There are endless reasons why someone would want to learn cryptocurrency trading strategies in 2022. These skills are more valuable than ever, as the market continues to expand and more opportunities emerge across the DeFi sector.
The ability to produce profits from anywhere using a simple PC is a huge benefit for anyone. Crypto trading is a great way to generate ROIs and further your overall financial understanding in 2022. Here are some crypto trading strategies for beginners to take your skills up a notch.
Crypto Trading in 2022 – It’s the Right Move
Like stocks and other global assets, cryptocurrencies can be bought, sold, and traded via marketplaces or directly between users. In most scenarios, traders rely on an exchange to facilitate the discovery and execution of these trades.
Crypto exchanges come in many different types nowadays. They each serve a vital role in connecting traders and ensuring that the transactions complete securely and in an efficient manner. As such, it’s vital to select an exchange that meets your trading requirements.
Not Every Exchange is Built Equal
Choosing the right type of exchange does require a little research as each platform operates uniquely and in an independent manner. In general, there are two main types of exchanges used by most traders in the market today, CEXs (centralized exchanges) and DEXs (decentralized exchanges). Here’s what makes these platforms different and why one is probably better suited to your trading style than the other.
CEXs (Centralized Exchanges)
Centralized exchanges have been a staple in the crypto market ever since it began. These large centralized platforms enable users to meet up and trade crypto conveniently and responsively. One of the first CEXs to make an impact in the crypto market was Mt.Gox. At one point in time, Mt.Gox was responsible for the majority of Bitcoin trading volume globally.
There are some advantages of CEXs. For one, they are generally more regulatory friendly and they provide a familiar trading experience to users. Most CEXs were designed to mimic stock trading platforms. As such, they operate using an orderbook. This book lists all trades available. Users interact with the order book and trade with other users.
Notably, CEXs rely on the orderbook to ensure the proper pricing of assets. Since each platform is different, there is usually some leeway between the prices of each CEX. This price difference leads to arbitrage trading opportunities as savvy users will often transfer digital assets between exchanges to obtain these automatic gains.
CEX Disadvantages
The downside of CEXs is their centralized nature. CEXs represent a major choke point in terms of decentralization in the market. If you have a project like Bitcoin, which is meant to remain decentralized but the main way people trade is via a CEX, the entire market becomes more centralized.
This centralization has led to CEXs taking a more aggressive stance in the market. In the past, they have used their positions to help usher in new projects and features that may have otherwise never seen such quick success. Additionally, CEXs bring an entirely new set of dangers.
Custodial CEXs
The main issue with CEXs is their custodial nature. Most CEXs such as Coinbase or Binance, require you to load your cryptocurrency onto a network wallet before your trading. This network wallet also holds the crypto for thousands of other traders. As such, it can become a tempting target for hackers.
CEX Hacks
You don’t have to look very far to find major CEX hacks in history. One of the most devastating was the Mt.Gox hack. In 2014, when cryptocurrency was still in its fledgling state, the Mt.Gox exchange suffered one of the largest crypto thefts in history. In this now-infamous incident, a hacker was able to obtain backend computer credentials which they used to siphon 740,000 Bitcoin from the platform.
The sheer size of the exchange and the losses incurred led to a major price drop in Bitcoin that would last for years. It also helped developers to realize that another type of exchange was needed to better protect against these attacks. The result of their efforts was the creation of a new type of exchange called DEXs.
DEXs (Decentralized Exchanges)
DEXs operate in a slightly different manner than their centralized counterparts. For example, most DEXs are AMM (automated market makers). This designation means that they lack an orderbook but instead utilize smart contracts to facilitate trading and price discovery. This method is more secure but can result in more slippage.
DEXs do away with the need to load your crypto onto a large wallet. Instead, your digital assets remain safely stored in your wallet until the point of trade. This approach helps to remove the main draw for hackers as there is very little incentive to hack these platforms versus the millions in crypto to be had when hacking a CEX.
DEX Disadvantages
While DEXs are more secure because they don’t hold your cryptocurrency, there are still some disadvantages. For example, DEXs lack many of the most common features found on CEXs. Options such as limit orders are now just making their way to the market.
A limit order is a preset trade that triggers at a certain price point. This option is used by traders regularly to ensure that they buy or sell at the optimal position. These features and others have proven to be a hard addition to DEXs, mainly because they don’t rely on an orderbook to facilitate trades.
Another issue to be aware of is the onboarding process of DEXs. Unlike CEXs, many DEXs require you to hold the main network’s tokens as a means to fuel transactions. For example, the popular DEX Uniswap requires users to hold a certain amount of Ethereum to conduct any trades on the exchange. While this isn’t a huge issue, it does require new users to adjust to meet the criteria.
How DEX Developers Combat these Issues
Platforms such as the META DEX combat these issues in multiple ways. Unlike its predecessors, the META DEX includes a direct fiat to Crypto onramp. This feature, which was made possible by a recent partnership with Onramper, enables users to convert their fiat to crypto using +50 types of global currencies in over 150 countries. This strategy helps to reduce onboarding issues of the past. META DEX users can simply use the Onramper portal to effortlessly enter the METANOMICs DeFi ecosystem.
Next-Gen DEXs offer More Features
Another major development in the DEX sector is the addition of more features. DEXs like the META DEX offers users a more familiar trading experience. The network provides access to trading features such as limit orders and more.
In addition to these options, platforms like META operate as a gateway to entire DeFi ecosystems. META DEX users can trade, HODL, stake, save, and spend their crypto securely and safely.
Tips to Drive Your Trading Strategy
The first and most important thing to understand as a trader is that you will need to DYOR (do your own research). This statement may seem obvious but it’s worth breaking it down to better understand how it can affect your results. The term DYOR is an acronym that means you need to always double-check the information you receive.
Applying DYOR to Your Trading Strategy
A more recent example of how the DYOR concept can save your profits is the Bitconnect fiasco. Bitconnect was a crypto Ponzi scheme that promised to repay lenders insane profits for their crypto loans. However, anyone who took the time to research the platform’s technical characteristics could easily see that the protocol was unsustainable. As such, it quickly failed and left traders holding the bag.
Analysis
Part of doing your research is sharpening your analysis skills. There are multiple ways to analyze a crypto project today. Professional traders may utilize a system called technical analysis. This approach requires you to review the indicators regarding a project including charts, price history, and recent market developments.
Technical analysis may seem difficult at first but the introduction of helpful tools and metrics has simplified the process over the last 3-years considerably. Crypto traders have the advantage of access to most stock trading technical indicators. Tools such as the MACD or Bollinger bands represent unique ways of gauging the market movements of a project.
The main goal of these indicators is to enable you to see when a potential breakout is about to occur. The term breakout refers to when an asset begins to break free from a trading range. Catching these trends before the rest of the market can help you to improve your ROIs considerably.
Social analysis
Uniquely, the internet plays a vital role in the growth and expansion of cryptocurrencies. As such, you can also measure the amount of online discussion and the temperament of these talks to better gauge a project’s potential. For example, when one of the world’s richest men, Elon Musk, posted a meme that had the famous Shiba Inu from Dogecoin on it, it was a sign that the project was set to receive a major bump in traders.
Monitoring social media activity is one of the best ways to determine the movements of a particular project. Reversely, if a project has very little social media activity, it’s safe to assume that traders are losing interest in the project which may result in less trading activity and a loss in value.
Signals
Another great way to stay ahead of the curve is via signals. Signals are company-published statements and posts that are directly meant for traders to view. These posts are usually published via market management tools. For example, when you sign up for the FTX market management Dapp, you gain access to custom signals.
These tools allow you to select projects to receive signals from directly. Signals are great because they notify you of major company developments such as the launch of a mainnet or a CEX coin listing. Both of these activities are historically followed by large upswings in price.
Buy Low Sell High
Once you have narrowed your selection down to projects you see potential in, you’re ready to begin trading. It’s often said the secret to trading is to buy low and sell high. While this strategy seems obvious, it’s quite difficult for most traders to follow as it goes directly against human nature.
When people see a project shooting upwards, they experience a phenomenon called FOMO (fear of missing out). FOMO is extremely dangerous for new traders as it can cause them to jump on projects that are at their all-time high. It can also make you trade out of your holdings during market downturns. However, these actions are the exact opposite of what you need to do. Consequently, you must conquer FOMO to become a successful trader.
Diversify Your Holdings
Another great way to better your trading strategy is to diversify your holdings. The crypto market is full of exciting and new projects worth watching. Finding a nice basket of assets can help you to obtain a more consistent ROI versus one project. Diversifying your assets is an age-old strategy that remains relevant in the digital economy today.
It’s not always Cut and Dry
Another vital lesson to understand is that there are large traders called whales that can make your time more difficult. These major traders can shift the market metrics and make projects look appealing for a moment and then tank their value. Thankfully, platforms such as META1 have begun to institute whale manipulation protections for users. These systems insulate you from pumps and dumps and other whale schemes to take your earnings.
Crypto Trading in 2022 – Let the Games Begin
Now that you have some insight into what it takes to be a successful trader, you are ready to enter the market. The general rule of thumb for new traders is to never trade more than you are willing to lose. Remember, there is a learning curve that you must overcome. Additionally, some outside influencers can also affect your result