WHAT TO CONSIDER BEFORE TRADING CRYPTOCURRENCY

Trading of cryptocurrencies involves the buying and selling of cryptocurrencies. The concept of trading cryptocurrencies doesn't involve only the buying of crypto. Unfortunately some people think that when we mention to trader an asset it means to buy the asset. A trader doesn't only get profit from opening a buy/long position on an asset, he can also gain profit from opening a short/sell position on the asset.

Today I am not here to look at the differences but to look at what to consider before trading(buying and selling) cryptocurrencies. Before a trader buys an asset there are certain factors or we can refer to them as analysis he or she makes. I will be looking at some of these factors namely;

• Fundamental Analysis
• Sentimental Analysis
• Technical Analysis

Now let us take them one after the other.

Fundamental Analysis

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Fundamental analysis can be described as trading based on news surrounding the asset. This is based on the current and old news that are talking about certain things of the asset. Fundamental analysis doesn't only mean news surrounding the past and current news but it also concerns the team members of the project. In this instance the trader takes into consideration the founder of the project and their roadmap. Roadmap in this instance being the whitepaper of the asset.

When a trader performs fundamental analysis on a project, the trader is able to establish that based on past events of the asset the price of the asset will rise or fall. The people too in charge if the project can be a base for the asset rising or falling. A perfect example is when Elon Musk spoke about his company halting the acceptance of BTC as payment for their Tesla cars. This caused the price of BTC to have a downtrend for sometime.

Sentimental Analysis

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Sentimental analysis is similar to fundamental analysis where the trader trades on impulse. Here the trader might follow what other traders are saying will happen in the market and he might also decide to trade according to the way he feels the market will go.

The trader can decide that every trader is going in this path but then he will decide to go in the other path and it might actually pay off. Since the crypto market is volatile the market can rise and fall at anytime thus a trader who trades on sentiment can be both wrong and correct.

Technical Analysis.

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Technical analysis is when a trader before going into or leaving the market uses technical indicators such as RSI, Bollinger bands etc. to make analysis before selling or buying the asset. Over here the assets price is placed on a chart and then the trader can use sites such as trading view to add the indicator and then make his or her readings. These indicators have special uses some of which are to identify the trend of the market, some of which are also to identify when the market is about going on a reversal.

These indicators are considered to be precise and they are considered to be more useful than the fundamental and sentimental analysis. for obvious reasons the technical indicators use the historical data of the price to make readings and even though they are not 100% accurate they are still better than the other types of analysis.

This is something small I have for the analysis part and then I hope to continue with this topic next time. In my next post I will take these analysis one by one so that I will take you through them keenly so that you will understand all the types of analysis better and for those who don't understand this they will be able to learn something new and use them to make profits in the market.

Thank you for reading.