The most powerful way to graphically represent prices over a given period of time is using candlestick charts. Candlesticks originate from Japan but are now the standard charting vehicle across most of the world.
Single candlesticks give us four key pieces of information from a given trade period:
- The price at the very beginning of the time period (Open Price)
- The price at every end of the time period (Close Price)
- The highest price of the time period (High)
- The lowest price of the time period (Low).
These four things dictate the structure of the candles as depicted below.
The final piece of information is the color of the candle body. If the closing price is higher than the opening price (prices went up), the candles will be colored green. Conversely, if the closing price is lower than the opening price (prices went down), the candle body will be red.
It is important to note that although candles give us a great overview of price action for a period of time, they can also hide critical information. This is illustrated below, with three very different price movements creating an identical candle
This highlights that we must always be mindful of the time period of our charts ( 1 week, 1 day, 1 hour, 5 min, etc). If we are looking to make a short-term trade then candles of a week or day will hide too much information. Conversely, a bullish setup in 5-minute candles will most likely give us very little useful information for daily or weekly price trends.
A good method is to look at longer time frames for market trends, then move to shorter time frames to find the ideal entry point.
Indicators provide traders with a means to derive additional information from a market. Combining two or more indicators together with market structure analysis, allows us to improve the probability of a successful trade.
In this section we will look at four key types of indicators:
Overbought/Oversold – This tells us if a market has increased or decreased in price too quickly, indicating that there will likely be a trend reversal
Momentum – These indicators tell us how the rate at which a market is changing. This can also help us identify when a trend is coming to an end.
Volume – Provides a tool to understand how much trading activity has occurred and if that activity is increasing or decreasing
Volatility – Regions of high or low volatility often preclude certain market events. These indicators help us identify these moments and give an indication of the risk involved in entering a trade.
How to buy crypto
Buying bitcoin and altcoins still remains the largest barrier between the general public and mass adoption. The reason for this is the bridge between Fiat currencies and Cryptocurrencies is difficult to safely create.
The main problem arises from the fact that transactions on the blockchain, once initiated, can not be reversed. They are woven into the fabric of the blockchain and cannot be undone. (This is a large part of what makes it safe).
With other transactions, this is not the case. A visa payment or bank transfer for instance can be initiated but not processed for days. During which time the sender could call up their bank and cancel it (If they have sufficient reason). This means that the person selling bitcoin to someone for USD must trust the other person in a way that is not necessary in the cryptocurrency world. As a result, exchanges that sell bitcoin require you to generally verify who you are with some form of identification.
Generally, the best place to buy bitcoins is through exchanges. This is a marketplace for people to buy and sell directly with one another and is where you will find the best price for your money.
The largest exchanges by volume and region are:
- GDAX – Coinbase (US)
- Bitfinex (Hong Kong)
- Bitstamp (US)
- BTCC (China)
- OKCoin (China)
- Kraken (US)
- BTC-e (Russia)
- BTCMarkets (Australia)
Many of these exchanges (Like Bitfinex and Kraken) will also allow you to buy Ethereum, Litecoin, and some of the other large market cap altcoins.
You can also buy bitcoins face to face using sources like LocalBitcoins or Bitcoin ATMs. There are many other websites and companies that allow you to buy directly from them and offer products like bitcoin debit cards. Before using any service ensure to look for recent reviews and news to ensure they have a good reputation and look to see what kind of markup they are placing on the price of the bitcoin they are selling. (This can easily be 10% on top of the price on exchange).
Once you have bitcoin you can transfer it to other exchanges that allow you to trade it with hundreds of other cryptocurrencies.
The most popular exchanges that specialize in altcoins are:
Storing your bitcoin and altcoins requires a wallet. A wallet is simply some method of keeping the private and public keys that give you access to your bitcoins on the blockchain. This can either be a hot wallet (Something connected to the internet) or a cold wallet (Something isolated from the internet).
One of the biggest risks in cryptocurrency is that no one is responsible for your coins but you. If they get lost or stolen that’s it. The blockchain itself is secure, but our computers and phones which are gateways to the blockchain are not. Hackers can find their way into your computer and extract your keys and take your coins (Just as they can with your internet banking, except there with crypto there is no bank to get them back for your).
To mitigate this cold wallets are the safest place to store your cryptocurrency when not actively trading them. This can be a paper wallet, an encrypted USB stick, or a hardware wallet like a TREZOR or NANO S LEDGER. The trick with these is to make sure they are kept in a safe place and have them safely backed up.
If you want to be actively trading, you must understand that keeping your coins on an exchange brings with it a certain level of risk. The saying goes “Whoever owns the keys owns the coins”. When you have your crypto on an exchange, you are relying on them to keep your private and public keys safe from theft. This has proven to be costly multiple times in the past with large exchanges being victims of hacks or insider theft multiple times in the past.
Other common wallets include:
- Ledger Nano S (Cold Hardware Wallet)
- TREZOR (Cold Hardware Wallet)
- JAXX (Hot Wallet – Keys kept locally)
- Blockchain.info (Hot Wallet)
- Coinbase (Hot Wallet)
- Mycelium (Hot Wallet)
- KeepKey (Cold Hardware Wallet)
- AirBitz (Hot Wallet)
As outlined many times above, there are a lot of risks involved in using cryptocurrency. This is due to the fact that it is still a very young technology, and whilst the blockchain technology itself is trustless and encrypted, the infrastructure to support and protect users is still being developed. It is always important to stay vigilant if you want to invest/trade in cryptocurrency. If you do, however, and your research and trade well you can make a lot of money in this space.