OK so cryptocurrency doesn’t have the best reputation for safety and low risk or being easy to understand, especially for absolute beginners. I remember well a few years back when I first started looking into it how incredibly difficult it all seemed, yet there were people out there making good money, even millions from this thing and I wanted to know more. Being an IT person I was able to spend some time researching online and learning what I needed to know, but I can fully appreciate that for someone who has not spent a career in software or stock trading, that the whole area of crypto would be a massive risk with the potential to lose a lot of money and/or time with a lot of brain ache built right in for good measure.
Cryptocurrency is an electronic form of money, it operates by thousands of computers around the world all whirring away to maintain the network. These computers are owned by lot’s of different people, not just one company and all of the transactions are maintained on a big, shared database, called the blockchain. This means that it’s impossible for any one person or company to control any one cryptocurrency and because the database is shared between all of the computers, if anyone tried to tamper with it, the others will automatically know about it. That’s why it is a pretty safe form of managing digital money.
There are a large number of different currencies, Bitcoin is only one of them. If you take a look at https://coinmarketcap.com/ you will be able to see a list of all the crypto that exists in the world today.
Each of these currencies is traded on one or more exchanges just like regular currency is traded on stock / currency exchanges. Just like you can buy Euro with Dollars or British Pounds with Euros, you can buy Bitcoin or any other crypto with Dollars, Pounds, Euros or whatever. An exchange is a facility owned by a single entity and works by letting thousands of people load up some money to their system and offer to buy crypto from other people and sell crypto to other people. The system (the exchange) in the middle manages all these offers to buy and sell, matches buyers and sellers on the marketplace and makes the transactions.
Some exchanges you can Google are:
However there are many more.
The idea of trading is that you buy some crypto when the exchange rate is x and then you sell it when the exchange rate is x + something and the something is your profit.
For example, lets say you bought one Bitcoin when it’s price was 10,000 Bitcoin to the Dollar and you sold it when the price was 15,000 Bitcoin to the Dollar, then you would have made 5,000 Dollars profit.
The exchanges allow you to buy and sell crypto in real time, literally in microseconds. You first buy a stablecoin, this is a cryptocurrency that tracks the USD price, so it’s price is stable to the Dollar, hence the name. An example of a stablecoin is Tether or USDT.
Then you load this USDT onto an exchange and start buying and selling other cryptocurrencies with it, hopefully making a profit as you go.
Binance is the worlds largest exchange and this is a good thing because it means they have a lot of liquidity. That means that there are thousands of people buying and selling cryptocurrencies on it 24/7, literally millions of USD worth of crypto is changing hands every hour. This is great because it means when you go in and make a trade for a few hundred USD the exchange will be able to fill your buy/sell order instantly, no waiting around for a buyer or seller to be matched with you to make the trade.
Also, Binance puts away a percentage of it’s profits as insurance. If the exchange got hacked and money stolen from it’s users, then it aims to pay out those users from this insurance fund. This has been put to the test in the past where in May 2019 it was widely reported that hackers had stolen $40 million from Binance. However Binance covered the costs from their insurance fund and no users lost money. You can google this but here is a link to a CNBC article on the matter.
Finally, because they are the largest exchange they have the best resources working to keep security up to date and state of the art, so it becomes very difficult for hackers to get in in the first place.
For example they have 2 factor authentication, which means that you need to log in with a user name and password plus a code generated in real time on your mobile phone. Anyone who does not have access to your phone cant generate the code and so cant get into your account.
Once you log in to Binance you can buy crypto with a variety of payment methods.
From the buy form you can see that they charge approximately 2% to buy crypto.
Once you have bought some USDT, you can go to the trading screen and use the big red and green buttons to trade cryptocurrencies.
This is where it starts to get complicated The price of crypto is moving all the time and Binance will charge you 0.1% every time you make a trade. So when you buy a crypto you pay 0.1% and when you sell you pay 0.1% so you must profit by more than 0.2% in order to make an actual profit. Plus over time you must profit by more than the 2% you paid to get your money onto the market.
There is a way to get a discount on this trading fee, you can buy some BNB – which is Binance’s own cryptocurrency and pay all your fees using that. If you hold BNB the exchange will automatically charge your trading fees to that balance, so you don’t need to do anything else.
In this case the trade fee will be 0.075% or lower depending on your trade volume. It’s a valuable saving to have when we are running the strategy that we will be discussing later.
Traditional stock markets trade during business hours, meaning that they are not open overnight or at the weekends. Crypto trades 24/7, so if you decide to buy some Bitcoin at lunchtime, then the price wobbles up and down for a bit and at bedtime it is higher than when you bought it and looking like it’s going to go up, do you stay up a bit longer and watch it? Do you sell and hope that you don’t miss out on a dramatic rise while you sleep? Do you leave the trade on and hope the price doesn’t tank overnight? It’s a dilemma I’ve been faced with many times when trading manually and not one I care to repeat. That is why I believe that an automatic trader that trades 24/7 on my behalf is a better idea – it’s just a case of finding one that works.
Another thing about manual trading is that it takes a LOT of time to learn how to do it well. Anyone can jump on Binance and buy and sell some crypto, but to make a consistent profit takes understanding of thousands of variable and math based indicators and fundamentals of what different cryptos do and how they are being perceived by the world at large. It’s literally thousands of hours of learning to be able to do this well, profitably and consistently. Even the most seasoned traders make losses sometimes, so really, if you are a beginner, don’t do it!
A little about indicators. Those lines you see on the chart above, the uppy downy red and green bars and the wavy sideways lines are some indicators which tell you something about the price of the crypto against the Dollar.
If you go to http://TradingView.com you can setup a free account and see the chart for any crypto in real time, for free. There is a paid option, but as an intro the free version will let you see what I am talking about.
Here is a TradingView chart and you can see the price indicator at the top and a few other indicators I have layered on at the bottom.
Here is a list of the indicators that they provide, there are thousands of entries in the list, so as you can see, there is a lot of stuff to learn.
Automated trading software looks at many of these indicators 24/7 and makes buy and sell decisions based on what it sees and what it knows about the markets. That way it takes the emotion out of the buying and selling decisions, it looks after it all while you are asleep and you don’t have to spend years learning about it.
Of course, automated software can still make mistakes, so we have to consider that too and build in mechanisms to guard against this. All of those formulas, math, indicators, market knowledge and safeguards are what’s known as a strategy and below are the details of an easy strategy that anyone can use to make profits from crypto. I would encourage you to research these things so you are comfortable with them. A great web site that tells you about trade strategies and indicators is https://www.investopedia.com/
But you can also jump onto chat forums for beginners on Reddit and just ask people specific questions. There are plenty of people willing to help, but beware, there are also plenty of scammers out there.
A typical scam would involve someone getting control of your money. They usually promise high returns, like hundreds or thousands of percent, guaranteed in a short time frame, but then when you put your money in they disappear within a few weeks and you never see your money again.
The short of it is that if it sounds too good to be true, it probably is. But for any scheme that is presented to you, just go online and google “is <<Scheme name>> a scam” and you will get some results that lead you to the answer. Also, ask around on the forums and feel free to contact me directly for an opinion.
If you put your money into a well known exchange like Binance, then don’t let anyone else have access to that account, it is relatively safe and definitely not a scam.
If you trade directly on Binance then everything is self contained, however if you use automated trading software then when you setup your trading software you need to create a key that allows the software to trade on Binance on your behalf. When you do this you need to ensure that the key permissions DO NOT allow money to be withdrawn from Binance, you must also never give your keys to anyone and you will be pretty safe.
You can also link your Binance keys to the unique internet address of your computer, the IP Address, this way only your computer can perform the trades for you and not someone else’s computer.
Here you can see the API setup screen in Binance where you can set the API only to be able to read and trade and restrict it to only allow access from trusted IP addresses.
There are plenty of guides online on how to do this, but let me know if you need any more information, or if it would be useful to have a step by step guide.
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