How to Increase Profitability in Crypto Trading?

How to increase profitability in crypto trading? Typically, if you want to make profits from crypto trading you will need to make the most out of the changes happening in the market prices of crypto coins in the short term.

This means that your ulterior goal would be to buy the coins when the prices are low and sell them off when it reaches a high.

If it involved only this much, crypto trading would have been a lucrative option for all, but, sadly, it is not the case.

This is because most traders do not understand what it takes to make profits and become a successful crypto trader.

However, this is essential because there is no other industry in the world that experiences the same level of growth as crypto.

If you look at the stats of the last five years you will see that the crypto industry has grown from $3 million per day in 2016 to more than $1 billion in 2021.

This signifies a growth of more than three hundred times, and that too in just five years!

The primary factor that drives such incredible growth in the crypto industry is its low barrier to entry.

Much unlike conventional trading and investing, crypto trading can be done by anybody with an internet connection since there are little or no financial or regulatory barriers to it.

All you need to do is create an account. However, with quick growth comes a rapid change which is what you should be aware of to make profits in crypto trading.

This article will help you in that aspect.

How to Increase the Profitability in Crypto Trading?

How to Increase Profitability in Crypto Trading

In order to increase your chances to make profits in crypto trading, you will need to know about the industry in detail including its history and also be well informed about the current trends that are followed in the market.

You will surely have a significant advantage in crypto trading if you have some prior experience in stock trading with any type of instrument.

This is because a lot of the traditional guidelines followed in these markets are also applicable in crypto trading.

However, if you do not, once again, this article will help you a lot.

A crypto market is characterized by its high volatility and therefore it involves a lot of risks when you trade a coin.

This means that your approach, trading style, knowledge and understanding of the market, and risk management mechanisms, everything should be perfect while trading crypto CFDs.

These are the specific attributes that separate a successful crypto trader from the others.

A lot of your success will depend on your focus in particular.

You may want to trade only one type of crypto coin and pairing such as BTC/USD or you may deal with several major coins and pairs.

You may also deal with the alternative cryptocurrencies or Altcoins only that typically come with a smaller market cap.

Nothing is wrong if you follow one or more of these options but the most important thing is to choose the right strategy for you based on your trading styles, needs, risk appetite and, most importantly, your overall objectives.

Crypto Trading Options

There are basically two specific crypto trading options that you can choose to follow.

The first option is to buy and sell crypto coins directly on the crypto exchange.

This perhaps is the most favored and viable option for the beginners because in doing so you actually get the ownership of the underlying asset.

However, the benefits of it can only be enjoyed when you hold the coins for a long term and not sell them off after a short period.

In this option you will need to put up the total value of the position and store the coins in a secure wallet till you sell them.

This option is also quite risky because the exchanges are often unregulated and can also be hacked which may result in losing your coins.

Also, the exchanges will charge you some fees when you buy or sell through them.

This particular crypto trading option is more like a traditional investor investing in shares of a publicly-traded company for a long term with a hope that it will rise in value.

The second option is to trade crypto CFDs via a regulated broker.

This option is most suited for those crypto traders who want to make profits in the short term, no matter how small or big it is.

This is also a viable trading option because you can leverage your trade by putting up a fraction of the total value of the position.

Another significant benefit of trading with crypto CFD traders is that it allows ‘shorting’ or ‘selling’ them to make profit from a declining market.

However, the risk of quick market changes to your capital still remains and therefore it should be monitored continuously.

Add to that, there are also liquidity risks with CFD trading because the contracts in hand may quickly become illiquid when there is a change in the market conditions.

It is for this reason you are advised to use a demo account to try the market out first without investing real capital before jumping into it.

However, before you finally make a choice of a crypto trading option, you should consider investigating a few other concepts and quickly overview them to make the right choice eventually.

Success Rules

There are few rules to make profit in crypto trading and be successful. Not in any specific order, these are as follows:

It is good to start crypto trading by gaining a little bit of experience first.

This will increase our chances to make profits.

Instead of jumping into the volatile crypto market with high investments, make smaller ones to get the feel of the market, know how it works, understand the mechanisms, and know the steps involved.

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It is also good to know the type of crypto trader you want to be in the first place.

This will play a significant role in your interest in trading as well as in the analysis.

Remember, day trading is the most favored option since you can make money every day but there are also other options that may help you make larger profits.

Another rule for success is to know about your trading styles, preferences, methods and strategies.

It is only when you follow the right trading strategy according to your trading style you will be able to make profits from crypto trading.

Once again, Bitcoin is not the only coin that is lucrative though it is the common one chosen by lots of crypto traders.

Knowing about market analysis is something that you should not ignore if you want to trade crypto successfully and make a lot of money.

This will, in turn, help you to make the right trading decisions, always, since you will know the right sources and tools to use for that matter.

You will also need to subscribe to the better channels to gain a lot of information and news about the crypto market.

This will enable you to make the right price predictions while trading.

Make the right choice between spot trading and derivatives trading because both come with different benefits.

Spot trading is the most commonly used and basic trading which involves buying crypto coins and holding them for a long time.

You can buy or sell crypto with any fiat currency.

Derivative trading, on the other hand, is trading with leverage contracts where you do not own the asset but the contract value is in accordance with the price of the underlying asset and therefore will rise and fall according to the current price of the coin.

The benefit of derivative trading is that it will give highest liquidity and you can sell them short to make profits when the market is falling.

There are also a few other important things to remember while trading crypto coins.

  • You must not consider it as your hobby because you are dealing with real money and real people who will give in everything to make it highly competitive for you. Therefore, take it seriously if you want to go far and make profits in crypto trading.
  • You must have a proper plan to trade crypto so that it minimizes the risks involved in it and maximizes your profit making chances. Your trading plan should include the right tools and exchanges.
  • Consider the trading capital you want to put in very seriously because it is everything. However, you will need to manage it with care. Therefore, invest an amount that you can manage, set it aside for a long time as well as can afford to lose.
  • Never let greed or emotions rule your crypto trading decisions because it will never pay your high returns. Instead, it will increase the risks. You may be forced to exit your position and lose money. Therefore, be patient, calm, and calculating to spot the profit opportunities and make the most of them.
  • Always use technology to help you out in your crypto trading efforts. There are lots of such tools to use but you need not use all of them. Just choose the ones you are good at using and those that compliment your trading style the best. Your primary objective should be to stay abreast with the enormous amount of data produced every day. Just make sure it provides timely and accurate insights.
  • Never let complacency creep in even if you see that the system is working fine and you are generating quite some profit. You will need to make changes in it from time to time to take advantage of the changing trend when you spot one.
  • Always use a reputed exchange that offers a high level of security and supports a large number of crypto coins. This will offer a greater variety of trading pairs to choose from. Also check that the trading and withdrawal fees are quite low so that these do not eat away your profits.
  • It is also better to use multiple exchanges because it will allow you to earn money through arbitrage. This is typically the process of selling crypto from one exchange to the other and making profits due to the difference in price. Yes, the same crypto coin may have different prices on different exchanges. You will also be able to trade with a wider range of crypto coins and currency pairs.
  • Learn about technical and fundamental analysis to know how the crypto market operates and make the right trading decisions accordingly based on the current and historic data.
  • You will also need to learn how to use different indicators such as RSI, candlestick patterns, Fibonacci Retracements, Moving Averages, and Bollinger Bands. These indicators will help you to predict the movements in the market more accurately.
  • Always follow the success stories from reputed sources rather than believing in what other people, especially the non-believers of crypto, have to say. This will make you a wiser crypto trader.
  • Always keep the volatility aspect in your mind so that you make wise decisions while investing and be well aware of the fact that the price of a coin today can change dramatically tomorrow morning.
  • Do not restrict your trade to Bitcoin. Instead, consider other coins as well, especially the Altcoins. This will save you from putting all eggs into one basket.  According to experts, it is best to trade with at least 5 different crypto coins in varying proportions.
  • And finally, always be vigilant with your trade. Monitor it constantly and follow the right safety precautions especially if you have invested huge amounts of cash into it.
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All these will ensure that you manage your crypto portfolio most effectively and responsibly to enhance your chances to make more profits from crypto trading.

Things to Understand

If you have proper understanding of every aspect of crypto trading, you will surely get more opportunities to make profits in the process.

The first important thing to understand is the relationship between risk and reward.

This will enable you to know about the negative outcomes of it and prepare yourself well ahead of time.

As said earlier, the greater the risk the greater the reward. Therefore, when you know the risks you will not run away from the risk but take it head on.

You should also understand the sentiment of the community so that you can spot the best trading opportunities.

You can gain valuable information and insights from different social channels, news sources, and community forums regarding the crypto market, the current trends and prices of coins.

Therefore, stay active in the blockchain community.

You must understand the different order types such as the limit orders and stop loss orders.

This will prevent you from making mistakes and losing money.

When these limits are placed you will not feel the negative effects when things start to spiral out of control.

Self control is also the key to success for a crypto trader.

Not reacting to panic sales will not cloud your trading decisions and enable you to stick to your trading strategy which is very important to make profits.

Also, make sure that you do not give in to the hype created by the celebrities endorsing a particular crypto coin.

This mat result is a quick rise in price of the coin that may hardly have any or very little value underlying or any utility in the real world.

More often than not, the value of such coins typically plummets down to nadir when the celebrities move out of it and talk about a different new coin.

Therefore, you should understand the long term potential of the coin and invest in one that has solid underlying fundamentals.

You should also understand that even if your portfolio is paying high returns, it may not be stable even if you have invested in a major crypto coin that you thought would be unwavering in terms of price.

Understand the type of investment you have made.

This means that you should know about the people behind the coin, the merchants accepting it and the others who are likely to accept it.

Most importantly, understand its growth potential and the technology on which the coin is based.

Another thing to ensure is that you use a secure wallet so that it protects your coins from the scammers or hackers and also from any other types of risks.

This is important because the wallet will be necessary to store your private keys that will give you access to it while making a transaction anywhere and anytime.

It is better to use cold wallets because these are offline and therefore safer than the online crypto exchange wallets which will prevent the hackers from getting access to it and eat away your profits.

Finally, understand that crypto trading will not make you a millionaire overnight.

It is typically a long term venture and if you eye on the short term gains mostly, you will be in for a disaster.

This is because it is very hard to time the trades perfectly.

Long term holding will give you coins enough time to recover from a bad market condition and pay you handsome profits when things normalize.

Profitability and Returns

The profitability and the amount of return you can expect from crypto trading will depend largely on your risk tolerance.

If you let any negative feeling take control of you after knowing about unfavorable market conditions then it will reduce your chances to make profits.

This is because you will certainly make wrong trading decisions.

Also, profitability and returns may be reduced due to crashes in the market due to several external issues such as:

  • Money laundering
  • Cyber attacks and thefts
  • Tax evasion
  • Exchange outages
  • Too much speculation and
  • Illegal Initial Coin Offerings or ICOs.

Also, you should know when to enter and exit a market and not expect to win all the time and make heavy investments.

This will result in losses.

Given the fact that you will trade crypto to make profits, you will need to understand the profitability aspects of the two trading options first as mentioned earlier.

Typically, when you choose to trade crypto CFDs you will face the same kind of risks as you would while trading with any financial instrument.

It is due to the constant and high volatility of this market. But as the saying goes, with high risk comes high rewards.

Therefore, depending on how well your trading strategy is designed, you can make quite good profits by following this option.

All you need is doing your homework, creating a good strategy, and knowing and using the right kind of tools that will help you to make profits and become successful.

Also, you may want to know how much profit you can make exactly from trading crypto as a trader.

Well, that is quite difficult to say because it all depends on the current price of the coin which, as said earlier, can swing either ways wildly.

The amount of returns you can make via crypto trading will also depend on whether you are a full time or a part time crypto trader.

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There are several crypto traders who do not consider it to be their actual job.

They do so simply because they want to grow their crypto portfolio and reinvest their earnings from it into some other avenues.

However, with that said, there are certainly lots of people who are giving their jobs up just to trade crypto. Get the point?

This is the common trend noticed especially among the millennial.

Sadly, as of now, there is no realistic and adequate data available publicly to tell you how much profit you can actually make from crypto trading and the rate of return on your investment whether you are a full time or a part time crypto trader.

Strategies

Finally, it comes to choosing the right crypto trading strategy to make profits.

This is important because crypto trading is all about buying and selling the coins at the right time in the right way.

A right strategy will help you to make right decisions depending on the market conditions.

It will also help you in streamlining your process depending on the timeframes and the technical indicator.

Here are a few crypto trading strategies that you can consider:

  • Day Trading – This type of trading strategy will allow you to buy and sell your crypto assets in one day and make your final exit at the end of the day.
  • Swing Trading – This is a crypto trading strategy that involves holding the coins for several days or even for several weeks depending on the market conditions. Trading decisions in this type of strategy are typically influenced by the new developments in the blockchain technology and the crypto markets after analyzing them carefully.
  • Auto Trading – This strategy involves using crypto trading bots to program the trades automatically. This means that you will not have to look for the opportunities. The bot will do it for you based on the set parameters.
  • Copy Trading – In this form of crypto trading you get an option to mimic or ‘copy’ the trade position of a specific crypto trader. In this process, you still have total control over your trade settings and stop loss.
  • Range Trading – This crypto trading strategy involves the process followed usually by the experienced analysts. This process is based on ‘resistance’ and ‘support’ levels of each day. ‘Resistance’ level indicates the point up to which the price of the crypto coin may increase. It is usually above the current market price of the coin. On the other hand, the ‘support’ level indicates the point below which the price of the coin is not expected to fall. This level is usually lower than the current market price of the coin.
  • Scalping – This particular trading strategy involves booking profits by using increased trading volumes. There is a certain amount of risks involved in such trading strategy but margin requirements and other rules may help you avoid having bad trading experiences. This strategy typically relies on analyzing past trends of the crypto asset, the trading volumes, and choosing the right entry and exit points in a day.
  • High Frequency Trading – Often referred to as HFT, High Frequency Trading involves algorithmic and quantitative trading. In this process you will need to develop trading bots and algorithms to help you enter and exit quickly. However, this trading strategy is best suited for the more advanced and experienced crypto traders because it needs a solid understanding of mathematics, the intricate market concepts, and computer science.
  • Dollar Cost Averaging – Commonly termed as DCA, Dollar Cost Averaging refers to investing a specific amount of money at a regular time period. This strategy therefore does not need timing the market and building wealth over time in the long term. However, you will need to understand the market cycle and the current trends by using different technical charts. You will also need to know the right time to exit, the overbought and oversold regions and more before taking a call.

Last but not least, now that you know about the different crypto trading strategies, here are a few other things to know that will also help you to make lots of profits from crypto trading.

  • First, you should always have a balanced crypto portfolio. Consider investing a fixed amount of money regularly on different types of crypto coins to beat the risks and volatility of the market by increasing your risk appetite.
  • Secondly, always double check any info you receive before taking any action based on it. In the crypto market information can be false and these spread quite quickly.
  • Thirdly, always evaluate your finances before you set your investment goals. This will ensure that you do not encounter any encumbrances while achieving your goals.

If you do everything just as it is needed to be done, then making profits from crypto trading is not difficult. Only thing is that you should not expect to become rich overnight.

Conclusion

It is quite easy to become a successful crypto trader provided you choose the right strategy and tools to make the most of the endless opportunities offered by it.

Thanks to this article, now that you know about it all, you can also be a winner.