Simple Tips that Will Help You Trade Bitcoin (and Other CryptoCurrencies)

When you buy/sell via an exchange, try to use limit orders (try not to use market orders). Limit orders have the lowest fees; market orders have higher fees. On GDAX, limit orders are free as long as they don’t fill immediately. Meanwhile, market orders result in a .3% fee, which is better than the 1.4% that Coinbase charges but not as good as 0%, especially if you are day trading.

If you are going long, consider dollar cost averaging. No better way to avoid making a poorly timed trade than to dollar cost average (buying incrementally instead of all at once and thereby buying an asset at its “average” price over time). If you don’t have a really solid grasp of technical indicators, consider averaging out of positions as well.

Consider laddering your buys and sells. In others words, instead of buying or selling everything in one chunk, set incremental buy and sell orders to buy when the price goes down and sell when the price goes up.

Dad advice: Aim to buy low, sell high; try not to buy high or sell low. Look at the price trend: if you are at the highest point it has been in the past 24 hours or so, that is inherently riskier. It can make sense to buy as the price starts to break out, but buying after a breakout at a new high while filled with excitement is a little “irrationally exuberant.” This is to say “buy the dips” and “the best time to buy is when there’s blood in the streets… even if it is your own.” Conversely, the worst time to buy is right after the price has shot up and everyone is manic. If you do buy high, consider HODLing (to “HODL” is to Hold On for Dear Life as the price goes down. It is what you do when you buy high and then neglect to set a stop or if you are going long and can’t or don’t want to cash out yet).

Learn to value coins in BTC. Bitcoin is the current primary currency of the crypto economy (i.e., its what you have to use to buy most altcoins). Those new to crypto tend to value things in dollars. Meanwhile, even seasoned cash traders value coins in dollars. However, enough crypto traders will value coins in BTC for it to matter. If you aren’t aware of the BTC charts, you won’t be able to properly understand the trends everyone else is analyzing and reacting to. You don’t have to make getting more BTC your goal, but you must have the BTC prices of altcoins on your radar. There are times when all coins move up, but altcoins steadily lose value against Bitcoin. Those who know will be the first to dump altcoins for Bitcoin; this will set off a vicious cycle that can result in the stagnation of altcoin prices.

Learn Technical Analysis. Technical Analysis (TA) is the analyzing of price and volume data and trying to predict future trends based on that. If you know how to read a chart, you’ll be better able to understand how things like candles, moving averages, RSI, and the order book can clue you into good spots to buy and sell. TIP: You don’t have to be good at this, you can just follow others who are. Fibonacci support and resistance levels, moving averages, RSI, and a few other popular indicators are vital to wrap your head around. All the pros use these, and all the big players have bots who run strategies based on these. You can’t afford to ignore TA if you are going to trade crypto. I suggest you get familiar with tradingview.com ASAP. See a basic TA strategy.

Watch the Order Book. The order book (found on all exchanges) can give you a good sense of what buy/sell orders are on the books. If you see a lot of sell orders at a certain price and want to sell, you may aim to sell under that price. Likewise, if you are waiting for the price to drop to buy, look at the distribution of other people’s buy orders. Just watch out for artificial buy walls and sell walls (large orders that aren’t meant to fill). You’ll almost always find buy walls and sell walls at support and resistance levels.

React to “the Mood of the Market,” But Otherwise Pick a Strategy and Stick With It. The market changes moods, and some strategies are better than others in a given market. So you’ll likely want to evolve your strategy as the market changes, and you learn. However, you’ll likely want to avoid things like going long for most of the year, but then 9 months into your investment you start day trading when the market is down. Sometimes it can be tempting to change one’s strategy to adjust to the current market (for example if the market is bearish and trading in a tight range), however, this can get you in real trouble. A long investor who starts going short will start realizing capital gains and will risk being in fiat if and when there is a recovery (recoveries, like corrections, can come on very quickly and without warning).

Don’t get itchy fingers (AKA be wary of FOMO buying). As noted above, if you have a strategy, stick with it. Sometimes the market will go nuts, and you’ll see epic gains, and you’ll get FOMO (all humans get FOMO, it takes discipline not to react to it). Selling or buying at that time may make sense, but don’t get nervous and switch up your whole strategy without thinking about it. That is often when bad moves are made. If you are going to buy heavily or sell heavily on a whim, consider taking a step back first.

Don’t share your private keys or passwords. You have to share your public address to receive coins, but never share your private keys or passwords with anyone. If you can avoid being online when you enter your private keys and passwords, that is even better.

Double check you are using the right link. Some scam sites will use a similar domain or a very close Twitter address to run phishing scams. Double check everything.

Dad Advice: Don’t invest more than you can afford to lose. No really, there will be many great investments in your lifetime, there has been in Bitcoins lifetime. Bitcoin doesn’t cost $225 anymore. The chances that you’ll never have to work again if you invest your life savings in Bitcoin aren’t non-existent, but they aren’t as good as they used to be. If Bitcoin ends up down, you’ll be hodling the bag while others are on to better and brighter pastures.

Watch the news. Did Russia and China just come out against exchanges? Is Bitcoin about to fork?

Know when to take a loss. Nothing is less fun than taking a loss, but if you are going short in BTC and you haven’t set a stop, sometimes it makes more sense to take a loss and wait for a better price than it does to suddenly start going long.

Know thy taxes. Speaking of legal tender like the USD, it is what you use to pay taxes. If you don’t understand Bitcoin’s tax implications, brush up on them before you start power trading. One could get them into a situation where they make money on paper, but end the year down in Bitcoin without taking their loss, and thus end up owing a bunch of money they don’t have in taxes. Those who don’t have investment experience can get in trouble if they don’t understand the somewhat complex implications of trading crypto.