Trading cryptocurrency when there is a high level of volatility and frequent fluctuations (which is common for the still-maturing market of digital assets) can be overwhelming for beginners, especially for those who have no previous experience in trading shares, stocks, hedge funds, or similar assets. Similarly, traders and investors who have already had a chance to get to know the basics of trading before the arrival of cryptocurrency assets may find the market of digital assets to be a helter-skelter version of Wall Street. Indeed, cryptocurrency prices may radically change from negative to positive or vice versa during a single trading session, but there is still the opportunity to make a substantial profit. By learning some basic terminology and following our step-by-step guide for beginners, your chances of scoring a positive ROI also go up.

Trading Terminology: A Crypto Traders’ Glossary

Every sector has a set of terms characteristic of that industry or market, and that is the very case with cryptocurrency trading as well. It is crucial that beginner traders find their way around and get used to the special terminology that comes with crypto trading and investing. Traders need to know basic and advanced terms to be able to follow up with trading analyses and key metrics that can help determine which cryptocurrency will make the most profitable choice for a given period.

Newcomers and beginner traders may have a hard time finding their way around specially crafted terms, many of which were created within closed crypto communities, which is why reviewing a crypto trading glossary is essential before making your first trade. A glossary that explains special terminology can help traders get to know the essential vocabulary.

Makers and Takers

Some basic terms in crypto trading that are often mentioned are “maker” and “taker”. Makers add volume to the exchange markets, while takers fill out orders that are traded immediately, which is why different trading fees may apply. Makers’ trades are recorded in order books, thereby “making” the market. On the other hand, immediate trades set by takers don’t reach the order books.

Exchange platforms are epicentres of crypto trading. Traders are offered a list of cryptocurrencies and trading pairs, and the trading is covered by fees. Some of these exchange platforms have different fees for makers and takers, where makers are rewarded with lower fees. On Tokens.net exchange, for example, makers are charged 0% in fees.

Liquidity, Trading Volumes, and Volatility

Traders use trading volumes, liquidity, and volatility to form investment decisions. Trading volumes show the number of assets bought and sold in a given period. Liquidity and volatility define the very correlation between the depth of the market and the possibility of making a profit based on taking the two key metrics into consideration.

Liquidity in the market shows how fast an asset can be sold or bought—greater liquidity means a faster turnaround of assets. Volatility describes the range of prices of assets in the market, referring to how rapidly the market value can go through a change. The higher the volatility, the greater are the chances of rapid and unpredictable price changes.

Make sure to review crypto trading terminology to get familiar with more key terms, such as liquidity, trading volumes, and volatility, all of which are necessary for cryptocurrency traders’ ROI.

Decide Which Cryptocurrency to Invest In

Once you are armed with trading terminology, you need to decide which cryptocurrency you want to invest in. Exchange platforms such as Tokens.net offer transparent metrics and charts to help traders make important decisions regarding cryptocurrency investments.

Top trading cryptocurrencies are always a good choice, especially in the long run, but all traders need to understand that the market of cryptocurrency is highly volatile, which means that prices can change radically from one day to the next, frequently dropping and rising with almost unpredictable market trends—almost. As unpredictable as the cryptocurrency market may seem, following up with key metrics such as monthly, daily, and weekly changes, as well as ROI, annual gains, and charts, may certainly help you base your decision.

When investing in the long run, you want to make sure that you are investing in a cryptocurrency that has great odds of rising in the following period, and the best option is to buy “discounted” cryptocurrencies. These assets shouldn’t be mistaken as fiat assets that have no odds of rising back up to their initial all-time high price. Traders often look for cryptocurrencies that have lost some of their value but are due to bounce back, which brings a positive ROI to their exchange wallets. The cryptocurrencies you invest in also need to have a legitimate project behind their assets. That way, you will avoid being scammed and investing in a scam coin. Always follow up with key metrics and make sure your decisions are not based on a hunch but are carefully thought through based on the performance of the cryptocurrency in the market. Another important thing is to know is when to buy and when to sell, which is essentially the basic rule of trading. You can always consider the rule of “buy low, sell high,” making sure that you can maximise your ROI and minimise your losses. Trading carries a certain dose of risk, but when traders think through their investment decisions, the risk can be somewhat mitigated. One of the best strategies for trading is to establish a pattern that will help you track and find highly profitable cryptocurrency based on market trends and trading opportunities reflected in key market metrics.

Another way to mitigate your losses and make sure that the chances for returns on investments are high is to buy small positions first to see how your first investments turn out. In the beginning, buy positions in top trading cryptocurrencies and hold them in the long run if the metrics are favourable while making smaller positions in less popular cryptos with substantially lower market caps than Bitcoin (BTC) or Ethereum (ETH). Make sure that you have calculated your chances of “winning” by looking into cryptocurrencies that are set to go from a downward trend to an upward trend rather than the other way around. Also, look into digital assets that have a proven track record of collecting gains in the market. Some cryptocurrencies may appear to be favourable and profitable in one moment, but the prices may drop substantially and radically the very next day.

Choose your cryptocurrencies wisely and follow up with market trends and key metrics, buying small positions at the beginning of your trading experience.

Learn How to Calculate Profits

Once you have learned how to choose your cryptocurrency and have adopted basic terminology, you need to learn how to calculate the profits made from your investments. Profits are the very thing that motivates traders and the sole goal of trading sessions. Traders invest funds to collect profits in the form of ROI (Return on Investment), which is why learning how to calculate your profit is essential. The ROI is how traders measure the amount earned in the form of a return on their investment. It’s calculated when the return (the amount traders get after completing a trade) is divided by the initial investment (the cost paid for making an entry). The result is expressed in percentage.

Successful traders are measured by losses and profits, with every change in the market affecting their investment decisions positively or negatively. When learning how to calculate your profits and losses, the first thing to know is that there are two categories of profit calculations: realised profits and unrealised profits (and losses).

Realised profits represent your closed positions, which are cryptocurrency investments that are already closed and have resulted in either losses or profits. Unrealised profits represent positions that are yet not closed and that haven’t brought any realised profits or losses that would affect the balance of your trading account. The balance shows all your funds and positions, increasing and decreasing in correlation with profits and losses that are already realised.

When calculating profits, you can use not only the fiat currency that you used to invest in cryptocurrency as a placeholder investment but also use the amount of cryptocurrency you invested in and use this amount for calculating your profits instead of making calculations with fiat currency value. Conversion between the two is included, so it all depends on which one of the two options is more suitable for you as a trader.

Profits can be calculated by entering your entry price and exit price, all multiplied by the size of the buy position you previously made, which will provide you with the result of your profits or losses. The entry price should be extracted from the exit price. The entry price is the amount you invested per single cryptocurrency unit once you have bought a position, and the exit price is the value you are left with after selling your position. Multiplied by the number of units of the given cryptocurrency you are trading, this simple equation will provide you with how much of your investment you lost or how much profit you made based on your initial investment.

To calculate your profits for a single unit of a cryptocurrency you have a position in, you can extract the amount you paid for that cryptocurrency from the price of that same cryptocurrency on the day you close your position (the day you sell your cryptocurrency). The result will be the amount of your profits.

For example, if you decide to buy one unit of Bitcoin (BTC) at the price of $9,000, and you sell at a price of $12,000, the calculation will be as follows:

If your expected profits turn into losses due to miscalculated risks before investing in a certain cryptocurrency position, you should learn how to manage your trading expectations to avoid disappointment. Keep in mind that each trade carries a certain amount of risk with numerous factors affecting the final outcome. While traders can control the way their money is invested—market trends can be observed and used to make investment decisions— they cannot control or predict investments in their entirety.

Create an Account on Tokens.net to Start Trading

When all is settled, and you have learned how to calculate your profits, as well as the basic trading terminology and how to choose the most profitable cryptocurrency, you are ready to create an account on Tokens.net and start trading.

Registering your account on Tokens.net is free, and the platform offers some of the most competitive fees for trading. For fee settlement, Tokens.net offers an ERC-20 token called Dynamic Trading Rights (DTR). DTR units used for fee settlements are automatically collected and cryptographically destroyed through a process known in cryptocurrency community circles as token burn to keep liquidity at a satisfying level and prevent the devaluation of DTR in the market.

The exchange offers a user-friendly interface suitable for trading beginners, while more experienced traders can access the more complex trading tools available on the platform. All key metrics, including 24-hour changes, live market price changes, 24-trading volumes, market capitalisation, trading pairs, and candlestick charts, are available for each listed cryptocurrency that offers three different versions based on different market change tracking times. Creating an account is simple, and you will have unlimited access to numerous top-trading cryptocurrency assets and ERC-20 tokens. The list of available digital assets is constantly updated with new, legit, popular, and high-quality cryptocurrencies, so traders have multiple options for investing in cryptocurrency.

To follow-up with the cryptocurrency assets of your choice and keep track of interesting investments, you can create personal watchlists via your Tokens.net account after completing registration. All trades and open orders are available under your personal account as well, so traders can easily close and open new positions at any time.

Tokens.net also offers a mobile app with a seamless transition from the web platform to the mobile exchanging, so traders can take their investments, balances, and positions anywhere, trading anytime with top security and the utmost safety. The app is completely manageable with customizable options, so users have full control over their trading information and wallet balances.

For detailed and in-depth guidance on how to create an account on Tokens.net, visit the official step-by-step guide. Once you create an account, you will be able to make a deposit and start trading instantly.

Start Trading

Once you have created an account on Tokens.net and have a basic knowledge of trading terminology, you are ready to start trading. However, before you buy your first position in your favourite cryptocurrency, you need to get familiar with three strategies that are crucial for successful trading sessions: technical analysis, fundamental analysis, and sentiment analysis.

These strategies aid traders in forming investment ideas and making decisions that are targeted towards generating profits.

Technical Analysis

Technical analysis is a method of predicting and forecasting the value of assets in the market as reflected in actively changing prices based on market trends available in the movement history of every cryptocurrency. With technical analysis, the price of assets and trading volumes are often used as the key metrics for future price forecasting; however, there are several more indicators of value within the technical analysis that may help traders and investors predict the prices of digital assets within a specific period. Exchange markets commonly display indicators crucial for creating technical analysis, and Tokens.net traders have unlimited access to key metrics, price indicators, and numerous valuable trading tools.

Below, you will find some of the most commonly used technical indicators and trading techniques.

Support and Resistance

Support and resistance serve the purpose of identifying the price reversal based on the price movement in the market, thereby forecasting a potential reversal in a trend towards a correction where an asset may either continue with the trend or go into a reversal.

Many trading strategies are based on support and resistance levels charts, where traders can identify zones of support and resistance, forecasting that the price of the given asset will go in one of two possible directions. Read more about support and resistance levels and how you can use them in trading here.

Candlestick

The reason why candlestick charts make an effective way of forecasting price movements and forming technical analyses for effective trading and maximised ROIs is that candlestick charts contain four key metrics to describe market trends and price movements to traders.

Much like bar charts, candlesticks are designed to showcase low price, high price, closing price, and opening price for a period specified by the trader. Traders can follow up with historical data on the key metrics regarding price movement and find the lowest and highest points in the value of assets for a given period. Learn more about candlestick charts before you start trading.

Moving Average

Moving average (MA) is used to filtering important market data related to long-term trends and price fluctuations while recording past price movements of marketed assets. MA is commonly used to determine levels of support and resistance. MA can be used as an individual trading tool to determine price trends while ignoring short-term price changes that fall out of the pattern. It can be also used to determine other technical indicators, such as SMA, EMA, DMA, double EMA, and triple EMA; SMA and EMA are most popular technical indicators among these. Multiple Moving Averages (MMAs) are also used. They combine long-term and short-term MA data for specific periods. Traders may combine different MAs—for instance, SMA50 + EMA100 or EMA50 + EMA100.

Simple Moving Average (SMA)

Simple moving average (SMA) is a trading indicator used to calculate an average change in price according to market trends for a certain period. SMA is used in cases where traders wish to create a technical analysis that will showcase an average value in past trends so that investment decisions can be made for future forecasts. Future price forecasts can be created by considering a trading indicator such as SMA because traders can get a bigger picture of past market trends, as well as price movement for a given period. Learn more about how you can use SMA in trading.

Exponential Moving Average (EMA)

Exponential moving average (EMA) is another useful trading strategy similar to SMA. It is designed to measure trends and the direction in which certain assets are moving during a specified period. EMA places weight on the most recent price data, reacting to the latest price changes. See how you can utilise EMA for technical analysis and investing.

MACD (Moving Average Convergence Divergence)

Moving average convergence divergence (MACD) is an indicator of market trends and movements calculated based on specified EMA periods. A calculated MACD value forms a line to signal traders on buy and sell actions based on the market movements. MACD is commonly used for security trading, although the indicator can be applied to form a forecasting analysis for cryptocurrency trading. Traders use the MACD indicator to follow signals for changes in the market. Learn how MACD is used and calculated.

Bollinger Band

The Bollinger Band is a trading tool that directly relates to the value of an SMA. The tool was first branded by one of the most famous technical traders, John Bollinger. Bollinger copyrighted the name and the concept of the Bollinger Band.

The Bollinger Band was developed as a trading tool that allows traders to follow-up with market trend deviations by following negative and positive standouts in the value of an SMA. As the name of the tool indicates, the graphic value of the Bollinger Band is expressed in three different lines, presenting the SMA with upper and lower bands to follow possible deviations in the SMA for specified periods. Find out how you can use the Bollinger Band in trading.

Fundamental Analysis

Fundamental analysis serves the purpose of presenting the intrinsic value of an asset in the market by considering various external factors set to affect the price in the market. Many financial and economic factors are used by traders to create a fundamental analysis, and traders include any and all factors that can affect the value of an asset in the market. Fundamental analysis also serves the purpose of helping traders and investors determine whether a specific asset is undervalued or overvalued.

Regardless of the type of market analysis used in finances and economics, each analysis has the goal of getting close to the real value of an asset in the market, with the ultimate objective of scoring gains and maximising the ROI. Fundamental analysis can be considered the very opposite of technical analysis because technical analysis studies volatility, price, trading volumes, and similar market data to help determine the future price momentum. Fundamental analysis, however, used all available public information relevant to the value of a specified asset to determine its real value. Factors such as the current state of the economy and operations of the company behind the asset, as well as the causes behind the demand-supply ratio, are all used to form a fundamental analysis that traders can use to determine the value of an asset and decide whether it is overbought or oversold based on the previously determined value. Fundamental analysis also uses future growth metrics, earnings, return on assets, revenue, and market capitalisation. Most commonly, fundamental analysis is used to determine the value of stocks in the market; however, this type of analysis is suitable for other types of assets, including cryptocurrency. Based on the collected public information, traders can determine a suitable price, including evaluating the very industry or sector under which the specified asset is categorised. Comparing the prices of similar assets is also an effective method when forging a fundamental analysis, providing a more realistic intrinsic value.

If intrinsic value is higher than the present price in the market, the asset is considered overvalued, whereas an undervalued asset has a lower intrinsic value than the present market price. Based on fundamental analysis, traders and investors can decide whether to go long or short on a certain position they have been analysing. When an asset has been deemed undervalued, traders commonly suggest buying that specified asset because the asset hasn’t reached its full capacity of market value.

Fundamental analysis relies on both the quality and quantity of an asset as determining factors that may be expressed in numbers, as well as facts that cannot be numerically expressed. Fundamental analysis may also include the business model of the company or start-up behind the specified asset, management and governance, and advantages and disadvantages as opposed to competition, customers, regulation, strength of the specific sector, and market share.

Sentiment Analysis

As the name of this type of analysis suggests, sentiment analysis includes feelings as the main factor in forming an opinion. Unlike technical analysis, which focuses on predicting price movements by following historical trends, and fundamental analysis, which studies public information about specified assets, sentiment analysis focuses on the psychology of crowds. Sentiment analysis studies the way the market feels as opposed to the level of risk. Usually, the greater the risk, the greater are the chances of losing an investment. However, sentiment analysis relies on the analysis of the way the market reacts to a present risk. Traders use this knowledge of risks to predict how other traders will react to the present risk, thereby forming their investment decisions. Because traders’ reactions to the risk may affect the price in the market by either action or lack of action, sentiment analysis comes in more than handy. Sentiment analysis may also look at when traders are ready to take a risk, which is usually at a time when market trends are more sensitive to news and reports. By looking into how other traders feel about the market, you may note significant trends that are affected by how the crowd is reacting to the presence of risk or a lack thereof.

The importance of sentiment analysis lies in the fact that the reaction of crowds and headlines related to assets in the market can affect market trends in the long run. What traders follow when forming a sentiment analysis is the difference between long and short positions in the market. A lack of long positions in the net value of all positions in the specific sector indicates that traders are not particularly hopeful about gains in the long-run for that specific asset, and vice versa.

Conclusion

Using technical and fundamental analyses only might not be enough for more effective forecasting of market outcomes and active and past market trends. Despite rock-solid market data that gives a buy, sell, or hold signal, all traders act differently based on analysis of the market, and that behaviour can be hardly predicted with market data without considering the reaction of other traders, following media opinion, and studying the general sentiment tied to the present market trends. Some traders may go long while others may decide to go short on a certain asset despite having the same data provided by technical and fundamental analyses, which is why sentiment analysis is used as a backup in decision making.

Although traders may utilise trading tools and indicators to maximise the ROI and make profitable investments, all traders make investment decisions by themselves and according to their own analysis results. All traders must note that each and every investment comes with risk.

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Author: Tokens Team
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