Cryptocurrency Trading Tips on Binance

How do I start trading cryptocurrency?

If you’ve decided you’d like to start trading, here are a few things to consider.

Firstly, you’ll, of course, need capital to trade with. If you don’t have savings and start trading with money you can’t lose, it can have a seriously detrimental impact on your life. Trading isn’t an easy feat – an overwhelming majority of beginner traders lose money. You’ll need to expect that the money you put aside for trading can vanish quickly, and you may never recover your losses. This is why it’s recommended to start with smaller amounts to test out the waters.

Something else you’ll also need to think about is your overall trading strategy. There are a lot of possible avenues to take when it comes to making money in the financial markets. Depending on the time and effort you can put into this undertaking, you can choose between many different strategies to achieve your financial goals.

Lastly, here’s an additional point. Many traders are at their best when trading isn’t their main source of income. This way, the emotional burden is easier to bear than if their day-to-day survival depended on it. Eliminating emotion is a core trait of successful traders, and it’s significantly harder to do when one’s livelihood is at stake. So, especially when you’re starting out, you could think of trading and investing as a side venture. And remember to start with small amounts for the sake of learning and practicing. It may also be beneficial to look into ways of making passive income with cryptocurrency.

If you’d like to learn about simple mistakes to avoid when it comes to trading and technical analysis, check out 7 Common Mistakes in Technical Analysis (TA).
 

How to trade cryptocurrency on Binance

So, you’ve decided you want to get into the world of trading cryptocurrency. What do you need to do?

First, you need to convert your fiat currency into cryptocurrency. The easiest way to do that is by going to the Buy Crypto page on Binance, where you’ll have a plethora of options. You can buy crypto with debit and credit cards, using your bank account on the P2P exchange, and through third-party solutions like Simplex, Paxful, or Koinax. Once you’re done, you’ll be part of the new financial system!

Now that you’ve got your cryptocurrency, the potential options are abundant. Right away, you can go to the Binance spot exchange and trade coins. If you have previous experience with trading, you could also check out the Binance margin trading platform or Binance Futures. There are also passive income opportunities available, which include staking, lending your assets in Binance Savings, joining the Binance mining pool, and more.

So far, these all included what is called a centralized exchange – like Binance. These are exchanges where you deposit your crypto and do your financial activities within the exchange’s internal systems. However, thanks to the magic of blockchain technology, there are other options out there called decentralized exchanges (DEX). On these venues, your funds never leave your own cryptocurrency wallet, so you’ll have full custody of them at all times. You can also connect your hardware wallet and trade directly from it.

Centralized exchanges are dominant in the cryptocurrency space. But many traders and blockchain enthusiasts believe that a significant portion of cryptocurrency trading volume will happen on DEXs in the future. Go to Binance DEX and try out the trading experience yourself!

What is a trading journal, and should I use one?

A trading journal is a documentation of your trading activities. Should you keep one? Probably! You could use a simple Excel spreadsheet, or subscribe to a dedicated service.

Especially when it comes to more active trading, some traders consider keeping a trading journal essential to becoming consistently profitable. After all, if you don’t document your trading activities, how will you identify your strengths and weaknesses? Without a trading journal, you wouldn’t have a clear idea of your performance.

Bear in mind that biases can play a major part in your trading decisions, and a trading journal can help mitigate some of them. How? Well, you can’t argue with the data! Trading performance all comes down to numbers, and if you’re not doing something well, that will be reflected in your performance. By meticulously keeping a trading journal, you can also monitor what strategies perform best.
 

How should I calculate my position size in trading?

One of the most important aspects of trading is risk management. In fact, some traders argue it is the most important thing. This is why it’s critical to calculate the size of your positions with a standardized formula. Here’s how the calculation goes.

First, you need to determine how much of your account you are willing to risk on individual trades. Let’s say this is 1%. Does it mean you enter positions with 1% of your account? No, it means that if your stop-loss is hit, you won’t lose more than 1% of your account.

That may seem too little, but this is to make sure that a few inevitable bad trades won’t blow up your account. So, once you’ve got this defined, you need to determine where your stop-loss is. You do this for each individual trade, based on the specifics of the trade idea. Let’s say you’ve determined that you’re going to place your stop-loss 5% from your initial entry. This means that when your stop-loss is hit, and you exit 5% from your entry, you should lose exactly 1% of your account.

So, let’s say our account size is 1000 USDT. We’re risking 1% with each trade. Our stop-loss is 5% from our entry. What position size should we use?
 

1000*0.01/0.05=200

If we want to only lose 10 USDT, which is 1% of our account, we should enter a 200 USDT position.

This process can seem a bit lengthy at first, but it’s essential for managing risk properly. Good news, we’ve got an entire article about it: How to Calculate Position Size in Trading.

What online trading software should I use?

Chart analysis is a core part of any technical analyst’s trading toolkit. But where is the best way to do it? Binance has integrated TradingView charts, so you can do your analysis directly on the platform – both on the web interface and in the mobile app. You can also create a TradingView account and check all Binance markets through their platform.

There are numerous other online charting software providers in the market, each providing different benefits. Typically, though, you’ll have to pay a monthly subscription fee. Some other ones focused on crypto trading are Coinigy, TradingLite, Exocharts, and Tensorcharts.
 

Should I join a paid group for trading?

Most likely not. Great free information about trading is abundant out there, so why not learn from that? It’s also useful to practice trading on your own, so you can learn from your mistakes and find what works best for you and your trading style.

Entering a paid group can be a valid learning tool, but beware of scams and fake advertising. After all, it’s quite easy to fake trading results to gain followers for a paid service.

It’s also worth thinking about why a successful trader might want to start a paid group in the first place. Sure, a bit of side income is always welcome, but why do it for a hefty fee if they’re doing so well already?

With that said, some successful traders run high quality paid communities with additional services such as special market data. Just be extra careful who you give your money to, as the majority of paid groups for trading exist to take advantage of beginner traders.

 

What is a pump and dump (PD)?

A pump and dump is a scheme that involves boosting the price of an asset through false information. When the price has gone up a significant amount (“pumped”), the perpetrators sell (“dump”) their cheaply bought bags at a much higher price.

Typical price pattern of a pump and dump scheme.


Pump and dump schemes are rampant in the cryptocurrency markets, especially in bull markets. During these times, many inexperienced investors enter the market, and they are easier to take advantage of. This type of fraud is most common with small market cap cryptocurrencies, as their prices are generally easier to inflate due to the low liquidity of these markets.

Pump and dump schemes are often orchestrated by private “pump and dump groups” that promise easy returns for joiners (usually in exchange for a fee). However, what usually happens is that those joiners are taken advantage of by an even smaller group who have already built their positions.

In the legacy markets, people found guilty of facilitating pump and dump schemes are subject to hefty fines.

 

Should I sign up for cryptocurrency airdrops?

Maybe, but be extra careful! Airdrops are a novel way of distributing cryptocurrencies to a wide audience. An airdrop can be a great way to make sure that a cryptocurrency isn’t centralized in the hands of only a few holders. A diverse set of holders is paramount for a healthy, decentralized network.

However, there’s no such thing as a free lunch. Well, sometimes, there may be, if you get very lucky! Typically, though, what happens is that the promoters of the airdrop will outright try to take advantage of you, or will want something in return.

What will they ask for? One of the most common “assets” asked in return for an airdrop is your personal information. Is your personal data worth $10-50 worth of a highly speculative cryptocurrency? That’s your choice to make, but there may be better ways to earn a bit of side income, without putting your privacy and personal data at risk. This is why you need to be extra careful when thinking about signing up for cryptocurrency airdrops.
 

Closing thoughts

So, we went through a lot, haven’t we? Getting started with cryptocurrency trading can be a daunting task – there are so many concepts to learn. Hopefully, this guide has helped you feel a bit more comfortable with cryptocurrency trading.

However, there is always more to learn! This is why we’ve created a QA platform specific to cryptocurrency: Ask Academy. If you have any further questions about cryptocurrency trading, blockchain technology, cryptography, or other related topics, feel free to post one and the community will answer it for you! See you there.