doing your research on the fundamentals of your target crypto,
the crypto market, the broader financial markets, and identifying
potential price catalysts, you’ll likely have enough information to

2
develop a trade idea (or “thesis”) and your level of conviction on this
idea.
f you think you’ve found a potential trade idea, then a helpful
exercise to help you develop it further is to answer the following
questions (or any other questions you feel you need to ask):

1. What is the dominant narrative or catalyst that will drive

demand for this crypto asset or drive traders to sell it?

2. How long could the dominant narrative on this crypto last?

3. Has the narrative been fully priced in already? (For example,

did a significant price move occur recently out of the blue for

no apparent reason?)

4. What upcoming catalysts could potentially change or support

the market’s bullish (or bearish) sentiment on the crypto?

5. Has the market seen this potential setup in the past? How did

it behave then? Are there any differences between then and

now?

6. Does your fundamental analysis of a specific crypto asset

align with the current crypto market sentiment? What about

the broader global market sentiment? If not, are the drivers

enough to overcome broader global market conditions?

In the previous lesson, I discussed how to use fundamental analysis


to understand specific cryptocurrencies you’re interested in,
develop a directional bias (“bullish” or “bearish”), and then

3
determine if any look like potential trade ideas (go “long” or
“short”).

Once you’ve got your directional bias based on fundamental


analysis, it’s now time to determine potential entry
prices (“entries”) for your trade, as well as exit prices (“exits”) to
take a profit or cut your loss.

For a discretionary trader, this is typically done using technical


analysis (TA) and price action (PA).

What is the market price?


there could be thousands upon thousands of buyers and sellers for
a single asset, all with different ideas of how much they’re willing to
buy/sell and at what price.

And these transactions happen at a much faster pace, many in as


little as fractions of a second, depending on the asset being traded.

With so many market participants and transactions happening every


second, the market price will move constantly, depending on
the balance between buyers and sellers. Or in other words, the
balance between the asset’s supply and demand.

est we can say about any market environment is that the price
reflects all known public information about the asset and what
the collective feeling is on that asset’s outlook (i.e., market
sentiment).

4
What is price action? What is
technical analysis?
Price action and technical analysis is the practice of
understanding the market sentiment of an asset through a
visual or mathematical framework around price history.

Through this lens, a trader can understand when market sentiment


was bullish, bearish, or neutral, and be able to find potential
points of inflection or sentiment change.

5
$70,000 Bearish

Breaking
Resistance $54,000

Support

In the chart above, we have BTC/USD price action on the four-hour


timeframe, and in terms of price action, we can see that in the
month of November, traders were bearish as they took the market
from near $70,000 to as low as $54,000 before the month end.We
can also see that $58,000 and $60,000 were major area of
interest, first acting as a support area in October, then breaking in
November and turning into an area of resistance, telling us that
could be an area that draws in sell orders if bearish sentiment
persists.

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