To trade other crypto
currencies it is best to buy bitcoins first at LocalBitcoins,
a p2p Bitcoin exchange.
details to get started HERE
a few common concepts and technical terms that you will need
to know before you get
ICO / ITO: An ‘Initial Coin Offering’ or ‘ICO’ is the cryptocurrency take on an ‘Initial Public Offering’, when a company’s shares are first listed on the stock market.
It usually takes place prior to the launch of a coin’s blockchain and involves the public sale of a certain percentage of the coin’s initial supply in order to raise funds
for development. An alternative name for this is an ‘Initial Token Offering’ or ‘ITO’.
Market Cap: The market capitalization of an altcoin is
the total value of all its coins. It is common practice to use
the currently available supply rather than the
total supply, and this may exclude unreleased premines. Market cap is therefore calculated by multiplying the price per coin by the number of coins currently
released onto the open market.
Premine: When some or all of a coin’s initial supply is generated automatically by the developer at, or prior to, the public launch, rather than being generated
over time through a form of mining, this is called a ‘pre-mine’ or ‘premine’. Pre-mines can be used for legitimate purposes: for example to crowdfund development
through an ICO, or to put into a fund for the continued development and promotion of a coin. They can also be dumped onto the market, for a quick and easy profit,
by a developer who then abandons the coin and disappears in a kind of exit scam.
Insta-mine: Because some altcoin enthusiasts are very wary of coins which have a premine, automatically suspecting a scam, a number of developers have
sought to find different ways to gain control of a large percentage of a coin’s supply from the beginning. One way to do this is to have very easy mining for a short
period after launch, during which the developers seek to instantly mine a large number of coins for very little cost. The difficulty then increases rapidly after a short
period of time. Sometimes this short and highly profitable mining period may take place before a coin has even been announced to the public. This is known as
an ‘insta-mine’ or ‘instamine’.
Ninja Launch: A ninja launch is basically a method for conducting an instamine. It involves announcing a coin suddenly with no prior warning, with the mining
beginning immediately as the coin is announced. By the time other users have had the chance to set themselves up to start mining, the developer may have already
conducted their own instamine. Another ninja launch tactic is to create an announcement with only very basic information, conduct and instamine, then add more
information to attract interest only after a significant amount of coins have already been mined.
FUD: The acronym FUD stands for ‘Fear, Uncertainty and Despair’. In cryptocurrency it is generally used to refer to negative talk about a coin which is inaccurate
or misleading, often posted in forums and through social media. This kind of FUD may be the result of a genuine fear response among the holders of a coin whose
value is crashing, or it may be deliberately spread in order to suppress the price – either by competing coins, speculators looking to pick up a bargain before hyping
the coin later, or just by angry trolls with some kind of grudge.
PoD: Some coins have anonymous developers who do not reveal their real identity. There may be good reasons for this, and it may not hinder a coin’s adoption
for example Bitcoin’s creator never revealed his real world identity. But if the developers are anonymous then there is a greater risk that they will disappear, and this
can be especially risky if there is a premine that they may be able to dump for an easy profit before they vanish. Several services have emerged which verify the
identities of developers in order to prevent this kind of scam, and this is often known as ‘Proof of Developer’ or ‘PoD’.
Emission Schedule: The rate at which new coins are generated and the pattern by which this changes over time. This may also be described as the ’emission curve’.
Ponzi Scheme: An investment scam in which initial investors are paid returns from the capital of subsequent investors, and an ever-increasing supply of new investors
is therefore needed for returns to be paid. If there is no reason for people to buy a coin as anything other than an investment, or if its creators never intend to pursue
regular users, for example, then it may be described as a ponzi scheme.
Whales: A whale is a large holder, who owns enough coins to move the market by a substantial amount when they buy or sell.
Bagholders: People who are left holding a coin which has depreciated in value by a large amount, and who continue to hold in the (often vain) hope of being able
to sell at a profit later on, are often described as ‘bagholders’.
Bots: A casual term used to refer to automated trading software.
are many ways trading altcoins is similar to investing in
penny stocks, and that comparison has been made many times in
the past by other authors. But in other
ways it is very different.
In case you don’t know, penny stocks are the shares of smaller businesses and early stage companies, which have a much lower value than regular stocks. They are
also much more volatile, often experiencing gains of more than 100% in a single day – or disappearing altogether overnight.
There are some important lessons that can be taken from penny stock trading and applied to altcoins:
Don’t put all of your eggs in one basket: The first thing you will learn about penny stocks is that you should spread your capital out among as many different
shares as possible, to reduce the chances that you will lose everything. The majority of new business will fail in their first few years, meaning that their shares will
drop in value to zero. The same is true for altcoins – many new coins will completely fail within the first year of trading. It’s also true that, although there is a lot you
can do to make sure you pick the winners, there are also so many unknowns that there is no such thing as a certainty. It is often tempting to go ‘all in’ on an exciting
opportunity you believe could make 1000% returns, but this can easily end your career as an altcoin trader before it has even begun
Don’t believe the hype (or the FUD): The smaller a market is, the easier it is to manipulate. Penny stocks have always been subject to a large amount of
professional hype, and this is certainly true for cryptocurrency as well. Professional promoters will hype up a coin, through newsletters and tip services, through
social media and blogs and even through advertising. They may be paid by the coin’s developers who wish to increase the value of their holdings, or they may
wish to increase the value of their own holdings. In either case, the kind of artificial price pump driven by this kind of hype is often followed by a price crash as
the people behind it cash out at the higher price. This is sometimes called a ‘Pump and Dump’ or just ‘P&D’. In a similar way, FUD can be deliberately spread
in order to artificially drive down the price so that the people behind it can pick up cheap coins. It is always true in life, but doubly true when researching altcoins
for trading, that you should always be skeptical of what you read, do your own research, and make up your own mind.
Be Quick to Take Losses, Slow to Take Profits: One of the biggest mistakes that penny stock traders make is to take profits on winners too soon, but keep
hold of the losers until they are worthless. I have seen this a lot in cryptocurrency trading as well. In both of these niches it is common for the majority of your picks
to lose money. When a trader sees profits of 50%, 100% or even higher in a relatively short space of time it is very easy for emotions to kick in and overtake any
reasoned assessment. This may feel like a great profit, you may fear losing it and want to lock in the profit, or you may just get excited and impatient to realize
your gains even though the price is still trending upwards. But because in both penny stocks and altcoins you are likely to pick a lot of losers, you need to get very
high profits on the winners to come out with a good profit overall – so even a 100% profit on a winning pick may not be as great as it might seem. At the same time,
many traders become emotionally invested in what they buy, and find it hard to give up hope and sell even when it is clear that the price is going down, and in
this way they end up losing most or all of the value of their investment when they could have cut their losses much earlier if they had taken a more rational approach.
One key difference between penny stocks and alternative digital currency is that the former may take years to realize a profit, whereas the cryptocurrency
world is very fast paced indeed. Retail penny stock traders may be able to pick out companies with potential and then only check back on them every few months,
in fact from one month to the next there may be little or no new information to use for re-evaluating your position. In cryptocurrency this would not be a good idea at all.
You should only get involved in a market like this is if you are ready and willing to spend a lot of time at your computer, regularly checking on price movements and
the latest news, and changing your positions accordingly.
are two main ways to understand the altcoin markets, forecast
the future direction of price movements and therefore pick
fundamental analysis and technical analysis.
Fundamental analysis attempts to determine the real value of something in order to determine whether it is undervalued or overvalued. When it comes to trading
altcoins this is more difficult, because they are generally very early in their development – so their value reflects potential future success rather than their current
position. You can still look at a coin’s level of adoptions, the strength of the network, number of transactions and so on, but this will only take you so far. To a great
extent you must rely on estimating the potential size of the market in the future and the chances that this potential will be fulfilled.
Technical analysis uses price and volume data, and seeks to find patterns and indicators which can be used to forecast the future direction of price movement.
Cryptocurrency markets are highly news driven. You are trading assets in a very fast paced world of bleeding-edge technology, where new developments are
released every day and the political / regulatory environment is still uncertain. If you want to make money trading altcoins, therefore, you really need to make sure
that you keep yourself up to date about the latest news and developments, both for the coins you are trading and for the industry as a whole.
you should have a good general idea of what cryptocurrency
trading is all about, but if you want to learn how
to make money trading digital currency then you
will need to have some more specific strategies and techniques in your arsenal. This section is not a comprehensive guide by any means, but should give you a few
ideas to get you started making money as an altcoin trader.
Most coins will start off at a low price, and rise in value if they are successful. Of course this is not always the case, especially for ICO coins which may start off at
a quite high valuation, depending on the structure and success of the ICO. But, nevertheless, it is usually true to say that the largest profits to be made often come
from seeing the potential of a newer coin early on, before anyone else, and then riding the wave of success as other traders and users jump on-board.
It is also true, however, that these very early days are the most risky time to invest in something. The technology will be unproven and may still be unfinished, and
there will be little other objective evidence to look at. Investing in cryptocurrency is a high risk, high reward endeavour anyway, but this is particularly true if you buy
very early on. You should therefore take care to spread out your capital over an even larger number of ventures if you take this approach in order to hedge your risk.
You may also like to get involved in mining if you are taking this approach, as some coins will launch and be available to mine before they are added to any
exchanges for trading.
To keep up to date with the latest launches you can follow the announcements board on Bitcointalk, CryptoCoinTalk, or a dedicated website such as Altcoin Calender.
a contrarian trading tip which is very useful to keep in mind.
As I already mentioned, this is a heavily news-driven market
with big swings based on new announce-
ments, feature releases, partnerships and so on. You may expect a big announcement to drive up the price immediately, but what you have to realize is that most of the time
the announcement has already been ‘priced in’ by many buyers, who expected it to happen. Buying after the news has been announced can still be profitable at times, so
this is not a hard and fast rule you should always follow, but it is certainly true that the best profits go to people who correctly anticipate the news, buy early (on the rumour),
and then sell into any spike in the price as a result of latecomers entering into the market after the announcement.
comparison to stocks or forex or any other traditional market,
there is a unique opportunity within cryptocurrency for
individual investors to become involved in helping
their investments to become successful. Many people will become deeply involved in the coins they support, being active members of their community of users, helping
to promote them, brainstorming and critiquing new ideas in the forums, networking to develop new opportunities, setting up new sites and services, and even getting
involved in developing new code through open source repositories on Github.
If you have something to contribute then this can be a great way to add value to your investment whilst also getting involved in something that you genuinely enjoy and
feel passionate about. It can also help you to get the inside track on what is happening, improving your ability to make informed decisions.
You should be careful, however, as the more involved you become in a coin the harder it will be for you to make objective decisions if the market conditions dictate
that the most profitable thing to do is to sell your holdings. It is vital when doing this that you don’t let your emotions influence your decisions about when and how much to buy or sell.
are trading in smaller markets you may well notice that your
own orders have the power to move the markets. Even small
offers placed onto the books may push up
the price, as others may move their own offers upwards to beat your price. It is tempting, when you notice this, to try to use this power to your advantage. Unless you are a
true whale and you really know what you are doing, this is not recommended.