Ok, so you heard somewhere that trading Bitcoin would be a good idea. Let me tell you, it won’t. You could make boatloads of money exchanging cryptocurrencies back and forth (or lose it), and I will give you in this chapter a technique I use to make some regular gains in bitcoins or litecoins or any of the thousands of cryptocoins that you can find in this crazy realm.
However I wouldn’t advice anyone to risk his or her money on trading, especially money you can’t afford to lose. So if you try these techniques don’t do it because I am telling you, I only print this information for academic and informative reasons and not to encourage anyone to trade currency.
Please contact a professional advisor before trading your hard earned money, I don’t accept any responsibility for the use you give to the information that I am about to share; what you do with this information and / or if you lose any money trading I will take no liability what so ever.
Ok, so if after all the discouragement you still want to read about Bitcoin Trading here we go:
The idea on trading anything, and Bitcoin in particular, is to buy cheap and sell expensive, or to buy low and sell high.
So what are we trading anyway? we will be trading the exchange difference between two altcurrencies, let’s say we buy Litecoins with our Bitcoins; after a few hours, if our trading was right, the Litecoin might have gained a few points, so we sell it back to buy Bitcoin and make money on the difference. Then we go and look for the next opportunity, and we keep on doing this until we are fed up with millions of altcoins.
So how exactly can you do this?
First go to your Coinbase account and buy a few bitcoins or small fractions of bitcoins, start small to practice, you can increase your exposure later once you are profitable and you understand the process.
Then you want to sign up for exchanges, you can use cryptsy.com and exmo.com to start with, however you will need to have accounts in many more exchanges, as you’ll see in a minute. In these exchanges you will be able to buy and sell a wide number of altcoins and you will have an address to receive your bitcoin from your Coinbase account or your wallet so you can start trading.
Ok, next you can find a list of the altcoins market’s share and in which exchanges to find them here:
There you will find a table with the different altcoins and also the amount of VOLUME they are trading. You should sort them out by the volume as the sorting criteria, because you should only trade currencies that have at least $40,000 of volume for the day or more. On any given day there could be between 12 and 20 within this range.
We do this because we want to buy and sell easily and not get stuck with some thinly traded coin that no one will take from us when we want to sell it. You really want to be where the traders are and take advantage of the Volume of transactions in a specific coin.
So we will be looking for volume spikes, for that we will use the column named % Change (24h). In this column we can see the hottest coins and the ones we’re interested in buying.
For example right now as I am writing this lines I can see Nautiluscoin going up like crazy, 90.72% in the last 24 hours!
So I go and check in which exchange I can find this atlcoin:
I click on the coin can see they have it on Bittrex, Criptsy and Poloniex.
But as you can see the volume, and the price is much better on Bittrex, so I rush to Bittrex and open an account (it should be ready in a few minutes) and deposit the bitcoins I want to use to trade.
So by now we know:
How to identify possible coins to trade – go to coinmarketcap.com and sort them by volume
Which ones can be candidates – the ones that have over $40,000 of 24h volume
Pinpoint the one that can give us profits – The one that is having a crazy positive spike in the last 24h, anything over 40% or 50% can do the trick
Find the altcoin’s market – click at the coin on the table and you can find in which markets it’s trading and at what price, go for the highest volume and the best price.
Move our trading coins to the exchange and get ready to trade
Ok, we will stop here for a second to understand a bit better why we chose coins with price and volume spikes.
In this trading strategy we will normally tend to follow the trend, or what other traders are doing; so if people rushes to buy a specific coin we will rush to buy it too, we don’t care for the reasons of this sudden interest. We only know that for now there is a mania for such coin that went nuts in a short amount of time and we want to capitalize on that mania.
It’s important to understand that we’re not buying for the long term. This sudden interest could last only a few hours or a few days, that’s fine for us, we will stay in the trade only for a few minutes or hours and then get out with a profit.
We don’t want to be the first one to jump into the pool or the last one. We just detect where the flow is going and take advantage of it for a little while and then go out. On a single trade you could make anywhere from 5 to 10% or more of your capital in a few hours, so the potential is really huge.
Ok so now let’s trade those coins!, let’s say we have 1 bitcoin to trade. In Bittrexthe exchange rate is$ 0.069891 so we can buy a 14.3079 Nautiluscoins with our 1 Bitcoin.
However please don’t follow into the trap of thinking that you’ll have to buy your shiny new Nautiluscoin for the “last price” found on the price rates.
You will see there’s a list with all the people bidding and offering different amounts of coin. You must try to low-ball the offer as much as possible. In all the exchanges you will find a table like this with the buy orders and sell orders, in this table you will find what is people paying to buy and sell their coins.
As you can see, trading will require a lot of time and commitment from your part, try not to over do it and it’s better if you start with low expectations and risking little money until you feel confident about what you’re doing.
So once you have bought your Altcoins you only have to sit and wait to see if the market keeps rising, normally it will and after one hour or maybe two or even three you will have a profit. However I’d never recommend going away from your screen leaving your trade open, if you go to sleep or need to do something just buy back your Bitcoin and stay safe.
If things go wrong and you start to lose money, pick a number you are willing to lose every time, let’s say 10% as an example, and if price just go against you and hit that price point simply sell and buy back your Bitcoins, don’t worry, you’ll have plenty of opportunities to recover.