Cryptocurrency Insurance

Blockchain | Crypto News | Exchanges | Latest News

As cryptocurrency continuously evolves and gets adopted, the question of insuring it has come up. In the last year alone, a few cryptocurrency exchanges have been hacked and millions of dollars lost like Coincheck, Coinrail, Bithumb, and Bitgrail. A report posted last year on Coindesk estimate a value of $2.7 million is stolen every day from crypto exchanges by hackers. Cryptocurrency as it stands is more lucrative than regular fiat and that is why it attracts the criminal hacking activities that plagues most exchanges. Enter global insurance companies.

So far a number of insurance companies have emerged with insurance services for cryptocurrency. They include XL Caitlin, Mitsui Sumitomo Insurance and Chubb. BlockRe is one insurance company that is solely dedicated to offering crypto insurance for digital asset holders and blockchain users. Last year, there was a conference held regarding insuring cryptocurrency dubbed Decentralized Insurance Developer Conference. Crypto insurance does not come without its risks. And I will list a few of them here:

  1. Currency of Claim – in normal settings, insurance claims are paid out in the currency of the respective countries where they were taken from. Compared to fiat currency, crypto is very volatile and this poses a problem in paying out the claims. For example, Bitcoin could be worth $18,000 today and $10,000 the next, which means that the sum assured would change from time to time. To avoid such problems as to if the company has set aside any enough reserves in the event of these occurrences, some insurance providers offer to hold some of the crypto in order to make the claim payments.
  2. Unpredictability – one of the most convenient ways of insurance services provision is the reliability of the market trends and history as such. Many companies rely on the market trends in order to make their calculations as well as draft their policies. As for cryptocurrency, the nature of the market is one that is almost impossible to predict. It also does not help that the entire system is based on technology which is also highly unpredictable and evolves consistently. Keeping abreast with developments may not be the easiest thing nor the cheapest for insurance companies.
  3. Anonymity – it is literally the whole modus operandi of cryptocurrency transactions. Which attracts a lot of negative users such as terrorists, fraudsters, hackers, corrupt politicians, criminals and such. Now, insurance policies cannot be issued to anonymous clients, which limits their services to a great extent.

As it stands, these issues have greatly affected the idea behind offering insurance services as there are very few takers, and investors are looking for ways to protect their assets. Marsh & McLennan insurance company recently formed a team of 10 professionals to service blockchain startups and AON which stands as the world’s second largest insurance brokers, offered crypto coverage for Metaco clients.

According to AON, the insurance policies will offer crime insurance products to Metaco clients that use both online and offline wallets. The step by AON will attract other insurance providers into investing in cryptocurrency insurance especially for hot wallets and exchanges. As it stands, the supply of digital asset insurance does not keep up with the demand. There is over $100 billion in cryptocurrency circulation but about $6 billion in insurance coverage available. It is also widely assumed that the cost of insuring cryptocurrencies will not be for the weak pockets; for example, insurance provider Allianz offers crypto insurance services but does not advertise the products on their website. Contacting the brokers directly seems to be the only option as to find out the extent of the policies offered. An expert on the idea of digital assets insurance stated that the cost of premiums in a year could go as high as $200,000 and that is for companies as opposed to individual clients.

Other strides into crypto insurers is the partnership between Gemini and AON to provide custody of digital assets. Another move in the same direction was made by Lloyd’s Bank and Kingdom Trust Cryptocurrency Insurance. The latter already stores over thirty assorted cryptocurrency token types. In addition, Lloyd’s Bank also provides insurance coverage for 2% of Coinbase’s funds.

In conclusion, there are a few concerns as to developing insurance products for cryptocurrencies. Namely being that there is a gap in information about cryptocurrencies and blockchain which means that the transparency aspect has to be addressed. Another issue is that concerning cryptocurrency value in the sense of settling claims since policies are in crypto but settlements are in fiat. Companies like AON are paving the way for other insurers in the sense of market evaluation. Another issue would be the accommodation of individual cryptocurrency holders being able to access insurance directly at affordable rates as compared to offering the service to exchanges and companies only.

On the first of May, CoinMarketCap announced that all the exchanges that will not provide mandatory data by June 2019 will be promptly removed from their calculations. The cryptocurrency data provider stated that the reason for this move was to provide greater transparency, accountability and accurate disclosure to the crypto space. In pursuit of transparency, all cryptocurrency exchanges will be required to provide mandatory API data including live order book data and failure to comply to this, CoinMarketCap stressed that any exchange will be promptly removed from its price and volume calculations. This condition will come into effect as of the 14th of June 2019.

Fast track the issue of crypto exchanges not submitting factual information as regards trading volumes or rather the concept of wash trading. Was trading by definition is a scenario where a trader buys and sells a security for the express purpose of feeding misleading or wrong information to the market concerned. Why CoinMarketCap is becoming strict with exchanges is because it is the number one provider of crypto trading information. As of 25th April 2019, Forbes conducted research regarding crypto exchanges and the legitimacy of their trading volumes.

Cryptocurrency exchanges are generally unregulated and this is beginning to become a concerning the maturity of the crypto space. The Blockchain Transparency Institute compiled a report at the end of 2018 detailing information collected from the top 25 crypto pairs from sixty seven different exchanges listed on CoinMarketCap and came up with shocking levels of wash trading evidence. The practice of wash trading is apparently so rampant where traders buy and sell their own orders to create an appearance of higher trading volumes than there really are as pertains a particular asset.

Yesterday, Cryptobriefing posted a damning article after the findings of the research carried out by the Blockchain Transparency Institute pointed fingers at the crypto exchange Binance being involved in wash trading. The percentage of market manipulation displayed on Binance was not specified but it is worth noting that there are a good number of exchanges whose numbers are over 90% genuine such as Liquid, Kraken, Coinbase, Poloniex, Lykke, Gate and Bisto with Kraken being the ‘cleanest’ of them all. Kindly take a quick look at the graph provided here at the time of the report showing the real volumes as opposed to those projected on a few exchanges.

The Forbes article was coined ‘95% of volume could be wash trading…’ which seemed to agree with one of the key points from the research by Blockchain Transparency Institute that most of the trading volume pairs reported were in actual sense about 1% of what was presented. I do not know about you but I find that grossly flabbergasting. I mean there are so many strides being made in cryptocurrency and I can imagine as the investor pool diversifies and increases, they would not be happy to know that the figures being presented to them are fictional. For the most part that is. Even an anonymous crypto surveyor of sorts based in Cyprus known as Cryptointegrity comprised of independent volunteer researchers from Europe and Asia reported in February 2019 that as high as 86% of trading volumes are completely artificial.  

So what is the resolve by CoinMarketCap going to do? The data provider partnered with Data Accountability and Transparency Alliance (DATA) on a three part executive agenda. The first part is as mentioned earlier, the mandatory provision of data by exchanges that wish to have their calculations remain on the site. The second phase is in-depth analyses of the information from the exchanges, which might include wallet addresses information, live market pair status and trading data history.

The third phase is providing data users with informed insights into blockchains as they continue to grow verified exchanges onto their databases. As it stands, 12 crypto exchange companies are on board. Wash trading effect reaches as far as trading bots that make all their returns based on the information provided on exchanges. Not to mention potentially ruin investment opportunities especially with institutional investors that are steadily becoming the driving force behind adoption and evolution of crypto and blockchain.

Not to mention that the SEC could potentially use this as a basis of their growing concern over the volatile and unchecked nature of digital assets seeing that until now Bitcoin ETFs are yet to be approved. I mean the reality that the genuine trading volumes are as low as 8-50% and it’s a point to impress users, then crypto stability is in big trouble. It causes a lot of issues regarding transparency as well as trust in the information that every crypto enthusiast relies on. The extent of the effect of wash trading remains to be seen but hopefully the CMC can restore some sort of verifiable figures as soon as possible.

 

The company had earlier announced their intention to register their very own crypto exchange by the end of April, at the conclusion of their registration with the country’s financial regulator. The company was incorporated in 1999 with the aim of giving merchants more power but at a lesser cost. The company advanced from a simple ecommerce start-up where they generated credit cards and were operating an internet bank, to this point where they are now involved in the global financial sector.

In 2012, the company made English its official language from the traditional Japanese, to allow the company to market itself to a wider audience and potential market. Fast forward to the introduction of digital currencies and the company began accepting Bitcoin and made plans to launch their own coin. The company has invested in various businesses as it has picked up expansion including fashion, banking, online retail services, media and travel. The company has even been likened to Amazon, due to its huge success in the last 20 years.

In 2018, Rakuten had announced that it would be acquiring Everybody’s Bitcoin Inc, which was a Japanese crypto exchange company via its subsidiary, Rakuten Card. The company was acquired for 265 Million Yen. Prior to this, the company had sponsored research into blockchain technology and in 2016, launched Rakuten Blockchain Lab, dedicated to blockchain technology. At the time, the company had a reward system where users would be awarded points for using Rakuten services and they could convert these points into tokens using blockchain technology.

Registration of its cryptocurrency exchange is just one more leap in the right direction, what with the innovative cryptocurrency sector. The announcement was made today and users should be members of the Rakuten Bank and will have the liberty of signing up using a web application, or go through multiple layers of the authentication process. The KYC procedures that Rakuten hopes to implement will play a major role in the adoption of cryptocurrency exchange, and will also provide a 24hour customer service support system.

The company received a license from the Japanese Financial Service Authority (FSA) to function as a cryptocurrency exchange, following the Agency’s dedication to promoting and controlling cryptocurrency exchanges at the start of 2019. The news by Rakuten is commendable following that the Japanese market is steadily growing in the digital assets arena as evidenced by Japanese messaging giant Line, which launched its own exchange Bitbox, and the purchase of the controversial Coincheck by the Monex Group. This week, an influential big investment player in Japan financed over $200 million into Bithumb on its first round of funds drive. Yahoo! Japan which also owns 40% (equity that was purchased for $19million last year) of the cryptocurrency exchange firm Tao Tao will begin its operations in May 2019.

The faith that the FSA has in Rakuten will go a long way in advancing the blockchain agenda of both bodies especially with the amalgamation of the latter which is known for its efficiency in management, even in the ongoing cryptocurrency bear market.

 

 

 

 

Digital Asset Financial Exchange is a Chinese cryptocurrency exchange with its headquarters in Singapore. The exchange is owned by the company DigiFinex Ltd which is incorporated in Seychelles and exclusively caters to the Asian market. The exchange has risen to the radar of the online cryptocurrency community due to its heavy trading volumes that exceed $400 million daily, coming into stiff competition with Binance, which has dominated the exchange market for a while now.

This is no mean feat considering that there are over 500 active crypto exchanges worldwide with a user base of more than 34 million crypto wallet holders. DigiFinex was incorporated in 2017 and have astonishingly managed to establish themselves as a trusted digital exchange. Apart from trading their own coin, DigiFinex coin, DFT, the exchange provides trading services for many blockchain based assets, including recently launched Gemini dollar.

The DFT token is an ERC-20 token based on Ethereum smart contract system, with a liquidity value of $2.1 billion according to CoinMarketCap.  One of the reasons why the volume on this platform is so high is that the company’s client base is strictly in Asia, which contributes to the bulk of daily cryptocurrency and digital asset trading more than anywhere else in the world. DigiFinex has a special quality in that its customer protection is its paramount selling point.

Annual audits are conducted by investors, in addition to the fact that the exchange company is one of the few that are SOA audit certified. So far, the company is yet to be subjected to a single security breach event. DigiFinex founder Ned Kee also stated that the company does not delve its resources into marketing but instead the bulk of their budget is spent on security and performing identity verification according to KYC requirements.

This is not only towards their clients but also their listing policy is very strict for interested parties that intend to list their projects on DigiFinex. The potential projects undergo a vigorous verification process which is then submitted for voting and cooperating. In a nutshell, the voting process is based on the volumes of the proposed token to be listed. As such, the token is run for a five day trial and if the trading volume drops below 200,000 CNY per day, it is promptly delisted. This policy is also applied to assets that have lost 90% of their initial valuation.

Another feature of the exchange platform is its real time accounting and transaction processing service. This is the case for single wallet users or multi-layer wallet holders, which is enviable considering the collective different signature addresses. It is probably for this reason that their trading costs are a little friendlier than most crypto exchanges. It charges a standard fee of 0.20% competing with the 0.25% industry average. On Binance, there is a 25% on all fees paid in the DFT token.

DigiFinex also provides a reward system for trading with their native DFT token. Rewards can be obtained when a user locks the tokens and completes specific trading amounts. It also supports 149 trading pairs like BTC/USDT, BCH/USDT, LTC/USDT, ETH/USDT and many more. The trading model is very similar to that displayed on Binance, including the rewards system which depends on the volume of trading accumulated between makers and takers over a 30 day period.

In 2018, the company launched a limited period DFT mining exercise that lasted from April to August 21st. the mining exercise practically catapulted the company from 50th position to 11th in a few months. The reason they halted mining was so as to prevent an overflow of DFT which would lead to a decrease in value, which was a smart move in my opinion.

However, the exchange is not all rosy as there are a few limitations that I need to point out:

  1. The application is only available on iOS based devices meaning a lot of potential clientele is losing a great opportunity to trade on the platform.
  2. The application is not very advisable for seasoned traders due to the fact that their trading features are very limited, such as the fact that there is no stop order or margin trading.
  3. Since the exchange services are geographically limited, there is absolutely no way to open an account from say like the US, which again limits participation and in a way sort of makes Binance a preferred choice, due to global expansion.

What are your thoughts?

 

 

 

 

 

Warning: margin trading is not suitable for beginners. If you’re new to margin trading on Bitmex, make sure to initially read over our guide “The Idiots Guide to Margin Trading on Bitmex” first. The guide covered here is for more advanced Bitmex trading topics.

Bitmex has long been the “go to” platform for margin trading Bitcoin and other various altcoins. If you don’t already have an account, well you probably shouldn’t be reading this guide now should you? 😉 However, if you’re looking to run before you walk, you can proceed to read over this guide (like anyone’s going to stop you), but I recommend you at least sign up for an account before you do.

You can click here and get a 10% discount on your transaction fees for the first 6 months. There’s no cost to you and it really does benefit the both of us.

So let’s start off with a few advanced features that you may not be too familiar with on the Bitmex exchange.

Stop Limit, Stop Market, and Trailing Stop Loss

stop losses on bitmex margin tradingIf you have any trading experience whatsoever, you should already know what a stop loss is so I’ll skip the formal introduction. If you’re not too familiar with stop losses, I highly recommend you check out this guide “Stop Losses VS Mental Stop Losses”.

Moving on…

Let’s take a look at the 3 stop losses that Bitmex provides for you and when you should use each one.

stop limit on bitmex margin trading with leverageStop Limit – when setting a stop limit on long trades, you always want to make sure that your “Stop Price” is lower than your “Limit Price”. Do the exact opposite for your short trades. This ensures that you exit your trade at the proper price point. By how much is up to you, but I do recommend a decent range between your stop price and your limit price. The closer these two numbers are to each other the less likely your order will get filled.

I personally recommend using a stop limit when you’re close to your computer. This way you can at least keep an eye on things, pay lower fees, and exit out of your trade in case your stop limit gets skipped over. If you’re not by your computer and still insist on using this feature, make sure to use a broad range between the limit and stop prices.

One of the key benefits to utilizing a stop loss limit is the fact that you’ll be paying minimal fees on your trades. Sometimes you can even receive a rebate on your funding fees depending on if you’re going long or short during an opposing bullish or bearish market. I’ll cover more about this below under “Fee Calculations and Funding Rates”

stop market bitmex trading marginStop Market – I don’t think it takes a genius to figure this one out. Stop market stop losses are the exact opposite of stop limits. Unlike the stop limit mentioned above, using this feature will ensure that you exit a trade and don’t suffer any more losses then you need to. This is a true “fail safe” stop loss as it will never get skipped or unfilled.

The main take away to utilizing the stop loss is the fact that it guarantees you an exit out of a trade. The downside to using the stop market is that you’ll pay more in fees. You may also exit a trade at a higher or lower price than the actual “stop price” you originally set if the market is moving at an extremely fast pace during this time.
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This can be a great solution for those who have a lot of money on the line and need a guaranteed way out of a bad trade. I’m not one to tell you which one to use, as that’s more of a personal preference (it can be situational one as well).

trailing stop loss bitmexTrailing Stop Loss – a trailing stop loss is an advanced trader’s best friend as it dynamically moves according to the current price movement.

A trailing stop loss will follow the current price action by a designated set price. This is best explained with a few examples.

You’re currently trading BTC at an entry of $7500 and set a “Trail Value” of $100. The market moves up to $7700 and then dips to $7600. You’d be stopped out at this point. You would have also made $100 profit as opposed to losing your funds if the dip kept moving past your entry point.

As you can see, this is a highly effective feature that Bitmex gives you which no other cryptocurrency exchange offers. This will allow you to keep your losses to a minimum. It’s also great for those more riskier traders who like to use higher leverage (above 20X).

The key takeaway to this type of stop loss is that it allows the Bitmex system to constantly babysit your trade by following the price point around like an angry cobra. The moment the price dips, the trailing stop loss quickly snaps it up and exits you out of the trade.

The downside to this is that you may be stopped out before a major rally in price. However this goes for any stop loss you may choose to use. The feature will also stop you out at the market price, so you’ll be paying a bit more on fees.

Now that we’ve covered all the stop loss features, let’s discuss the “Place Order” features you may not be familiar with.

Reduce Only

reduce only bitmex margin trading featureA pretty simple and useful feature, the “Reduce Only” tickbox will allow you to close out your trade without opening up a new position on the opposite side of the market (I call this inverse trading). This is best explained with an example. <image>

Let’s say you start a long position for $1000 at entry price $7500 and set a sell limit to exit out of your trade at $7600 for $1000 (using the sell/short button). However, in your haste, you accidentally input an additional zero, thus opening a short for $9000 ($10,000 sell/short quantity – your long trade of $1000). This type of mistake could have dire consequences on your trading account funds.

When checking the “reduce only” feature, the Bitmex system will not allow you to execute the trade and will immediately cancel out the additional $9000 that would have put you in a short trade. The feature will still execute the trade but only utilize $1000 worth to exit you out of it.

This is an extremely useful feature that can get you out of trouble and should be checked unless you actually plan on opening an immediate “inverse trade” upon your exit (long to short or short to long). I cover more on this within the advanced Bitmex trading strategies below.

Post Only

This feature should be used at all times. When checking this box, only limit orders will be allowed to execute your trades, thus saving you a ton on fees. Look at this feature as a safety precaution from accidentally creating a market order (being a taker, and not a maker).

Using Cross Margin

cross leverage margin trading on bitmexLeaving the leverage margin bar to the far left will allow you to utilize the Cross margin feature. Unlike isolated margin, where you have to manually input the amount of leverage you would like to use for your trade, cross margin uses your entire Bitmex balance as collateral.

This also saves you the time of inputting a leverage amount and calculating a quantity that corresponds to this leverage. These are two key aspects to isolated margin trading that you’ll have to take into consideration. Simply adjusting the leverage slider will not change the amount of contracts that you’re actually trading. It will only raise or lower the limit that you’re allowed to trade with. This is better explained with an example.

Let’s say you have $500 in your Bitmex account, and you want to trade with $5000 worth of BTC contracts. With isolated margin, you would have to move the leverage slider to 10X and then input the quantity to $5000 (this figure would be a little lower due to trading fees).

With cross margin, all you would need to do is input the $5000 into the quantity box and Bitmex will calculate it as 10X leverage off of your $500 account balance.

Most of the time, you want to use cross margin for your trades. Make sure that you never go over 10X leverage (20X is pushing it). For beginners, I highly recommend you keeping it to 2-5X.

However, there are occasions where you want to use isolated margin. Let’s say you like to put in a few day trades but only want to risk $100 of your account balance at 10X leverage for a total of $1000. Seeing that you have $500 in your Bitmex account, you would merely move the slider to 2X. This way if you get liquidated, you only lose $100 off your total account balance.

Personally speaking, I don’t trust myself to only use a set amount within my account balance, so I only fund my Bitmex accounts with an amount I’m willing to lose when using cross margin trading. This is because cross margin won’t get you liquidated as easily as isolated margin, as long as you’re not too crazy with that leverage. This is also the leverage type that most professional traders use for that exact reason.

Tip: I recommend opening 2-3 Bitmex accounts, since all of them are anonymous (no KYC needed) and fairly easy to start up. Fund each account with $500 to $1000. This way, if you’re having a bad day and there’s a massive swing against you (like 8-15% in the opposite direction of your trade), your entire t uprading capital doesn’t get annihilated.

Unrealized and Realized PNL

unrealized profit and loss on bitmexUnrealized PNL is related to the Mark Price. The Mark Price is what determines your risk management of your position on Bitmex. This means that when you get liquidated due to the price going against you, it’s due to the fact that Mark Price has crossed the liquidation price threshold. This will prevent you from getting liquidated from a sudden price swing on Bitmex’s local platform as the Mark Price is comprised of several other exchange values.

Bitmex has a reasonably complex way of calculating the Mark Price which can be found here. It uses a combination of Bitcoin to USD Spot Index (which is 50% Bitstamp and 50% GDAX) as well as the depth of the order book.

Realized PNL is simply what your current profit and loss is according to Bitmex. You’ll receive this figure by hovering your mouse over the Mark Price. This is the real price that showcases your real profit and loss.

unrealised profit and loss on bitmex

Fee Calculations and Funding Rates

contract details of funding rate on bitmexBitmex calculates these much differently than any other cryptocurrency exchange. When looking at the Contract Details box, if the fee is displayed in red, long positions will have to pay the fee. This means that there are more long positions than short at that moment.

On the other side, if the fee is displayed in green then Long positions receive the fee. When you hover your mouse over the “funding rate” you’ll see a predicted rate for the next eight hour period.

This rate is in regards to the funding rate and does not take into account the maker or taker fees for placing the trade. If you exit your trade within this eight hour period, you will not have to pay the funding fee.

Tip: keep an eye out when this fee is about to go into effect. Many traders will exit the market (thus shorting) around 30 minutes or so before the fee hits their account. This would be a great opportunity to buy in and take advantage of a long trade as soon as the fee period ends. When time properly, this can be easy money.

Bitmex Advanced Trading Strategies

1.  Scaling In and Out of Your Positionno matter if you’re going long or short with your trade, scaling in and out of position is highly recommended and utilized by most advanced traders.

In order to get the very best possible position for your entry and exit positions, you need to layer them (aka scaling in and out). Let’s say you’re trading with $1000 and want to take a long position at $7500 on Bitcoin. The current position is at $7800.

Instead of watching the chart all day and trying to time that five minute window in order to get the closest price to that $7500, you would simply set 3-4 entries on the way down.

This would look something like: $250 at $7700, $250 at $7600, $250 at $7500 and $250 at $7400 in case you catch a long wick down.  Now, all the entry points may not get filled as the price may only reach $7600, however you’ll be at an advantageous entry point with capital in the trade.

The opposite goes for your exit positions. Let’s say your ideal exit position is at $8000. You currently have $1000 in the trade at an entry position of $7500. You can scale out of your position by setting exit points at $7700 exiting with $500, $7850 with $300 and then $800 with $200. Again, this will allow you to both enter and exit the market at the most advantageous price points as well as accumulating the most profit along the way.

tradingview scaling into entry point
click to enlarge

Note: this is not only a margin trading strategy, but a typical advanced trading strategy that you can use for any cryptocurrency exchange.

2. Use stop losses when trading top and bottom ranges – this essentially means that if your trading at a top or bottom of a particular price range, you want to ensure that you have a stop loss in place in case your strategy is not fulfilled.

To put this into perspective…

Let’s say you spot an inverse head and shoulders, however it’s located near the top of a 3 day price range. You want to set a stop loss at a key level to where you don’t get stopped out before a major rally, however still within range to exit you out of the trade if the market turns against you.

Using the stop loss will allow you to take advantage of the charting patterns while still giving you a safety net in case the strategy doesn’t end up going the way you had planned.

The same goes for entering a trade with a short when you’re at the bottom of a 3 to 7 day average. Make sure you place a stop loss above your short, but at a price level that you know won’t get prematurely stopped out before a major dip ensues.

This is best illustrated with a chart…

stop losses on bitmex trading range margin trading
click to enlarge

3. When to Use Market & Limit Orders – for an overwhelming majority of your trades, you’re going to want to use limit orders with the “post only” feature checked. However, there are occasions where you’re going to want to use market orders.

For example, utilizing “stock market” stop losses are highly recommended when using one of the strategies above, but especially when you’re not close to your computer or watching the market.

For everything else, stick to limit orders and keep those fees to a minimum.

4. Using Inverse Trades – the beauty behind margin trading on Bitmex is that you can immediately cash out of a long with an immediate inverse short trade.

For example: let’s say the current 3 day price range for Bitcoin is between $6200 and $6800. You’re currently exiting a long trade with $1000 at $6800 from an entry of $6600. Instead of exiting the trade with a short of $1000, you can input $2000 into the quantity box and immediately start a short trade upon exiting your long.

I only recommend doing this when you’re at the bottom or top of a 3 to 5 day price range. The chances of your trade reaching a peak and reversing is much more likely than creating a new ATH (all-time high). This is best outlined with an illustration below.

trading long and short trades on bitmex
click to enlarge

5. Playing Both Long and Short Trades Simultaneously – A strategy that some of the more advanced traders use on certain occasions is to set both a short and long limit. This can be used in times where you’re unsure which direction the market is about to break out to. It’s also good to use for trading patterns like a symmetrical triangle.

In these cases, you’ll need to have 2 Bitmex accounts available. On one account, you’ll set up a long entry point above the potential breakout. On the other account, you’ll set up a short entry point below the potential breakout. This way you’re setting yourself up to take advantage of the breakout in either direction.


Another similar scenario you could use this strategy is…

If the price movement reaches a high from a 3 day moving period (like the $6800 price point covered in the example above). You can place an inverse trade to short at this peak as well as set a limit order to go long on the trade in case of a major breakout. Again, you’re covered on both sides of the spectrum.

bitmex margin trading with leverage account limits on buy and short

Great Job! We’re Done Here…

I hope you enjoyed my advanced Bitmex trading guide. Using just a few of the strategies I covered above will allow you to create an incredible income for yourself in a much shorter time frame than it would typically take trading on any other cryptocurrency exchange. This is due to the fact that you’ll not only be able to multiply your trading capital with leverage, but also have access to both long and short trades as well.

Remember, initially trade with small amounts until you get acclimated to the platform. Print this guide out and keep it close by for when you need it.

Save 10% on BitMEX fees with this coupon link. BitMEX fees are MUCH higher than your typical crypto exchange because the fee applies to the entire leveraged position, not just your margin (initial deposited amount).

As always, if you have any additional strategies you would like to share or questions concerning other aspects Bitmex trading, please feel free to leave a comment below. I’m typically quick to reply.

Good luck and happy trading!

If you’d like to read more about Bitmex trading strategies, check out our other guides…

The Idiots Guide to Margin Trading on Bitmex

Bitmex Liquidations: How to Avoid Getting REKT

Warning: margin trading is not suited for beginners. You should have at least several months of trading experience before attempting to margin trade. Note that using the information below is done at your own risk. This is not financial advice blah blah blah….

Ok, now that we got that out of the way…

Let’s get you started making some of that Bitmex “short trade with 100X leverage” money you’ve heard so many people talking about (btw, never do that…and if you do, you’re an idiot).

Whether you love em or hate em, Bitmex has the potential to take you from zero to hero faster than any other trading method out there. This is potentially the biggest draw to the Bitmex trading platform.

If you have a solid understanding of technical analysis, a trading strategy with a proven track record, and lots of trading experience under your belt, Bitmex may be your “go to” cryptocurrency exchange for some of that quick crypto cashflow.

However, if you’ve only traded for a few weeks and don’t have a solid understanding and proven game-winning trading strategy, Bitmex will wreck you faster than Mike Tyson on acid.

This is for heavyweights only. If you haven’t been through a few battles yet, don’t step inside the ring.

How to Get Started Trading on Bitmex

I highly recommend you open up your Bitmex trading account by using the link here in order to register. You receive a 10% discount on all your transaction fees for the first six months at no additional cost to you. Now do it!

For US Residents…

If you’re a US resident, you need to make sure that you’re either using a UK VPN or private proxy when signing up. I recommend you use BuyProxies.org and purchase their lowest tier package which is $10 per month.

Once you’ve completed your registration, you no longer need the proxies (or VPN if you decide to go that route). You can sign in with your standard US IP (no proxy or VPN) from there on out.

Ok, now that we got that out of the way, let’s get you started with the fundamentals…

Bitmex Margin Trading In Plain English

I’ll start off by defining a few terms that you’ll need to be familiar with in your early stages ….

Margin trading – this is the method of conducting a purchase using cash that is provided to you (the trader) as a loan.  In reality, you’re not really “borrowing funds” from any centralized entity, you’re merely swapping out “contracts” with others utilizing the platform.

If you’re shorting, you’re swapping out with someone going long. If you’re going long, you’re swapping out with someone that is shorting.

That’s the gist behind it all. For the sake of this guide, I’ll loosely use the term borrowing.

Leverage – the amount of funds that you decide to borrow. The higher the leverage, the more funds you borrow, and the more risk you take at getting liquidated.

Example: $1000 with 5X leverage = $5000 your trading with. Your liquidation price is given to you before and during your transaction, so you should never be surprised at where it’s at.
<image: the power of leverage.png>

Liquidation price – this is the price at which your account balance (or amounts of funds you’re using) is completely wiped out.

Example: $100 with 25% leverage at BTC entry price of $7500 = $6002 liquidation price.

bitmex trading liquidation price margin trading

Don’t worry about calculating all this stuff by yourself. Bitmex was nice enough to provide you with a calculator. You’ll never be left in the dark when it comes to your profit, loss, or liquidation price.

bitmex liquidation calculator margin trading

Long position – betting that price movement will increase.

Short position – betting that price movement will decrease.

bitmex limit orders margin tradingLimit order – (aka market maker) set a price and have it filled once the market reaches your set price. 9 times out of 10, you should be using this for all your trades to prevent paying high fees.

Market order – (making you the market taker) this is where you’ll immediately exit your trade. For having this convenience, you pay 3X the fee (%0.0075 as opposed to %0.0025).

Take Profit – like the name implies, this is where you start taking profits as the price value increases. The opposite applies for shorts. You want to start taking profit below your entry price.

Stop Loss Limit – this is to prevent you from completely losing all your capital from a sudden drop (for longs) or sudden spike (for shorts) in price action. Once a stop loss trigger has been reached your trade initiates your stop loss limit price. Once this limit price has been reached, you’re exited out of the trade. This will ensure that your loss is minimized.

stop limit orders and stop markets margin trading bitmexStop Loss Market – the same as stop loss limit, however your trade will be “immediately exited” at the market price. I highly recommend using this over the stop limit when you’re not close to your computer (or on any occasion for that matter).

When price drops, it drops fast. There’s a good chance that your stop limit price will not activate and you’ll be left holding the bags (debt). Using the stop loss market, ensures you that during a strong dip, you keep your losses to a minimum. You’re guaranteed an exit out of the trade, which again, is not always likely with stop loss limits.

 

trailing stop loss markets margin trading bitmexTrailing Stop – think of this as a “moving stop loss” that follows the current price by a set value.

Example: $1000 at BTC entry price of $6500 with a trailing stop loss of $250 would mean that if the price action decreases to $6250, you would be stopped out (exit the trade).

However, if your price increases to $7000 and then drops $250, it would be stopped out at $6750. This is a great feature to use when you’re trade is already in profit. Trailing stops will ensure that you take advantage of quick spikes in price if you’re not by your computer. 

Bitmex not only allows you to trade with borrowed money, but enables you to make a profit on both an uptrend or downtrend. No longer will you be confined to bull markets once your familiar with this trading platform. Hell, you might actually look forward to bear markets. You can make just as much during these periods of margin trading than you can within bull markets, if you play your cards right.

Now let’s look at the various ways to leverage your trades on Bitmex…

Leverage Trading on Bitmex

bitmex crypto exchange margin tradingThe cryptocurrency exchange allows you to create anonymous accounts without giving your real name or information. In order to start trading on Bitmex, all you really need to do it is deposit Bitcoin into your account. No other currency is accepted as a deposit, so don’t send you’re Ethereum, Litecoin, Ripple, or any other altcoin for that matter. Deposits are fairly quick, but this is highly dependent upon how busy Bitcoin miners are. I typically receive my deposited funds within 15 to 30 minutes.

Be aware that Bitmex doesn’t actually trade in Bitcoin, it trades in contracts. Contracts are an agreement to buy or sell an asset (in this instance cryptocurrency) without actually owning the actual currency. Once you withdrawal your funds, your contract for those funds are awarded to you and therefore “real Bitcoin” is sent to your destination address.

Bitmex offers two types of contracts…

Perpetual Contracts

perpetual contracts with bitmex trading marginCreated specifically by the Bitmex team, this type of contract is also known as a “perpetual swap”. This is the type of contract you’ll be primarily trading when you’re first starting out, especially when you’re day or swing trading on a shorter timeframe (like 4 hour and below).

These contracts don’t have a specific date at which they will expire, so they are great for short term trading. They have a variable interest rate where cash flow is added or subtracted from your current equity. For more detailed information, click here.

As the name suggests, these contracts are continuously renewed. Perpetual contracts are also known supposed to be less volatile; however you wouldn’t think that’s the case when looking over their charts.

For having the ability to use these contracts, you’ll pay a fee every 8 hours of 0.0015% for longs and you’ll actually get a rebate of 0.0015% for shorts. Ethereum fees are much higher at 0.1562% for longs, but you receive a much larger rebate at 0.1562% every 8 hours.

For more detailed explanation of fees, click here.

Futures Contracts

This is basically an agreement between a buyer and seller to exchange a currency at a defined date in the future for an agreed upon price.  Futures contracts tend to have a fixed interest rate which makes them great for longer term trading, like swing trading (using the 4 hour charts) or shorter term investing.

The great thing about these contracts is that they have a fixed interest rate which doesn’t fluctuate over time.

Now that you have a basic concept of margin trading terms, let’s move on to the next step and cover short trades.

How to Short Cryptocurrency on Bitmex

shorting a trade falling margin trading short tradeBitmex offers quite a few cryptocurrencies to short as of the release of this guide. The altcoins they include within their platform change constantly. At the present moment you can short these altcoins with the corresponding leverage.

Ethereum (ETH) up to 50X leverage

Litecoin (LTC) up to 33.3X leverage

Ripple (XRP) up to 20X leverage

Cardano (ADA) up to 20X leverage

Bitcoin Cash (BCH) up to 20X leverage

EOS (EOS) up to 20X leverage

Tron (TRX) up to 20X leverage

Bitcoin (BTC) is the only crypto that you can leverage up to 100X leverage, which I would not recommend. When you’re leveraging past 50X, you’re essentially gambling. With that being said, if you have spare change laying around and are feeling lucky, go ahead and roll the dice. Just know, the odds aren’t in your favor. With $100 at 100X leverage, you can make $1000 in less than a few minutes (or lose it). You obviously don’t want to do this with rent money!

Back to short trading…

Shorting works in the same way as a long position except you’re placing trades on the decrease in value of a particular currency. This would’ve been the ideal way of taking advantage of the extended bear market this year (2018 and still continuing).

As an example, if you kept $2000 in a longer term short with Bitcoin on January 6th where the price of BTC was ~$17,000, till today,, without touching it, you would have $3280 (64% gain + a rebate on your fees) during this period. Remember, that doesn’t account for all the times you might have cashed out of the short due to intermittent bullish trends, which would have potentially left you with 2-5X your profit…easy. A few of my friends made over 700% during this period, shorting BTC and made 3X as much shorting altcoins.

So just remember the wise old saying…. “The trend is your friend till the end”. 

Don’t trade against the trend, trade WITH it!

For more information about shorting and how to create wealth for yourself during a bear market, check out our “Top 5 Ways to Profit in a Crypto Bear Market

Shorting Altcoins

As a general rule of thumb, if Bitcoin moves up, then altcoins move down. If Bitcoin moves down, altcoins move down. If Bitcoin consolidates (moves sideways) then altcoins move up. If you can follow the simple rule, you’ll have no problem knowing when to short or go a long with margin trading altcoins.

Tip: TradingView will show you the altcoins that are moving with or against Bitcoin under the comparisons feature. 

tradingview crypto trading comparison tool

You can use this highly useful feature in order to view which altcoins are about to drop or rally before it happens. Bitcoin typically leads the way as far the trend so, for example, if you see Bitcoin starting to quickly drop and know which altcoin(s) move in the opposite direction, you can set up a long trade for those altcoins before it happens.

However, make sure to always keep a tight stop loss in case the altcoin decides to move in the same direction as Bitcoin.

How Much to Leverage: A Warning to All Newcomers

One of the more significant facets to margin trading with Bitmex is that you can leverage your trades with as much capital as you want. With that said, I highly recommend you keep the leverage to around 3X-10X to start. Anything above this and you’re risking liquidation. One false, call with a bit too much leverage, and your account can be wiped out in no time. If you’re trading with 20X and over on a longer term trade, you’re just looking for trouble.

 

If you do decide to leverage more than 20X, make sure you do it with a small amount. Experienced traders who scalp trade with 20X-40x are typically watching the charts like a hawk for any dramatic movements. If or when the trade moves against the trader, with strong full-bodied candles, stop losses are typically put in place. Never try this unless you have at least several months of Bitmex trading experience. 

No matter what, remember to…

Always plan your trades out ahead of time and never trade in a rush. Typically, when you try to “catch a falling knife” or “catch a moving rocket”, things don’t end up going very well for you. The more adrenaline coursing through your body, the more idiotic your decisions become.

The Difference Between Isolated and Cross Leverage

You have two types of leverages with Bitmex, Isolated and Cross. You can switch between one or the other by simply adjusting the leverage slider on the “Your Position” box located on the left hand side of your trading panel. Use Cross leverage by moving the slider all the way to the left (obviously where it says “Cross”). Use isolated leverage for the remaining numbers (2x,3x,5x,10x,etc)

bitmex leverage margin adjustment slider

Now bear in mind….Isolated leverage does not automatically multiply your position. No one on YouTube seems to be explaining this properly. Once you move the leverage slider, this merely adjusts how much margin you can use. You still need to manually change the quantity yourself.

For example: if your account contains $1000 and you move the leverage slider to 3X, then you’re capable of trading with $3000. You need to manually input $3000 into the quantity box.

Regarding cross margin…

You no longer need to worry about moving the leverage slider. Cross will simply use all the funds available in your Bitmex account for the margin. Just think of it as an automated way of Bitmex calculating the margin for you.

Now, read this sentence carefully… your profit is determined by the quantity and not the leverage itself. Leverage has nothing to do with profit. The amount of profit that you make is dictated by the size of your position. The leverage simply sets a limit on how much you can borrow for the quantity of your position.

Here are a few examples of Cross margin…

Your account contains $1000 and you want to use 3X leverage. All you need to do is input $3000 into the quantity box and your account is automatically at 3X leverage. If you wanted to 10X your leverage, you would simply input $10,000 into the quantity box.

By using cross margin, you’re eliminating one step from the process of manually inputting the leverage (moving the slider). The only thing you need to worry about is inputting the amount into the quantity box. However, if you don’t want to utilize your entire Bitmex balance, isolated margin may be the right choice for you.

I personally recommend using cross margin and only deposit a limited amount of funds into my account so I’m not tempted to lose it all in one trade.

Beginner Bitmex Quick Tips & Trading Strategies

Trading on Bitmex can be extremely fun or depressing depending on what strategy you decide to use. Here are a few tips I picked up along the way to help maximize my gains and lower the chances of losing a trade.

 

  • Be the Market Maker, Not the Taker – don’t waste so much money on fees. If you’re using “Market” with most of your trades, you’re getting killed here.

If you’re not familiar with the terms market maker and market taker, simply put… a market maker creates limit orders within the order book (thus waiting for his trade to execute). A market taker uses the “Market” button when buying or selling into a position (thus executes a trade immediately at market price).

Always use limit orders (you’re the market maker) for your trades. The fees are 1/3 the price of a taker fee (market taker). Also make sure to click on the “post only” tick box so you’ll only be able to use limit orders.

market maker margin trading bitmexMany times, depending on the market, you’ll receive a rebate on your fees. While the fees seem small at first glance (0.0075% taker fee), this adds up to a lot when considering that this fee includes your leveraged amount and not the actual funds in your account. For example, if you’re on cross margin at 100X, then you would be paying 7.5% on the total amount.

The only time I recommend using market is during stop losses. Use the stop market feature when setting your stop losses. The market moves so fast that most of the time, if you set a stop limit, it won’t get filled. You’ll be left holding the bags or worse, getting liquidated.

  • Use Cross Leverage – I covered this above, but it’s worth repeating. Most of the professional traders use this leverage type because it helps guard against those crazy Bitmex fluctuations where you might have the right call, however you get liquidated right before that major pump.

    For example: If you have 1 BTC and you open a position worth .1 BTC, on normal 100x leverage, your liquidation would be ~$60 away from your entry price. With Cross, you have .9 BTC as margin, meaning your liquidation would be about $600 away from your entry.

    You’re risking your entire account balance with this margin type, however it’s well worth it considering all the major fluctuations (most notably Bitcoin). I recommend using a stop loss or better yet, only funding your Bitmex account with amounts that your willing to lose ($200 – $1000).

  • Pay Attention to Contract Details: Funding Rate – you notice of the bottom left-hand corner Bitmex, there is a contract details box. Inside that box is your “funding rate”. This plays a massive part with the trading landscape. This fee will get to be extremely high if everyone is longing and very few are shorting.
    If this fee is positive and you have a long open, you’ll pay for that fee every eight hours on a perpetual swap. If you have a short opening that situation, you would receive that fee.

    bitmex contract details funding rate and rebateBeyond the fee aspect to this, there’s a pump and dump associated with it as well. Roughly around 30 minutes before the funding time, everyone will be closing their longs in order to avoid the fee. Once the funding has completed, the price will skyrocket. Position your trades around this time and you can make a quick daily profit.

  • Be Patient with Entry. Setup Limit Orders – never ever try to catch you can. By the time your order is filled, too late and you’re likely to get stuck with a horrible entry.

    Set up various limit orders at key positions before a rally (or short) begins. The best way of doing this is scaling in and out of the position. I cover more on this within my swing trading guide located here.

    In short, if you want to take a position at $7500 with $1000, then you want to scale in your orders at $7200 with $250, $7300 with $250, $7400 with $250, and $7500 with $250. This is the easiest and most effective way of gaining a good entry and exit positions up. Even outside of larger pumps, jumping into a massive rally is almost always a bad idea.

    If you miss an entry, just be patient as another one is around the corner. It’s a lot better to miss an entry than lose money.

  • Stop Losses or Scaling In/Out – use one of these 2 strategies for protecting your capital. Here is my recommendation.

    a) If you plan on using higher leverage (20X+ riskier approach) then use tight stop losses. This will prevent you from losing all your Bitfinex funds in one bad trade.

    b) If you plan on using lower leverage (20X and below – less risky) then you can afford to scale out of a bad trade. I would highly advise initially testing this strategy with smaller amounts until you get a feel for it. Scaling out of a trade takes experience, but one where, if you master it, will allow you to walk away from most trades without a loss.

    tradingview scaling into entry point
    click to enlarge

Neither one of these strategies is right or wrong. It’s a matter of personal preference and which one suites certain situations over others. If you’re more of a risk taker, you may prefer scaling. If you like to keep things conservative, then stop losses may be your “bread and butter”. Each one has their pros and cons.

Let’s Wrap This Up..

Bitmex allows traders to make money on bull and bear markets. This is why I highly experienced traders love it so much. The exchange has gained a ton of popularity this year due to its enormous volumes and rich array of features

This is a great exchange when you don’t want to risk too much of your own money trading, however would like to utilize the trading leverage (thus more capital) for higher profits.

Personally speaking, I like to fail fast. Time is too precious of a commodity to waste away trading $100 at a time for possible $5-$10 profits.

If you’re looking for reliable, secure exchange, look no further than Bitmex. It offers large leverage positions as well as a ton of functionality that other cryptocurrency exchanges don’t offer.

Save 10% on BitMEX fees with this coupon link. BitMEX fees are MUCH higher than your typical crypto exchange because the fee applies to the entire leveraged position, not just your margin (initial deposited amount).

I’d love to hear about some of your experiences with Bitmex. Let me know in the comments below. Who knows….maybe I can lend you some advice.

[UPDATE] We recently uploaded the “Bitmex Advanced Margin Trading Guide“, so I recommend you go check that out for our latest advanced strategies and tips.

Good luck and happy trading!

If you’d like to read more about Bitmex trading strategies, check out our other guides…

Bitmex Advanced Margin Trading Guide

Bitmex Liquidations: How to Avoid Getting REKT

 

This extensive beginners guide to cryptocurrency trading will introduce you to a wide range of fundamental investment and trading strategies you’ll need to learn before moving onto more intricate topics like technical analysis.

I hope this guide can help serve as an introduction to those looking to get into crypto trading. Many of its lessons I had to learn the hard way, so buckle up and try not to make the same mistakes I did. Regardless of how careful you are, just know that you’re going to make mistakes. As long as you learn from them, and move forward, you’ll be successful in this new and highly exciting cryptocurrency era.

If you’re just starting out, I highly recommend you bookmark this guide and start from Step 1. If you consider yourself a moderate to experienced trader, by all means, use the table of contents below to zip down to exactly what you need to know!

Ready? Good! Let’s get started…

Table of Contents

  1. Step 1 – Open A Cryptocurrency Exchange Account
    – An Option for Quicker Deposits
    – Your Funds Are Deposited
  2. Step 2 – Trading your Bitcoin On A Cryptocurrency Exchange
  3. Step 3 – Getting Familiar With The Trading Exchange Interface
    – Trading Platform Order Types
  4. Step 4 – Exploring More Altcoins via CoinMarketCap
  5. Step 5 – Transfers, Deposits & Withdrawals
    Deposits and Withdrawals
  6. Step 6 – Mitigating Your Risk & Securing Your Profits
    Securing Your Profits via Digital Wallet
  7. Proven Cryptocurrency Trading Techniques
    – Trading Tools For Technical Analysis
  8. Common Crypto Trading Mistakes & How to Avoid Them
    – Keep Your Cool

    – Let Opportunity Come To You
    – Only Invest What You Can Afford To Lose 

Step 1 – Open A Cryptocurrency Exchange Account

  1. Start preparing by scanning your ID in the form of a driver’s license or passport ID and have that bad boy stored on your computer. We’ll use this on our next step. Make sure you scan the front and back of your card.
  2. Initially join a “cryptocurrency to fiat exchange” that allows you to purchase crypto with your bank account or debit card. These exchanges include…

    Coinbase

    LocalBitcoin

    CoinMama (lower fees)

    Gemini

    Don’t just join one, join them all. You’ll find that one exchange will be slower to transfer fiat currency than another during certain times of the year. It’s always good to have backups of your backup.

  3. Set an account with a cryptocurrency “trading” exchange. The ones mentioned above are great for turning your fiat currency over into cryptocurrency. There are much better exchanges that will allow you to trade your crypto for other altcoins and vice versa. The exchanges mentioned below have much better charts and trading features you’ll end up using on all your trades.

    You’ll need to submit a driver’s license, passport, etc in order to get into most serious crypto exchanges. You might as well kill two birds with one stone and apply to all these exchanges, at once.

PRO TIP:  there’s no need to purchase a whole number of a cryptocurrency.  You can own small fractions of any denomination, so don’t really worry about  fulfilling an entire Bitcoin for example. There are millions of investors and traders who only own fractional amounts of multiple coins.

An Option for Quicker Deposits

If you’re impatient like me and don’t feel like waiting several days for your deposit to complete, check out  LocalBitcoins  This place accepts everything from cash, credit card, and even Walmart card payments into crypto.

Everything on this site is sold through third-party sellers so be careful and make sure you purchase through a reputable one who has reviews on their local user ID (think eBay for crypto). 

With this option you’re not paying ridiculously high fees. However, you will have to get up off your ass and make the transaction yourself either through bank account transfer or cash in hand.

4. Set up a direct deposit or wire transfer from your bank account for the quickest possible deposit into any one of these exchanges. Depending on the time of day, alignment of the stars, season of the year, etc… it can take anywhere from 1 to 7 days for the funds to reach your account.

To be quite honest, it really depends on how busy your current exchange is at any given moment. Coinbase tends to be the busiest and most widely used so if you’re in a hurry, you may not want to use this one immediately…unless you have time to kill.

Your Funds Are Deposited

Now that your deposit has hit your account, and you have that beautiful cryptocurrency on-hand (because I know it’s burning a hole in your digital pocket) let’s move on to the next step, trading on crypto exchanges.

PRO TIP: – when you sign up to Coinbase or any other “US-based” exchange, your transactions will be reported to the IRS. Do yourself a favor and make sure you’re tracking all transactions.

A great service that provides this for you, without having to do it manually (which is an extreme headache) is CoinTracking. I highly recommend this service to everyone who intends on trading more than a few coins per year.

Step 2 – Trading your Bitcoin On A Cryptocurrency Exchange

trading-your-bitcoin-on-an-exchange guideThis is where the rubber meets the road. If you want to invest or trade in a cryptocurrency other than Bitcoin, Litecoin, Ethereum, or Bitcoin Cash then you’re going to need to get real familiar with a cryptocurrency exchange trading platform.

These exchanges can be a bit intimidating to the weary newcomer, however believe me when I say, once you learn one, you’ll know how to use all of them.

I’ll go over the intricacies of how to use each one, however let’s stay on course and get you signed up to a few of these beginner friendly exchanges.

  1. Sign up to Binance – this is where all the beginner to more intermediate crypto traders go. This is a great place to start your crypto trading journey.
  2. Sign up to HitBTC – this is another beginner friendly exchange that caters to the trading noob. They have some pretty cool trading features as well when you get into the intricacies of trading (order book) but I’ll cover this in another article.
  3. Sign up to Bittrex – this exchange is more of an intermediate to advanced level exchange, however is definitely worth signing up to while you’re in the process of applying for these exchanges.

Also worth mentioning is GDAX, however you essentially get access to that exchange when you get accepted to Coinbase. It’s the official trading platform for their users. I don’t currently use that platform but realize that there are a lot of other beginners that do, so it’s worth checking out.

PRO TIP:  learn what “dollar cost averaging” is before you start trading. This basically means that if you want to invest $1000 total into a coin, you want to split that up into segments of 4 ($250).

For example…let’s say you want to invest in Litecoin (LTC). You invest $250 to start. After a month, you want to invest another $250. Keep repeating this process every month, until you have fully invested your full $1000 capital. 

This strategy ensures that you get the best price over time. To ensure you get the lowest price, invest on monthly dips. Over the course of 4 months, you’ll end up investing at a much lower price than you would have dumping your entire investment in one lump sum. 

PRO TIP: – Stay tuned to our Youtube channel where I’ll cover more details behind trading and technical analysis on different platforms as well as several different beginner trading strategies.

Step 3 – Getting Familiar With The Trading Exchange Interface

Watch this video to get acquainted with the Binance trading interface

Be sure to check out our Technical Analysis, Candlesticks, and Chart Patterns section of our site where I cover all the standard details of crypto trading.

Trading Platform Order Types

There are 3 different order types you’re going to use when buying or selling at any crypto exchange. You should be comfortable with each one in order to be a successful trader.

Note that all orders, both buy and sell, have fees attached to them. They are relatively small (fractions of a percent), so don’t worry about them too much.

market-order-on-exchange

Market Orders – these orders allow you to get into a trade right away at the current market price. Orders are immediately filled within an order book at the best available rate. The advantage of this order is,  it’s completed immediately. On the other hand, you don’t always receive the best price..

 

buy-limit-order-for-binance-exchange

Limit orders – This order type allows you to set a specific price. The market can then fill that order at the specific price. The drawback to this order type is, your order may not always be filled before the price inevitably increases. You may notice that the order book is full of buy and sell orders. Once you place a limit order you’ll be able to view where your order is within the order book, usually indicated by an arrow pointing to your exact order. On other exchanges your order is in bold print.

stop-limit-order-for-binance

Stop Orders – (AKA – “stop losses”) The disadvantage to having a stop order is that there are cases where a price will drop significantly during a small period before it rallies (increases) to meet your original goal. This is a way for market-makers to eliminate stop losses before increasing price action for a more prominent bullish run.

I cover more intricate details about stop losses within this guide. I highly recommend you read it before implementing this feature into your trades.

PRO TIP:  Trading is all about minimizing losses and maximizing your gains. No one and I mean no one is going to win them all (not even close). You just have to make sure that your losses are small while keeping your gains relatively large. Obviously this is an oversimplified statement, but it covers the basis of trading.

Many technical strategies and money management techniques go into making this statement a reality. 

Candlesticks and Trading Patterns – you want to get yourself familiar with these indicators as they are the basic foundation of trading cryptocurrency. We cover a wide variety of these patterns on our candlestick and trading patterns section. I highly advise that you check these out now and study them while you’re waiting for your exchange approvals to facilitate.

Step 4 – Exploring More Altcoins via CoinMarketCap

If you’ve been in the crypto world for more than a week, then I’m sure you’ve heard of the website CoinMarketCap.com. This handy crypto tool should be your ever-loving sidekick when it comes to checking on the latest trends, prices, exchange listings, and news for anything crypto coin related. 

The only real issue that I’ve had with a CoinMarketCap is that it’s not updated in real time and can showcase older prices (by an hour). However if you want to view real time cryptocurrency price updates, I highly recommend you check out our live crypto chart page for up to the minute price updates.

Moving forward…

living-under-a-rock-coinmarketcapSo let’s just pretend you’ve been living under a rock for the past few months and heard about a new cryptocurrency that’s bound to change the way we view reality.  I know, tough sell. The very first thing you want to do is check CoinMarketCap and place a search for that coin. 

Once you find it, click on the link and look under the tab labeled “Markets” to view what exchanges sell the coin.  You’ll typically notice that it’s being traded on several exchanges, unless it’s brand new.

You can also view other relevant information on the coin like their website, latest news release, forum gossip, market value over time (charts), and so much more. There’s a ton of information for you to dissect on CoinMarketCap, so you have no reason to not do your due diligence before investing.

This should be one of the very first places you explore before trading or investing in a new altcoin. Alternatively, our CCJ Live Trading Charts give you the same information offered on CoinMarketCap.

Step 5 – Transfers, Deposits & Withdrawals
cryptocurrency-exchange-transfers-and-deposits

Transfers seem to be common occurrence for cryptocurrency trading, even more than any other trading commodity in the world (forex, stocks, options, etc), so let’s make sure you do it right, ok?

One aspect to coin transfers that you really need to get acclimated to our the fees. Transfer fees from one cryptocurrency exchange to another can vary greatly.

For example, at the time of this release, Bitcoin transfer fees are fairly high, whereas Litecoin offers a much cheaper rate. Always make sure you check the transfer fees before submission. They are displayed within a pop-up box right before you submit the transfer.

Also take note of the transfer time, which is equally as important as the fees. Check out bitinfocharts to see what the current coin transfer rates and fees are before setting up a transfer.

Once the transfer is complete, you can easily purchase the cryptocurrency that you intend to trade pairs with (typically BTC, ETH, or USDT).

Deposits and Withdrawals

crypto-coin-deposits-and-withdrawels
click to enlarge

These both work in the same manner and are fairly easy to accomplish. Once you complete the process once, you’ll most likely be able do it again without hesitation. In this example, we’ll be depositing BTC into Binance from Coinbase. You want to start out by retrieving your deposit address (the exchange you will be sending coins to). From here you want to click on the deposit button and copy your deposit address.

coinbase-send-and-receive-funds-transfer-withdrawel

Take that deposit address and place it into the Coinbase Send/Request tab under Recipient. Once you click the “Send Funds” button, the transfer is complete. Now that wasn’t too hard was it?

Important Note – If you want to check on the status of your transfer, keep your deposit address handy and place it into the search bar located on blockchain.info

PRO TIP : Always, and I mean always enable the two factor authorization for all exchanges you currently use. Most exchanges use the authenticator app or Authy app which reside on your smartphone. This will ensure that no unwanted guests have access to your account without also having access to your smartphone. This little added security feature is what you want to have when there are thousands of dollars on the line.

Step 6 – Mitigating Your Risk & Securing Your Profits

secure-your-hard-wallet-cryptocurrency

Congratulations young grasshoppa! You’re one step closer to becoming the next crypto millionaire. However, there is one aspect to crypto that you want to make sure you adopt in the early stages of your career. SECURING YOUR PROFITS!

Weekly news regarding exchange hacks and crypto scams are prevalent within this budding industry. Cryptocurrency is in its “Wild West” stage of adoption so everyone’s out to grab a little piece of your digital nuggets.

Many of the low level hacks that tend to go under reported however occur on at daily basis are spoof sites scams. These are websites that look like real crypto exchanges you frequent. The scammer requests that you login to the fake exchange and once you login with your credentials, you can say goodbye to your precious crypto coins. That’s why utilizing 2 factor authentication is so important. Make sure you have that feature turned on before you start trading.

You can also utilize sites like HaveIBeenPawned and input your information there so the site can scan for security breaches to see if your username, password, or other information has been leaked. Sign up for their notifications so they can let you know of future breaches as well.

Securing Your Profits via Digital Wallet

Now that you’ve acquired your little stake of currency within the crypto sphere, you need a secure place to store. There are 4 mediums in which you can do just that.

crypto-exchanges-wallets-softCrypto Exchanges – this is the easiest option, however the most risky as well. It allows for fast liquidation of assets. You don’t have to wait for your crypto to transfer to your exchange of preference. You can easily exchange your coins for others altcoins and diversify your portfolio from within these virtual crypto shopping malls.

The biggest disadvantage to these venues is the fact that you don’t have full control over your wallet. If the exchange is hacked (many of the newer and less established exchanges are) and they declare bankruptcy, you might end up holding the bags for it. Mt Gox is a great example of this. This infamous exchange is constantly being referred to when it comes to these types of scenarios. [LATEST: they are currently in process of returning customer funds]

exodus-soft-wallet-crypto-storage

Soft wallets – this solution includes storing your crypto on a computer software program like Exodus. All your coins will be stored on your desktop or laptop computers for safekeeping.

When using the solution, you need to make sure you keep your private key safe in case something happens to your computer, like a virus or hardware malfunction. This private key will enable you to retrieve your funds if an unfortunate event like this occurs.

Make sure that this private key is secured in a safe place. Like other utilities that have private keys, you’re still the susceptible to having them stolen if you’re not careful where you place it. 

my-ether-wallet

Online Wallets – this offers users you way to keep your cryptocurrency online, within a secure environment, without the worry of being hacked or shutdown. Services like My Ether Wallet (MEW) offer an option to access your wallet from anywhere in the world, while maintaining full control of your funds. You’ll always have access to your private key when needed.

The main advantage of this service is, portability of funds. The disadvantage is that your private key is still susceptible to being stolen if you keep it on your computer or somewhere easily found within your home. It’s a very small chance, but still a chance.

hard-wallet-ledger-nano-cryptoHardware Wallets – the introduction of wallets like Ledger Nano S can take care of your private keys for you so that you’re off the hook with regard to keeping your key in a safe place. This ultimately means that hackers will never be able to steal your private key via key loggers, file scanners, etc.

If that wasn’t good enough, you’ll have a backup of your secret key, which you can access if you ever lose sight of your Ledger Nano. The only disadvantage (if you’re really reaching for one), is that you’ll have to pay a transfer fee when you decide to transfer your coins from your wallet to an exchange. I wouldn’t really categorize that as a disadvantage as it simply comes with the territory regardless of what wallet you decide to use

Proven Cryptocurrency Trading Techniques

In order to get you moving in the right direction I want to cover a few proven ways to make money trading cryptocurrency. Many of these techniques have been carried over from traditional stock market trading, however, unlike traditional stocks you won’t find the volatile swings we see every day with cryptocurrency. This means more opportunities for us.

A Little Technical Analysis Goes A Long Way

First and foremost, you’re going to want a get a good grasp on technical analysis and trading patterns. Please check out the technical analysis section of our site where I cover all the fundamental chart patterns, candlesticks, as well as indicators. You’ll need to study these in order to achieve a high chance of success with trading. I also cover more detailed technical analysis over on our YouTube channel along with several different trading strategies.

If you’re more of the investor type and you plan on investing in numerous altcoins for the long haul, it’s still good to have a fundamental understanding of technical analysis.

So what exactly is technical analysis?

Technical analysis is the study of past price patterns in order to receive a high probability of a potential outcome. This tends to equip us with a unique ability to identify future opportunities of profit. The cryptocurrency market, more than any other traditional trading marketplace, have a herd like mentality. The tendency for inexperienced traders is to buy when the price is high (rallying) and sell when the price is low. We can take clear advantage of this with proper technical analysis.

It’s much easier to nail down fundamental analysis, simply because everyone has the ability to stay up-to-date on the latest cryptocurrency news due to all the information we have at our fingertips. In order to become a successful trader, we need to utilize fundamental and technical analysis at all times.

Note: technical analysis is not an all-in-one strategy. It is only one of the tools we use to help execute our overall strategy.

Be careful to not dump 100% of your funds into one single coin. Spread your funds out over several different coins or use dollar cost averaging, which I covered above.

Trading Tools For Technical Analysis

day-trading-cryptocurrency-coin-toolsTradingview, in my honest opinion, is the very best charting platform on the net. They not only offer you a free chart to hone your technical analysis skills with, but it’s also a great social networking site for  beginner and advanced traders. You can really learn a lot by  following how other traders are plotting their trades.

Plotting chart patterns, as if you had real money in the coin, helps a lot with learning the basics of technical analysis, however it can never prepare you for the emotional side of trading when using your own money.

Once you feel comfortable with technical analysis and think your skills are up to snuff, I highly recommend starting out with very small amounts to trade, in your beginning stages. This will ensure you are actively trading, perfecting your TA  abilities, as well as honing your emotional skills which greatly come into play when trading with currency.

Other trading platforms like Coinigy are great, but they don’t even come close to the value and features you get with Tradingview.

Build Your Strategy and Be Consistent With It

One of the easiest ways to lose money trading is to bounce around from one strategy to the next without really using one particular strategy for any decent amount of time. Crypto traders need strategies and need to be consistent with them.

A solid strategy will always answer these questions…

  • How to protect your capital when the market turns against you (bearish trends).
  • When to take profits when you’re ahead.
  • How much to buy and sell.
  • When a strategy works or when it completely fails you (know when to hold em and fold em).

Just remember, a solid strategy will allow you to win only half of your trading battles, and still keep you in profit.

PRO TIP: This is definitely worth repeating. Finding a proven strategy that has worked for you and sticking to it is the most important thing you can do along your crypto trading journey.

With that being said, it also might be one of the toughest.  You’re not going to win them all, but if you can at least win close to half of them, you’re going to come out ahead (as well as using proper money management skills). Remember; don’t fix it if it ain’t broke!

Common Crypto Trading Mistakes & How to Avoid Them

We’re almost done, so I congratulate you for sticking with me so far (unless you cheated and skipped to the end). By now, you should have a fundamental understanding on cryptocurrency trading. Hell, you might even think this was more simple than you had originally thought. Better start preparing for that “lambo life” by the end of the year right?

Yeah, yeah….don’t get too far ahead of yourself young grasshoppa. Even though some of these more simplified concepts may sound easy to grasp, the truth of the matter is, the emotional part of trading is a lot more difficult.

master-at-trading-cryptocurrencyYou might think you’re a Zen master now, but  just wait till you start trading with your own hard earned income. It’s going to take some solid work (and pain) before you really master the concepts  within this guide. The only way to do it is through experience and trade discipline.

When trading with real money, you’ve rightfully earned, you’re going to make mistakes. Just realize that now and be ok with it. There’s not a trader out there that hasn’t lost a ton of trades. So let’s close this guide out with a few of the most common mistakes beginner traders (yes you) will make.

 

Keep Your Cool 

keep-emotions-in-check-trading-cryptoPerhaps one of the most frequent and careless mistakes a trader can make is letting their emotions get the best of them. If you have the wrong mindset, you will always lose in the long run. Set a clear goal for the profit goal you wish to obtain for the day or week and just “walk away” once that goal is met. Set up the same for losses to ensure you don’t keep digging yourself a hole.

If your losses for a particular day become too great, walk away and come back another day when opportunities are more present.

2-3% profit per day is a great goal for an initial investment of $1000. Reinvest that money and compound interest to allow your profit to work for you.

Protect Your Investment

Let me sum this up in one word, stop loss! That’s all there really is to say. If you don’t know what a stop loss is, read this article.  To me traders fail because they don’t set proper stop limits. This is an easy fix so don’t let it happen to you.

Let Opportunity Come To You

Use technical analysis in order to determine when a particular trading strategy is open, in order for you to take up a position. If you find a chart pattern that’s about to break out and have two or three indicators confirming the pattern, you should feel confident about taking the position.

Also make sure to set trading alerts for when your favorite coins reach an all-time low or break out of a major support. Wait for the trade to come to you as opposed to forcing one. This will save you many painful days of regret.

Watch For Paralysis By Overanalysis

Technical analysis is not a prediction into the future. If that was the case we’d all be billionaires by now. Studying charts for hours is not going to produce consistent income. If certain charting patterns and signals don’t feel right or indicators are not confirming your strategy, then it’s best you trust your gut. Save your money to trade another day.

There will be plenty of times where chart patterns and indicators point to a potential breakout and it doesn’t happen. Don’t let it get to you as the market is made up of too many irrational factors for it to be too predictable. Continue to use a strategy that works for you and implement it on a consistent basis.

Only Invest What You Can Afford To Lose

I realize you’ve heard this statement 100 times over but it does bear repeating. There are too many stories of novice traders investing in a trade, in which they take money out from their bank account (or worse savings) that they can’t afford to lose. 

This is not only a bad idea for trading but for any investment opportunity as well. You’ll also realize that your emotions get the best of you when you’re trading money that you can’t afford to lose. Trading with the mindset of not giving a damn is one of the most powerful mindsets that you can bring to the table. 

In conclusion…

I hope this guide helps you on your journey towards wealth and independence. Be sure to check out our other guides related to technical analysis, trading fundamentals, and crypto trading tools. They’ll help you along your path to crypto millions. Good luck and happy trading!

For an updated list on trading guides, visit our crypto trading section here.

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