How To Trade Altcoins? Complete Guide [2024]
Due to the growing development of the cryptocurrency market, altcoins – all cryptocurrencies except for Bitcoin – have attracted special attention among traders who wants to diversify the portfolio and above all seek to make every growing opportunity. Of course, to successfully start working with a particular altcoin, it is necessary to determine for what and how you can sell it for a profit to understand the need for careful study of the topic to ‘get on this boat’. Here is the detailed guide on how to trade altcoins that includes real examples of trading and major strategies.
Buying and Investing in the Altcoins to Trade
The first general activity that one would engage in when trying to begin trading in altcoins is to carry out research to determine the best altcoins to trade. The market is overwhelmed with the thousands of altcoins, all of them have their own applications, opportunities and threats. True trading begins by picking the right altcoins right from an evaluation of a number of factors such as; Technology, Developers behind the project, Market capitalization, daily trading volumes and community backing.
For instance, Ethereum (ETH) has continued to persist as one of the primary altcoins for trading because of the sound dApps and smart contract platform it supports. In early 2021 Ethereum marked its overhaul to Ethereum 2. 0 that had integrated the Proof of Stake (PoS) consensus mechanism owed to increased its price and trading volumes. Investors who bet on the upgrades that Ethereum 2. Only a handful of individuals, who bought HL for a mere $0 in the early years, could benefit from its increase in price because of the rising demand for the network services.
Other altcoin is the Solano (SOL) which emerged to prominence in 2021 due to it’s high-speed and cheap fees. Such an advantage as the capacity to perform thousands of operations per second allowed Solana to attract DeFi projects as well as NFTs, which caused the sharp growth of its rate. Those who had gotten in at the ground floor were able to reap big from this token, after Solana experienced astronomical growth and was trading at around $1. Users ranged from 50 at the start of the year 2021 to over 200 by the end of September in the same year.
Besides such pioneers as Ethereum and Solana, relatively ‘younger’ members of the appearing industry, which involve Polkadot, Cardano, have been also gaining much attention. Polkadot has gained interest from traders who want to long-term investments because of its approach to blockchain networks’ interaction and Cardano due to its sustainability and scalability. That enables them to discover trading opportunities within the altcoin market, before such trends go mainstream.
Trading Strategy for Second Generations Cryptocurrencies
After deciding on the altcoins you would like to trade, it is also important to determine the approach that you wish to use in trading the altcoins in consideration to your objectives of investment and your ability to take risks. Having a trading plan must not be overlooked since it guides the trader in making right decisions and managing risks as there is high risk involved in the trading especially when dealing with the cryptocurrencies.
There is an approach called swing trading here the investment targets short to medium term price movements. Swing trading involves merely the utilization of technical indicators to look for an altcoin, purchase it at a lower price, and subsequently sell it at a higher price within several days or even a few weeks. This strategy entails one to have adequate knowledge in technical analysis and or trends on the market besides the timing of getting into the market as well as the timing of exiting from the market. For instance, during the bull run in 2021, several traders made good profits using the swing trading to trade in altcoins such as LINK and UNI.
Another strategy is day trading in which investors purchase and sell altcoins on a single day in order to profit from short-term fluctuations in prices. Day trading involves a lot of self control and the capability to make some decision within a short period of time on the basis of market data. Thus, in 2021, day traders who focused on monitoring now-rarer altcoins such as Dogecoin were able to earn money on its [extremely] high and unpredictable fluctuations resulting from hype on social media and recommendations from Hollywood film actors like, for example, Musk.
Another trading technique is long term holding, commonly referred to as HODLing, where investors purchase altcoins with the aim of holding the coins for years in the hope of an increase in the alternative coin’s value. It is most appropriate for altcoins that have gains potential thought they initially might have humble starts or that have solid fundamentals. For instance, those who bought BNB since their ICO in 2017 have seen their investment explode in recent months; BNB is now among the biggest altcoins by market capitalization.
Risk Management in trading in Altcoin
In trading altcoins, the aspect of risk management is one that is essential when making trade. The market for cryptocurrencies is extremely unpredictable, and its subordinate, the altcoins, are even more sensitive to huge fluctuations in price. The general management of risks can prevent capital loss, and enhance the probabilities of achievement of objectives.
It’s always advisable to ensure that you practice basic risk management procedures that allow you to set on your altcoins a stop loss order which sells the asset if its price touches bottom. This assists to avoid large losses that may be realized in case the market is against your position. For instance, if you bought Solana (SOL) at $150 for a stop loss price of $130, the automation of this order will sell Solana if it gets to $130 so that you don’t lose more.
The final risk management strategy is to diversify one’s portfolio so as to minimize the number of altcoins invested in; instead of investing all ones’ money into say BTC, one can invest in several altcoins. That way, an investor is shielded from a terrible investment in an altcoin because the investment portfolio is diversified. For example, a diversified portfolio might consist of high cap altcoins such as Ethereum and Polkadot and low cap higher risk altcoins.
One also needs to learn not to use hardcore leverage when trading altcoins. Gearing is the use of borrowed capital, meaning while your profits can be greatly boosted, so can your losses. During the year 2021 many people using high leverage percentages where meeting their margin calls during market downturns and suffering large account losses. So it is better to use leverage sparingly and only where the potential risks or losses entail full comprehension of the implied risk factors.
Imitating or Following the Major Market Indicators
A simple understanding of how to trade altcoins involves ensuring one gets updates on market trends and events. Cryptocurrencies are sensitive to macro and micro factors and these factors include regulatory actions, technical innovations and changing macroeconomic factors. It’s also a good idea to follow the news and current market sentiment to be able to timely react on the shifts in the market.
For instance, in May this year when the Chinese government cracked down their growing cryptocurrency mining industry and Tesla the car manufacturer stopped accepting Bitcoin as a mode of payment for their cars. These events sparked panic selling across the market and in the process, many of the altcoins in the market posted nosedives in their value. Those traders who had been observing the news closely were able to do one of the following, sell their stocks in case they saw they were going to loss or invest in the stocks during the downturn as it was cheaper.
Similar to the cases above, social media sites, for instance, Twitter and the ‘WallStreetBets’ community of Reddit also influence market sentiment. In 2021 the popularity of such assets as Dogecoin (DOGE) and Shiba Inu (SHIB) relied on social media promotion and customer’s stories. Those dealers, who participated in these platforms and follow personalities such as Elon Musk saw tendencies and followed the listed shares with success.
Also, watching such on-chain data or technical levels may be useful to detect some tendencies on the market. For instance, following the active addresses, transaction volume, and even the whales involved in a given altcoin will go a long way in the control of a trader in evaluating the state of an altcoin and indeed its future trends. There are many useful resources on the internet that provides on-chain data such as Glassnode and Santiment that can help traders make good decisions.
Platforms for Trading Altcoins
However, when it comes to operations with such coins, the choice of the site is critical. You need to ensure that the selected platform has several altcoins, high level of technical analysis and reliable safety measures for your money. Below are some of the most popular and reliable platforms for trading altcoins:Below are some of the most popular and reliable platforms for trading altcoins:
Binance is arguably among the biggest and most active cryptocurrency trading platforms globally, which lists numerous altcoins for trading. This the reason why Binance has adopted an interface that is easy to use as it is sophisticated to meet the needs of any trader. This year alone, Binance trading has been at over $1 trillion daily and overall, meaning the exchange platform’s monopoly in the crypto market. Apart from spot trading, Binance also provides futures trading and staking, which show it may suit well for users that trade alts.
The United States dominates this exchange platform that is also famous for trading altcoins among other platforms. When it comes to buying and selling altcoins, Coinbase has lots of regulatory compliance and security features. Coinbase came into operation in 2012 and in 2021 it became operational publicly through the NASDAQ direct listing. Some of the altcoins that it supports are ETH, ADA, and SOL and also provides users with knowledge to trade effectivity.
Kraken is a reliable broker with numerous altcoins available for trading and such features as margin trading and futures. Kraken has gained laurels for its stringent security system and well-laid fee plan, to prove that it is no amateur platform for shallow-hearted traders. Self custody popped to prominence in 2021 when Kraken became the first crypto exchange that was granted a U. S. banking charter and would expand offerings including crypto backed financial products like loans and savings accounts. The large variety of tools and services offered by Kraken ensure that altcoin trading and investment is easy to manage on this platform.
There is yet another platform through which such tokens can be bought and sold and this is known as the KuCoin platform which offers a wide range of tokens and has some of the lowest trading fees. KuCoin provides quite specific features as trading bots, the margin trading, staking option that makes the exchange suitable for those users, who want to expand their choice of altcoins to invest. To stand tall in the crypto industry, in 2021, KuCoin began integrating DeFi tokens and NFTs in its list of coins. For altcoin trading, KuCoin offers a user-friendly platform that is complemented with numerous functions.
Conclusion: The Standard Operating Procedure on the Art of Altcoin Trading
Effective trading in the altcoins involves analysis, designing of a good trading plan, management of risks as well as the knowledge on the status of the market. Choosing promising altcoins, creating an individual trading plan, minimizing the risks, and tracking the market are the keys to trading in the turbulent environment of altcoins.
The examples of such altcoins as Ethereum, Solana, and Polkadot reveal the possible profits of altcoin trading, and the significance of the choice of the platforms, including Binance, Coinbase, Kraken, and KuCoin to perform trading. In other words, the need to remain as open minded, conscious and advance will determine success in trading the altcoins as the market unfurls in the future.
