Giga Chad’s Crash Course on Trading and Investing
Welcome to Giga Chad’s official crash course on trading and investing. Here, you’ll be able to learn the basics of trading and investing, you’ll be able to identify and use the most popular indicators and learn some valuable skills. This is a perfect article to read if you are new to crypto.
Different forms of Investing and Trading:
Long Term Investing: This is a form of investing in which can last months, years, or even decades. An individual will buy into a project expecting the value will appreciate coinciding with time. Normally, this method of trading is considered the most profitable, although, there are of course ways to make money through other trading and investing techniques and strategies. The term ‘HODLing’ is used within the crypto community to identify long-term holdings of a project. (Use the Weekly/Monthly time frames for long-term investing)
Positional Trading: This form of trading takes advantage of trend movements. This trading strategy tends to last longer than a day, this can range from days all the way up to years, depending on the trend. (Use the Daily/Weekly/Monthly time frames for positional trading)
Intraday Trading: commonly known as ‘day trading’, is a form of short-term trading that typically does not exceed the same trading day. Traders use this method to take advantage of price fluctuations but tend to get out of a trade before it becomes unmanageable. (Use the hourly time frames for Intraday trading)
Safest long-term investments in crypto:
Bitcoin ($BTC): Bitcoin is the largest cryptocurrency via market capitalization, which results in Bitcoin having a large dominance over the market. Altcoins (every coin that is not Bitcoin) normally follow Bitcoin’s price movement, suggesting that Bitcoin is a fairly safe first investment. Bitcoin is also the most likely coin to be adopted on a commercial level due to its popularity and scarcity (only 21 million Bitcoin — a limited supply), which inevitably results in value appreciation over time.
Ethereum ($ETH): Ethereum is the second-largest cryptocurrency via market capitalization. Ethereum is a very different coin to Bitcoin, Ethereum focuses more on ‘smart contracts and is in fact the most used blockchain with various tokens on ERC-20. As this is widely used by many people, Ethereum is a safe investment, especially with the recent London hard fork implementation.
Understanding The Differences Between ‘Coin’ & ‘Token’:
A ‘coin’ is considered to have its own blockchain on which it’s operating — examples can include; ETH, BTC, and ADA.
A ‘token’ is different as it is considered a currency, this resides off a blockchain instead of having its own blockchain. Token’s use the blockchains technology to operate or transfer from different wallets.
Understanding Market Capitalization & Burning Effects:
Market capitalization, also abbreviated to ‘market cap’, is simply the current price of the coin/token * the number of coins/tokens. If more people buy than sell, the price increases and therefore also makes the market cap increase.
If a project decides to burn any coins or tokens, this will also increase the market capitalization as there are fewer coins but the price remains the same.
‘Circulating supply’ (market cap) is considered the amount of coins/tokens currently available to the public via exchanges. ‘Reported circulating supply’ (fully diluted market cap) is a number of coins/tokens to which the project has access too, this can be much more than the current circulating supply. Over time, projects may wish to provide more coins to the public, but they will do this gradually so the price does not drastically decrease as there are more coins now in circulation.
Technical Indicator: Relative Strength Index (RSI):
Technical indicators can be used to your advantage when trading cryptocurrency. There is a range of different technical indicators which can assist you, although the main popular ones are RSI, MACD, and Fibonacci retracement levels.
Within this article, we shall discuss the relative strength index indicator, if highly requested, we can provide other articles on how to use different indicators. Just ask in our Discord (discord.gg/gigachad)!
RSI is a tool in which measures the momentum of a coin’s price change. This is measured on a line graph from 0–100. If the number is anything under 30, the coin is considered ‘oversold’ and vice versa; if the number is anything over 70, the coin is considered ‘ overbought’. This could be used to indicate when to buy or sell this coin. Once the RSI range is either above 70 or below 30, this usually indicates a potential trend reversal although there can be anomalies.
Different Trend Patterns:
Understanding trend analysis is extremely important when predicting price movements. Typically, traders will look at the past and apply that to the future to predict a price movement.
“History never repeats itself, but it does often rhyme.” Mark Twain.
There can be trends within trends that contradict one another, which are more specifically noticeable on higher time frames, which is worth noting.
An uptrend shows price movement in an upward direction. Generally, when drawing an uptrend line, you aim to contain the data’s ‘best fit’ through the bottom of the data, as shown below:
A downtrend shows price movement in a downward direction. Generally, when drawing a downtrend line, you aim to contain the data’s ‘best fit’ through the top of the data, as shown below:
A sideways trend (often know as ‘crab’ movement) is when a price ranges between two points but there is generally no up or down trend determined.
Provided below is an illustration of a market cycle. It’s typically sorted into 4 rough sections to understand how the market is behaving.
Usually, the ‘stealth phase’ stated at the bottom of the illustration is considered the ‘accumulation/smart’ period. The ‘awareness phase’ is considered the ‘markup phase’ which suggests institutional investors are starting to get interested. The ‘mania phase’ is considered the ‘distribution’ phase in which the general public gets involved causing a pretty big pump. Lastly, the ‘blow-off phase’ suggests the top is in, and therefore follows a markdown phase or a ‘correction’ of the market.
To determine the current market phase, ideally, you will want to be checking different time frames and different charts to get the best understanding. Chad tip: start at higher time frames and move inwards when trading, you’ll gain a better understanding of the market this way.
Apply your knowledge on uptrends to different charts and attempt to find yourself a good buy-in opportunity.
The easiest and most profitable way to invest your capital into Cryptocurrencies. The trick here is to not convert all your cash into coins at once, but do it on a weekly/monthly basis with a certain percentage of your capital. This will give you the average Price in USD and prevents you from catching bad entry prices. For example, You have $10,000 and want to buy BTC, so you buy $1,000 worth of BTC every Sunday for 10 weeks.
Having a Good Exit Strategy:
Do you need an Exit Strategy? Long story short; yes, but the definition can vary. Some might say “My Exit Strategy is to hold BTC until 1 Million”, others might say I never sell. Some of the most common Strategies are the following:
- If you x2 or x4 on a specific Alt Coin, you take out the initial investment and let the rest keep growing
- Only cash out when you really are in need of life-changing money (a situation that shouldn’t depend on your Crypto net worth in the first place)
- Sell when you think we hit the yop of a bull run, and wait until the correction has taken place
- Dollar-Cost Average out
- Reinvest the gains you made during the Bullrun into other assets (Possible Money flow = Gains from Alts into BTC / ETH / USD)
- Wait until you hit a certain psychological amount (100k, 500k, 1million)
For some people, Crypto IS the Exit Strategy out of the fiat world. It’s up to the trader (you) to choose the most appropriate exit strategy that suits you and your financial aims. Try not to be too greedy.
Basics of Risk Management:
Trading consists of 3 major factors;
Strategy, Risk Management, and managing your emotions. While the latter is the most challenging, good Risk Management can help you not to lose your whole capital in a couple of trades and it’ll also allow you to sleep well while leaving your positions open overnight. Here are a few tips:
- Only trade with 5–10% of your whole portfolio
- Don’t risk more than 1–2% of your equity in a single trade
- Use Stop-loss Orders to prevent getting liquidated and ensure profit by moving up your stop loss
- If a trade goes against you, don’t be afraid to cut losses and make out a point where you cut them BEFORE you even enter the trade
- Don’t be greedy; be happy with profit. It all adds up
- Set multiple Take Profit orders
- Make sure to cash out money from time to time in case BTC drops massively.