Getting Started With Bitcoin and Crytocurrency Trading
Last updated on April 18th, 2020
Being in business since 1996, Netpicks has seen a lot of changes that have been a boom and bust for traders. We’ve traded in both dot com bubbles, real estate crash, the banking and housing collapse, and from the ashes, opportunities presented themselves.
We believe that Bitcoin and other digital currencies present another opportunity that, as an emerging technology, is one that is virtually “ground floor”. It wasn’t until May 2017 that Bitcoin started to make large price strides to the upside and cryptocurrencies still haven’t reached mainstream acceptance.
We want to make sure you are fully aware of the opportunity (and risks) that lies before you in the cryptocurrency market and then give you a way to make sure you don’t miss out.
Why Consider the Bitcoin and Cryptocurrency Opportunity?
I remember when Facebook was in its infancy and it seemed to be just another internet startup that would eventually fail. The price of the Facebook stock closed at $18.06 on August 27 2012 from an initial public offering of $38 earlier in May.
Fast forward to December 2017 and the stock is trading at $178.68. All those that scoffed at the idea of a social interaction site becoming much of anything are no doubt regretting that decision.
Cryptocurrency has a different appeal.
Bitcoin and altcoins (other cryptocurrenceis that are not Bitcoin) could be called “internet money”. Unlike Facebook, there is a real value as these “coins” can be used to purchase goods and services just like any other currency.
Is Bitcoin is too expensive to buy?
You may be thinking that the current price of Bitcoin or any altcoin is too high for what you have available. You do not need to purchase the cryptocurrency in its entirety. You can actually purchase a fraction of the overall value and still see the same percentage gain/loss as others. Bitcoins can be split into 100 million bits.
Virtual Currency Example: View CFTC advisories as they contain more information on the risks associated with trading virtual currencies.
This is a screen capture of a chart showing the trading system we use to take full advantage of the Bitcoin opportunity. Even though this trade used the full value of Bitcoin, you could still have participated in this trade using a fraction of the value that Bitcoin was trading at.
This makes the cryptocurrency trading opportunity available to virtually anybody.
Bitcoin is not the only game in town
The opportunity in cryptocurrency trading does not start and end with Bitcoin. There are other currencies (altcurrencies) you can trade including:
Will these altcurrencies reach the same frenzy as Bitcoin and see the rapid rise in price?
Like everything else in trading, nobody knows.
What we know right now is this appears to be a trading opportunity that those who are thinking about trading cryptocurrency, may want to consider.
We are using our 22 years experience to help you take advantage of this opportunity.
Netpicks traders currently own currencies that we are holding long term.
In addition, while we missed the initial opportunity for Bitcoin mining, we are active with an operating bank of 100+ high power Bitcoin mining computers.
We are involved daily in the cryptocurrency space and we do this because we believe we’ve identified the risks involved and are confident in our core trading systems and strategies.
- If you have already bought crypto, the chances are you did so on emotion and have no clear plan on how or when to exit even partials of your positions
- If you haven’t yet gotten involved, you either don’t see the opportunity, have fears about the risk, or have no clue on how to begin
Netpicks is a robust trading company that has done the hard work for people wanting to explore this opportunity.
Just like you see in that graphic above:
- You will have the setups you can take to enter the trade
- You will know exactly where you can limit your risk
- You will know where you can exit for profits, scale out partial, and hold for longer term gain
Nothing is guaranteed except you missing out on the huge potential if you choose to ignore what could be the biggest advancement in currency and technology in our lifetime
Investing In Cryptocurrency
There is a difference between investing and trading.
There are many reasons to want to hold long term positions in cryptocurrency. Bitcoin may have stretched too far but as mentioned, Bitcoin is not the only show in town as there are the altcurrencies such as Litecoin to consider.
There are also certain stocks like RIOT which provide investment services for the blockchain technology. As well, there are 3 U.S.-based ETFs under review by the SEC which wants a piece of the cryptocurrency pie.
Why would you want to buy and hold when many say that style of investing is dead?
- The technology is still in it’s infancy which points towards growth potential
- While most asset classes are co-related, cryptocurrencies is not strongly related to any other class
- The big money is still on the sidelines, hedge funds and such, and once they are involved, the opportunity will undergo some competitive changes.
With a trading strategy that limits risk and gives you an entry into this market, holding for the longer term is a smart play. Remember, the future of money is virtual and this could be the start of the inevitable.
Initial Coin Offerings (ICO).
New coins are being developed and while they do present opportunities for ground floor involvement, these are high risk ventures as most do not gain traction.
Unless you are a well capitalized venture capitalist, these are opportunities you may want to skip. There are enough altcurrencies that have already began to move that you can participate in.
Trading Opportunities in Cryptocurrencies
Day traders need volatility and we certainly see that in most of the currencies that are traded. Getting in and out of your position should not be a problem because the liquidity is there.
Keep in mind that the established asset classes are also full of HFT and algorithms that take advantage of even the slightest efficiency in those instruments. As of now, that competition is not present in the crypto markets.
Like Trading In General, There Are Risks
I know it’s easy to look at a chart of Bitcoin and see the run in price and think there was no way to lose. In 2017, there’s been a 2500% increase in Bitcoin value and while there has been pullbacks in price, the uptrend is obvious.
It’s easy to think you’d ride the pullbacks especially as an investor but how would you have handled the far right edge? That was a 21% drop in price.
Virtual Currency Example: View CFTC advisories as they contain more information on the risks associated with trading virtual currencies.
With the potential of massive gains also comes increased risk of quick drops in price and even full collapse.
- Regulations are virtually none existent. If you traded in the early days of Forex, you know the nightmare this can cause
- You are not trading accepted and mature markets. Obscene spikes in price based on a news event or bouts of lack of liquidity could have negative affects on your holdings
- Cryptocurrencies exist in the virtual world which makes them targets for hackers. Tens of millions have been stolen and you can read about a $70 million heist here
The risks of loss is real and the usual disclaimer is that you should only trade with money you can afford to lose.
How To Get Started Trading Cryptocurrency
If you have decided to take some funds that you won’t miss if crypto is a total bust, there are some things that you must know.
The first thing you must do whether you are going to swing trade or day trade crypto such as Bitcoin is open up a trading account. Once the account is open, you must convert your funds into Bitcoins.
This does not mean you can only trade Bitcoin.
This is simply the first step in the process which will open you up to all the altcoins the exchange offers.
While not a full endorsement as your needs may be different, we like Coinbase and GDAX. The reasons we like them (we are located in the U.S.) is because of the insurance that they have meaning that if the exchange gets hacked, you are protected.
This is extremely important considering the hacking that has occurred and the millions that have been taken by hackers.
Keep in mind that your personal account, if hacked, is not covered by the insurance so make sure you follow protect your interests.
Coinbase has an extra layer of security where less than 2% of the customers funds are online. The rest is stored safely offline.
To ensure that you are the only person that can log into your exchange account, you must set up two-factor authorization. You can use email, text, but our choice is using the Google Authentication app. Install it on your phone and then scan the bar code that you will find inside your account.
Every time you attempt to log into your account, you will be asked for the authentication code that will be found on the app on your phone.
Funding Your Account
There are multiple ways to fund your account with fiat currency. Some will require you to send in pictures of government issued identification before allowing certain deposit capabilities.
Once your account is funded, you can exchange those funds for Bitcoin and begin to trade using your cryptocurrency trading strategy of choice.
Protecting Your Bitcoin and Altcurrencies
It’s one thing to make money and it’s an entirely different thing to keep it. I am not referring to the obvious risks when trading any asset class. When dealing with cryptocurrency trading, you have another risk that is always present: hackers.
Our top piece of advice is to keep only the amounts you need for trading in your account on the exchange. The rest of your stake, keep either in an online wallet or even better, offline storage. Anything you keep online has the potential to be hacked.
Our pick for the best offline wallet is: Ledger Nano S
“secrets like private keys are never exposed: sensitive operations are isolated inside your hardware wallet within a state-of-the-art Secure Element, locked by a PIN code. Transactions can’t get tampered with, they are physically verified on the embedded screen with a simple press of a button.”
For those with little funds on the line, you may be satisfied with keeping everything online in a virtual wallet for ease of use. If you are holding for long term investing or have a substantial bankroll, it would not be responsible to keep it online.
How Will You Trade Cryptocurrencies?
This is the most important part of this entire article. Without a verifiable edge in trading, it won’t matter how great the exchange is or how secure your currencies are. You will lose.
There are three types of involvement you may want to consider when looking at the cryptocurrency opportunity.
Buy and hold positions for the long term
Cryptocurreny is in its infancy and is still not mainstream. It makes sense, given the direction the world is going in terms stepping away from government control of money, that everybody who is trading Bitcoin and other coins, hold a piece for long term growth. Who knows, this could end up being your retirement nest egg.
Understand that you will see drops of 20% of more, sometimes on a daily basis. You must be able to withstand these pullbacks in price and if you have allocated your risk properly, the only damage you will suffer is from your ego. Buy and hold means exactly that – buy and hold until the real turn shows up and that’s why you need a proper trading strategy
Active swing trading
This is an approach, given the strength of impulse moves, that we prefer. Using our trading strategy and plans, we get:
- Exact points to enter the trade
- Exact points where will will limit our risk
- Exact price points where you will exit your position for profits
There is something to be said for carrying a position, making substantial gains and then taking all risk out of the market by taking profits. This is great for traders who have a difficult time watching paper profits erode during the natural ebb and flow of price.
Active Buy and Hold
This is an ideal combination of swing trading but buy and holding without a profit target. What we do have in place is what we call an emergency stop which protects the gains we’ve made.
The main reason we like this approach is because we are in the growth phase of cryptocurrency even though people were saying it was a bubble at different price points.
And it may very well be a bubble waiting to burst and the opposite is also true.
Active buy and hold allows us to take advantage of the opportunity during growth and allow profits to increase. We are also protected if, as we’ve seen in the past, a crash happens
It’s the best of both worlds.
Getting Started With Bitcoin and Crytocurrency Trading – Wrap Up
We don’t believe that cryptocurrency trading is a bubble. In fact, we believe that it is one of the greatest financial opportunities that has come around in decades.
The way price is evolving and how it ebbs and flows with volatility, there are opportunities to get involved depending on your type of strategy and capitalization.
The market capitalization has skyrocketed which points to the increased interest in cryptocurrencies. They are opportunities but with increased opportunity, comes increased risk. Ensure you are well aware of all risks involved not only with cryptocurrency trading, but with trading overall.
You do have time to do more research to ensure that cryptocurrency trading is a risk you are willing to take. From which exchange you are going to use, to security and trading strategy, it can be a lot to process.
I hope this article has been helpful as you explore this trading opportunity. As always, feel free to contact us directly.