The top 5 tools you need to start crypto trading
It’s no secret you can make a lot of money crypto trading. According to The Telegraph, the top traders hold an estimated $1 billion apiece. With Bitcoin hovering around $10,000 and the halvening coming up, this could be the year to start crypto trading yourself.
However, crypto trading is still considered uncharted territory. For every success, there are at least two failures. To stand a chance of making any money, you should be familiar with all the trading tools at your disposal and how to use them.
So here are a few tips on the best trading tools and what are some of the best free trading tools for beginners..
This one is obvious, but any top trader will tell you to read the news if you want to earn money.
Fortunately, we live in an age where information is everywhere we look.
With an internet connection, you have access to hundreds of forums like Reddit, Quora, and Telegram where you can feel the pulse of the crypto community. Here traders post inside-info about new products and services along with personal experiences they’ve had while trading.
“Don’t blindly follow someone, follow the market and try to hear what it is telling you.”
― Jaymin Shah (NewsEsquire founder)
There are also dozens of dedicated crypto news sites to check out like Coindesk, Cointelegraph, and The Block. They employ top-notch journalists (some more than others) to do the deep digging for you. There are, of course, many sub-par news sites as well so it’s important to cross-reference new information, especially when you’re just starting out.
Here’s an interesting tip: Many pros track prices by simply watching the number of hits in Google and Twitter analytics for a specific coin. When hits go up, so does the price and vice versa. Don’t take my word for it. Look it up.
Almost as important as reading news is knowing which exchange is right for you.
Just like Wall Street with its stock exchanges and brokers crypto has its own online exchanges and brokers.
As a trader, you need to understand the different exchanges and find the ones that best suit your trading style.
Exchanges vary greatly in function, size, and interface. Some only accept users from certain regions, some only exchange certain cryptos. Some let you trade directly between other people and others work as a broker for your assets. Top exchanges like Binance serve user bases of more than 6 million, move more than 150 coins and $500 million in assets every day. Others only serve a fraction of that number.
If you want a no-nonsense look at exchanges ranked by volume and coins, look at the rankings on Coinmarketcap. However, if you’re new you should probably look at something less heady like this list from Blockgeeks. They give a great basic overview of all the top trading platforms and what to expect on them.
Trading is a great way to earn, but did you know you can make money with cryptocurrencies even when you aren’t trading?
You can do this through staking.
Some cryptos are built upon networks that require staking to validate transactions, such as transferring the crypto from one person to another. If you help the network validate these transactions, you can earn a staking reward.
All you need is some cryptocurrency to stake on the network and then you’ll be chosen at random to validate transactions (and earn the reward). The more you stake, the greater the rewards, so it’s a great way to earn a passive income on your holdings.
Having said that, staking does have an upfront cost. In most cases, you must set up your own node on the network and this can require substantial funds and electricity to run (and a bit of technical know-how).
Sometimes, you might want to buy a large amount of crypto because you expect the price to increase, but your money might be tied up in other assets.
In these situations, a crypto-backed loan is a lesser-known but effective tool used by savvy traders to free up funds they know they can pay back later. With a crypto-backed loan, you can leverage the value of your current holdings to obtain money or stablecoins without selling them.
Of course, this is a risky strategy and you should be prepared to lose your collateral if your prediction is wrong.
Here’s an example of a well-timed leveraged trade:
1. Say you own 50 ETH and you have a feeling that the price will go up soon, so you want to buy more.
2. You put down all of your ETH (let’s say 1 ETH= $280 right now) as collateral for a loan of $9,240 at 8% interest.
3. You use the loan to purchase 33 more ETH.
4. The price of ETH increases from $280 to $350.
5. Now your 33 ETH is worth $11,550. You would now have enough asset value to pay off your loan completely and still have $1,571 in your pocket. Not to mention the 50 ETH you’ll get back once you repay.
Here’s an example of a poorly-timed leveraged trade:
1. You use 50 ETH to take out a loan to buy 33 ETH (1 ETH = $280)
2. Unfortunately, the price of ETH falls to $250 instead of going up as you predicted.
3. Suddenly, your 33 ETH is now only worth $8,250. To pay off your loan you need to come up with over $1,500 dollars or risk losing your collateral.
Loans can be a powerful tool, but with great power comes great responsibility. Remember: only borrow what you can afford to repay.
There are many places you can go to obtain a crypto-backed loan, but many of them are only limited to a handful of coins and only allow you to withdraw funds in stablecoins.
On MyConstant, you can borrow against 75+ different coins and withdraw loans in any major stablecoin or fiat currency like USD, HKD, or RMB. Loans on MyConstant require you put down 200% of your loan value as collateral and you decide the interest rate and term.
DeFi or Decentralized Finance is a suite of applications on the blockchain that allow you to lend, earn, transfer, and borrow cryptocurrencies autonomously.
Decentralized finance often lacks the personal touch and customer service of a centralized financial platform. However, because DeFi processes are autonomous, they’re proving much quicker, cheaper, and more reliable than traditional platforms.
You can find a great list of the best DeFi platforms on DefiPulse. We also wrote an overview of DeFi on our blog that I encourage you to read.
It’s an exciting time to enter the rapidly morphing and expanding crypto universe. Every year, new projects materialize and add something more exciting and profitable to the landscape.
Let me send you on your way with a final word of advice.
Many companies in the crypto space are new, dealing with complex technology. Even the most established platforms are still squashing bugs and mending security flaws.
There are also many people and platforms that masquerade as “get-rich-quick” schemes and trusted entities. Ensure you’re aware of the data you’re sharing and that you place important info like wallet keys somewhere private, safe, and recoverable.
Lastly, though crypto is largely unregulated, some countries (like China) do have some regulations on this sector. It’s important to look into your local laws so you know what you can and cannot do with your earnings.
Risks aside, I hope this article has given you 5 best trading tools and advice you need to feel comfortable crypto trading. If done correctly, it can be a very rewarding experience. With global adoption on the rise, it’s safe to say you are taking part in the future of finance.
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