Cryptocurrency trading and investing can be a complex and daunting task for those who are new to the space. This guide will cover the basics of trading and investing cryptocurrency profitably.

Foundations

<p>In the world of cryptocurrency, you can choose to participate in many different ways. You can buy and hold coins like Bitcoin and Ethereum or <a href="https://gainium.io/">trade</a> them on exchanges for a profit. Here we will explore the pros and cons of each method so that you can make the best decision for your needs!</p><h2>The differences between trading and investing in crypto</h2><h3>Time horizon</h3><p>One of the key distinctions between trading and investing is the time horizon. When trading crypto, you want to buy low and sell high in a much shorter timeframe than if you were investing. This means that you will need to be glued to the market, always ready to take advantage of any price changes. Trading crypto is a very active approach to making profits.</p><p>The most popular trading strategies used in cryptocurrency markets are:</p><ul><li>Scalping:&nbsp;Scalping is a trading strategy where traders buy and sell coins in-between minimal price movements to make small profits from each trade. Each position is typically held for only minutes or seconds before moving on to the next trade. They usually make many trades daily, potentially adding up to a nice profit at the end of the day.</li><li>Day Trading:&nbsp;Day traders close deals within a day and seldom keep positions overnight. They monitor the market all the time to profit from intraday price changes. Each trade lasts anywhere from minutes to hours.</li><li>Momentum: Momentum traders enter the trade while the price is trending upwards or downwards, and exit as soon as the trend changes. The goal is to take advantage of market momentum to make profits. This type of trading generally requires the ability to read the charts to time the entry and exit and understand how the markets work. A single trade can last anywhere from one hour to several weeks.</li><li>Swing Trading:&nbsp;This approach takes advantage of a coin's brief-term price fluctuations. Swing traders utilize technical analysis to quickly forecast significant price changes in a specified direction. Swing trades usually last longer than a momentum trades, ranging between a day and a few weeks.</li></ul><p>Investing, on the other hand, generally has a much longer time horizon. You are not as concerned with day-to-day or even month-to-month fluctuations. Instead, you are looking to buy and hold crypto for years or even decades. This means that you can afford to take a more hands-off approach, checking in on your investment occasionally.</p><h3>Research and analysis</h3><p>Another key difference is the amount of research and analysis into each method. When trading crypto, you must be up-to-date on all the latest news and developments. This means regularly reading articles, listening to podcasts, and attending events and meetups.</p><p>Investing in crypto also requires research, but it is done less often. Cryptocurrency investors typically perform a type of fundamental analysis before investing. In traditional stocks, fundamental analysis involves studying a company's financials, such as its income statement, balance sheet, and cash flow statement. However, studying the fundamental value of a crypto asset is much trickier. There are no earnings or cash flows to analyze. Instead, you need to try to determine the fair value of a coin by looking at factors such as the team behind it, the technology, the adoption rate, and overall market conditions. Once you have found a project that you believe in, you can set and forget your investment for the most part. You may need to stay up-to-date on the latest news if you are worried about a major price change, but other than that, you can relax and let your money grow.</p><h3>Time commitment</h3><p>This leads us to the next point: the time commitment required for each method. Trading crypto can be a full-time job, especially if you do it professionally. Some people make a living by day trading crypto and other assets.</p><p>Investing in crypto is generally much less time-consuming. As we mentioned, you can do your research and then check in every so often to see how your investment is doing.</p><h3>Risk tolerance</h3><p>Another key consideration is risk tolerance. Trading crypto is a very risky proposition. Prices can swing wildly from one day to the next, and there is always the possibility that you could lose everything you invest, particularly if you use leverage. Adopting a good <a href="https://gainium.io/academy/managing-risk">risk management strategy</a> will help you avoid losses and remain profitable over the long term.</p><p>Investing in crypto is also risky, but the risks are generally more long-term. For example, you could lose money if the project you invest in fails to deliver on its promises. Or, the value of your investment could go down over time if the overall market shrinks. To mitigate the risks of investing in crypto, you should elaborate a <a href="https://gainium.io/academy/crypto-portfolio-management">portfolio management strategy</a> and stick to it.</p><h3>Capital required</h3><p>To trade crypto, you must have a certain amount of capital available. The exact amount required will vary depending on the size of your trades, but you will generally need at least $1,000-$2,000 to start with. Small account holders can use leverage to increase their effective trading capital. For example, if you have a $1,000 account and use a 10:1 margin, you can trade up to $10,000 worth of crypto. This allows you to make bigger profits on your trades and increases your risk. If the market moves against you, you could lose your money very quickly.</p><p>Investing in crypto does not require as much capital. You can start with just a few hundred dollars, and many investors choose to average dollar-cost. Even if you don't have much money to invest initially, don't worry – you can still get involved in the market.</p><h3>Extra perks</h3><p>One perk of trading is the ability to use leverage to increase your profits. Leverage is, however, a double-edged sword. Using leverage also increases your risk. As mentioned before, if the trade goes against you, you could lose more money than you originally invested. Markets can quickly turn and force <a href="https://www.coindesk.com/markets/2022/06/14/cryptos-see-over-1b-in-liquidations-as-bitcoin-ether-lose-major-support-levels/">liquidation cascades</a> that wipe up millions of dollars in value. So, it is important only to use leverage if you are comfortable with the risks involved.</p><p>Crypto investors have some perks available to earn passive income from their holdings. These perks include airdrops, yield farming, stacking, and interest-bearing accounts.</p><p>Airdrops are when a project distributes free tokens or coins to its supporters. Airdrops are a marketing strategy to increase token awareness, but why refuse free money? Token holders are given a small amount of the token for free or in return for a small favor, such as retweeting a company's message.</p><p>Yield farming is a way to earn cryptocurrencies by loaning crypto assets to DeFi platforms. Yield farmers get to choose how long they want to contribute their assets. This process, which could last a few days or up to a few months, allows users to earn fees daily. Though this is a popular option to earn passive income from your crypto holdings, it has <a href="https://www.fxstreet.com/cryptocurrencies/news/here-are-some-of-the-biggest-risks-when-yield-farming-202012021339">risks</a>.</p><p>Staking is committing your cryptocurrency assets to a blockchain network to validate transactions and support the network. It's utilized by blockchain networks that employ the proof <a href="https://www.investopedia.com/terms/p/proof-stake-pos.asp">of stake (PoS)</a> consensus method. Users get compensated interest on their stake while they wait for block rewards to be distributed. It also has its set of <a href="https://www.fool.com/investing/2022/06/30/3-risks-you-must-understand-before-staking-cryptoc/">risks</a>, though generally considered a less risky approach than yield farming.</p><p>Cryptocurrency interest-bearing accounts allow you to store your digital assets and receive a percentage of that asset as interest. Behind the scenes, the company offering the interest account may trade, lend or participate in staking using your deposit, passing you a portion of the rewards they earn. Once considered a generally safe approach to earning passive income on your investment, this thesis crumbled when the giant Celsius network <a href="https://www.bloomberg.com/news/articles/2022-07-14/crypto-lender-celsius-files-for-bankruptcy-in-cash-crunch">went bankrupt</a> amidst a market meltdown. When choosing an interest-bearing account, you must research the strategies they use to generate yield (I like <a href="https://midas.investments/?p=aff40654">Midas</a> and have been using them for many months now).</p><h3>Yearly ROI</h3><p>Finally, look at each method’s potential return on investment (ROI). When trading crypto, you aim to buy low and sell high as often as possible. If you are successful, you could see a very high ROI. However, it is important to remember that there are no guarantees in the trading world. In reality, most traders lose money due to the high risk of trading. However, with a well-tested trading strategy and a well-defined <a href="https://gainium.io/academy/managing-risk">risk management</a> plan, you can considerably increase your chances of making money.</p><p>Investing in crypto, on the other hand, generally has a lower ROI than (successful) trading. This is because you are not looking to sell right away. Instead, you are hoping that your investment's value will increase over time. While this could happen, it is important to be realistic about the potential ROI and the time horizon required when investing. Crypto investors can turn to airdrops, stacking, yield farming, and interest-bearing accounts to increase the ROI of their investments.</p><h2>The hybrid trading-investing approach</h2><p>When it comes to choosing between trading or investing, there is a third option, which is the trading-investing hybrid approach. This approach involves using wide-range grid bots that automatically make small but consistent profits over weeks or months (that is, if you set up a wide enough range).</p><p>This approach has the benefit of a higher ROI than investing while requiring very little time commitment. In addition, it is a much less risky approach than pure crypto trading. Wide-range grid bots are an excellent choice for beginners and experienced crypto users.</p><h2>Conclusion: which one is for you?</h2><p>Now that we have examined the key differences between trading and investing in crypto, it's time to decide which is right for you. If you are the type of person who is always monitoring the market and enjoys the challenge of making trades, then trading might be the right choice.</p><p>On the other hand, investing might be a better option if you are looking to invest in crypto for the long term and are comfortable with holding your assets for a while.</p><p>It doesn't need to be black and white; you can do both simultaneously. You can allocate some of your capital to trading and another to invest. This is a great option if you are starting and would like to test the waters before diving in.</p><p>You can also go for the hybrid approach and put your investments to work with grid bots, getting the benefits of investing and trading simultaneously.</p>

When it comes to the world of cryptocurrency, there are many different ways you can choose to participate. You can buy and hold coins like Bitcoin and Ethereum, or you can trade them on exchanges for a profit. Here we will explore the pros and cons of each method, so you can make the best decision for your individual needs!

trading-investing.svg

Trading vs. Investing

When investing or trading cryptocurrencies, it is necessary to have methods that guide our decisions. Fundamental, technical and on-chain Analysis can help us determine whether or not a token is a good investment.

fundamental-technical-on-chain.svg

Fundamental, Technical and On-chain Analysis

<p>When trading crypto, it's important to be aware of the risks involved and take steps to manage them. By doing so, you can avoid losses and make more profitable trades. In this article, we cover the type of risks you can encounter when trading crypto and how to mitigate them effectively.</p><h2>What are the type of risks in crypto trading?</h2><h3>Regulatory risk</h3><p>Regulatory risk is the risk that a government will regulate crypto tokens in a way that reduces their value. This risk is especially high in countries where crypto is not yet regulated. Governments may decide to ban crypto trading, or they may regulate it so tightly that it becomes unprofitable to trade.</p><p>There are two main ways to reduce regulatory risk: diversifying your portfolio and staying informed about new regulations. By diversifying your portfolio, you can spread your risk across multiple crypto assets. This makes it less likely that any one regulation will cause a significant loss in value.</p><p>Staying informed about new regulations is also important. By knowing what the government is planning, you can adjust your trading strategy to account for the new regulations. This will help you avoid losses caused by regulatory changes.</p><h3>Technology risk</h3><p>Technology risk is the risk that a cryptocurrency will become obsolete.</p><p>Crypto technology is advancing at an incredible pace, and blockchains are becoming more efficient all the time. For example, the Bitcoin network uses Proof-of-work validation mechanism to process transactions. This allows for the network to process transactions with an average speed of 7 transactions per second. While that's a leap over the slow model of traditional finance, it is no competition for more efficient blockchains such as Solana. Solana is one of the fastest blockchains out there. Using a hybrid proof-of-history (PoH)/proof-of-stake (PoS) consensus mechanism it achieves a speed of 3,000 transactions per second (and could theoretically increase to 710,000TPS).</p><p>There is a lot of controversy about proof of work and its energy consumption impact on the environment, this could lead to a change in the crypto landscape.</p><p>To reduce technology risk, you should diversify your portfolio across multiple crypto assets. This way, even if one cryptocurrency becomes obsolete, your portfolio will not be significantly affected.</p><p>You should also keep up with the latest developments in crypto technology. By knowing what new technologies are being developed, you can make sure your portfolio includes crypto assets that are on the cutting edge. This will help you avoid losses caused by technology risk.</p><h3>Custody risk</h3><p>Custody risk is the risk that you will lose your crypto because you can't access them. This can happen if you forget your password, or if the company you're using to store your crypto goes out of business. You could also lose access to your crypto if you are storing them in a physical wallet and you lose it.</p><p>To avoid custody risk, you should use a reputable crypto custody service. Make sure to keep a backup of your passwords in case you lose access to them. You should also pay special attention to not accidentally throwing away or losing your physical crypto wallet (ask the guy who <a href="https://www.businessinsider.com/james-howells-threw-away-bitcoin-dump-masterplan-get-back-2022-7">accidentally trashed 181M worth of bitcoin</a>).</p><h3>Exchange risk</h3><p>Exchange risk is the risk that an exchange will close down or be hacked. This can result in you losing access to your crypto assets.</p><p>To avoid exchange risk, you should use a reputable exchange. You should also make sure to spread your portfolio across multiple exchanges.</p><h3>Liquidity risk</h3><p>Liquidity risk is the risk that you will not be able to sell your crypto asset at the price you want. This can be caused by low liquidity in the market or by large sell orders. While liquidity is rarely a concern for top market cap tokens, it can be a significant risk when trading small cap tokens.</p><p>To reduce liquidity risk, you need to understand the liquidity of the crypto asset you are trading. You can do this by looking at the order book and volume chart. The order book shows how much of a crypto asset is being offered for sale at different prices. The volume chart shows how much of a crypto asset has been traded in the last 24 hours.</p><p>Another way to reduce liquidity risk is to use limit orders. A limit order allows you to set a price at which you are willing to buy or sell crypto. This helps ensure that you will get the price you want, even if there is low liquidity in the market.</p><p>By understanding the liquidity of a crypto asset, you can know how easily it can be sold. If there is low liquidity in the market, you may have to sell at a discount or wait for a buyer to come along. If there are large sell orders, it may be difficult to find a buyer at the price you want. In both cases, liquidity risk can cause losses.</p><h3>Volatility risk</h3><p>Volatility risk is the risk that the price of a crypto asset will fluctuate rapidly. This can cause losses if you are not prepared for the price changes.</p><p>To reduce volatility risk, you need to understand the historical volatility of the crypto asset you are trading. You can do this by looking at a price chart. The price chart will show you how the price has fluctuated over time.</p><h3>Leverage and liquidation risk</h3><p>To reduce leverage risk, you need to understand how leverage works. Leverage is when you borrow money to invest in crypto. This increases your potential profits, but it also increases your potential losses. So, it's important to understand how much leverage you are using and to be aware of the risks involved.</p><p>If the price of the crypto asset moves against you, you may lose more money than you have invested. If the value of your crypto asset falls below a certain level there is a risk that your whole account balance will be liquidated. When this happens, the exchange will automatically sell your crypto asset to cover the loan.</p><p>Using leverage increases your risk significantly, so it's important to understand how it works. To reduce this risk, you should use a low amount of leverage or avoid using leverage altogether.</p><h2>Risk management strategies</h2><h3>Position sizing</h3><p>Position sizing is the process of allocating a fixed amount of capital to a specific trade. This limits your exposure to any one trade and helps you to stay in the market for the long term. It also allows you to make more trades, which increases your chances of making a profit. For example, a typical position sizing strategy is to use a 1% risk per trade. This means that if you have a $10,000 account, you would risk losing a maximum of $100 on each trade.</p><p>By using position sizing, you can reduce the impact of volatility on your account and spread out your risk over many trades.</p><h3>Risk:Reward Ratio</h3><p>The risk:reward ratio tells you how much you can expect to lose compared to how much you can expect to gain. The risk:reward ratio is calculated by dividing the potential loss by the potential gain. For example, if you think there is a 50% chance of losing $100 and a 50% chance of gaining $200, the risk:reward ratio would be 1:2 (1 divided by 2). This means that for every $1 you risked, you could potentially gain $2 back.</p><p>By using the risk:reward ratio, you can ensure that your risks are limited and that you're making a profit on every trade. It also allows you to maximize your profits by increasing your winning trades and reducing your losing trades.</p><h3>Stop Loss and Take Profit</h3><p>When trading crypto, it's important to use stop loss and take profit orders to limit your risk. Stop loss orders are used to sell a crypto asset if it falls below a certain price. This limits your losses and helps you to protect your capital. Take-profit orders are used to sell a crypto asset if it reaches a certain price. This locks in your profits and helps you to maximize your gains.</p><h2>Incorporating good risk management into your trading strategies</h2><h3>Journaling your gains and losses</h3><p>When trading crypto, it's important to keep a journal of your losses and gains. This helps you to track your progress and identify any problems with your trading strategy. It also allows you to see how well you're doing and whether you need to make any changes.</p><h3>Monitor your win rate</h3><p>Your win rate is the percentage of your trades that are profitable. For example, if you make 10 trades and 6 of them are profitable, your win rate would be 60%. It's important to monitor your win rate so you can identify any problems with your trading strategy. If your win rate is too low, it may be a sign that you're taking too much risk.</p><h3>Measure drawdown</h3><p>When trading crypto, it's important to measure your drawdown. Drawdown is the biggest loss you've ever had from your peak balance. It helps you to identify how much risk you're taking and whether your trading strategy is working. By measuring your drawdown, you can ensure that you're not taking too much risk.</p>

When trading crypto, it's important to be aware of the risks involved and take steps to manage them. By doing so, you can avoid losses and make more profitable trades. In this article, we cover the type of risks you can encounter when trading crypto and how to mitigate them effectively.

managing-risk.svg

Managing Risk

<p>Do you own crypto? Then you have a crypto portfolio. In simple terms, a crypto portfolio is all the tokens that you own. Whether you are a trader or an investor, having a good portfolio management strategy is essential to improving your returns over time. If you are just starting and want to develop a well-balanced portfolio or if you already have one but would like to learn more about managing it optimally, then this article is for you.</p><h2>What is crypto portfolio management and why should you do it?</h2><p>Crypto portfolio management is about using a proven system to profit from crypto in the long run.</p><p>Traders and investors can quickly succumb to fear or greed and make decisions that could potentially put their portfolios at risk. Therefore, having a proper portfolio management system in place can help you keep your emotions in check and save yourself from painful mistakes.</p><h2>How to effectively build and manage your cryptocurrency portfolio</h2><h3>1 - Setting your crypto portfolio allocation/diversification</h3><p>Having the right diversification in place is essential to reducing the risk of volatility. By investing in a variety of different cryptocurrencies, you can mitigate your risk and ensure that you're not putting all your eggs in one basket. Although most crypto assets are correlated, small-cap crypto assets experience much higher volatility than big-cap tokens such as Bitcoin, Ethereum, and BNB. Therefore, by having the right mix of crypto assets you can enjoy the potential high rewards of small cap tokens while safeguarding your portfolio from the violent ups and downs they can often experience.</p><p>Diversification is also important to avoid the risk of total capital loss associated with black swan events that might impact a particular coin. There have been notable examples of crypto assets losing 99% of their value overnight, &nbsp;and while these events are rare, they can still happen. By spreading your portfolio across a large number of crypto assets, you can smooth out the ride and protect yourself from complete loss in case one of your investments were to experience a significant drop in value.</p><p>You may be wondering, how to find the perfect allocation. When it comes to diversification, there is no perfect answer and every portfolio is different. A good starting point would be to have at least 30 different crypto assets, and then you can rebalance from there as you see fit. Make sure to include a good mix of crypto asset categories (smart contracts, gaming, metaverse, stablecoins, Defi, etc.) and blockchains (Ethereum, Solana, Polygon, etc.)</p><p>Another key factor to consider when allocating your crypto portfolio is your risk tolerance. If you are willing to take on more risk, then you can allocate a higher percentage of your portfolio to small-cap and mid-cap crypto assets. However, if you are risk-averse, then you might want to keep a higher percentage in stablecoins and big cap tokens.</p><p>While the mix of cryptocurrencies can vary to your liking, I think it's important to discuss a special role in your portfolio allocation: Stablecoin. How much stablecoin should you keep in your portfolio? This depends on your risk tolerance. If you are a risk-averse investor, then you might want to keep a higher percentage of stablecoins than crypto investors with a higher appetite for risk. Stablecoins are great to have in your portfolio not only because they provide stability and can act as a hedge against market volatility; but because you can quickly use them to buy more crypto when prices are down. I personally always keep somewhere between 30-50% of my portfolio in stablecoins such as BUSD, USDT, and USDC.</p><h3>2 - Dollar-cost averaging (DCA)</h3><p>Once you've diversified your crypto portfolio, it's important to dollar cost average of your investments. This simply means investing a fixed amount of money into your portfolio regularly. This will help you smooth out the price fluctuations and protect yourself from big losses. For example, let's say you invest $100 into your crypto portfolio every week. If the price of Bitcoin goes up $50 one week and down $50 the next week, you're still investing the same amount of money. This helps to protect you from volatility and gives you a chance to buy more crypto when prices are low.</p><p>Dollar-cost averaging is a great way to build your crypto portfolio over time and it's something that I do on a regular basis. If you're new to investing, I would recommend starting with a small amount of money and then increasing it as you get more comfortable with the process.</p><h3>3 - Portfolio tracking and rebalancing</h3><p>As the market ebbs and flows, some of your crypto assets may grow in value while others drop in value, causing your portfolio allocation to differ from your original plan. That's why it's important to track your crypto portfolio over time. This will help you see how your investments are performing and make adjustments as needed. By rebalancing, you can sell off the assets that have done well and buy more of the assets that have done poorly. This will help keep your portfolio aligned with your risk tolerance and investment goals.</p><p>There are a variety of different crypto portfolio tracking apps that you can use. Some popular options include Blockfolio, Delta, and CoinMarketCap.</p><h3>4 - Exit Strategy</h3><p>An exit strategy is another important part of crypto portfolio management. This is because crypto assets are often very volatile, and you need to take advantage of the market conditions.</p><p>Defining your exit strategy is simply planning when you will buy or sell. &nbsp;In other words, when do you plan to take profits, limit your downside, increase your exposure or reduce your exposure to crypto assets depending on market conditions.</p><p>Crypto investors should get into the habit of taking profits regularly. This will help you lock in your profits and protect yourself from any major market crashes. By taking profits regularly, you're also able to invest those profits back into crypto when the prices are low.</p><p>You should always have a selling plan in place. This means that you should know at what price you will sell your crypto assets and take your profits. This will help you stay disciplined and ensure that you don't sell too early or too late.</p><p>For example, what would you do if the price of a crypto asset goes up by 30%? You may decide to lock in some profits and sell 25% of that token. What about if the price of a crypto asset goes down by 20%? Perhaps you would like to take an additional risk and buy more of that asset, or perhaps you would like to sell a portion of that asset to limit your downside. The specific actions you would take in any case depend on your trading style and risk tolerance, but what's more important is that you do have a plan and that you stick to it.</p>

Do you own crypto? Then you have a crypto portfolio. If you are just starting and want to develop a well-balanced portfolio or if you already have one but would like to learn more about managing it optimally, then this article is for you.

Foundations

Trading vs. Investing

Fundamental, Technical and On-chain Analysis

Managing Risk

Crypto Portfolio Management