How Much Can You Earn Trading Cryptocurrency? – Tips For Beginners
Cryptocurrency is making waves in the digital arena. As an alternative to traditional banking, wire transfers, stocks, or bonds, cryptocurrency is a high-risk, high-value market. A lot of people are interested in this market because of the chance to make good money.
So, how much can you earn trading cryptocurrency? The answer is simple: a lot. For experienced traders, a single day of trading can reap up to $1,000 in profits alone. Of course, to reach this kind of profit, you will also need to invest a higher amount in crypto assets.
There are different ways to trade cryptocurrency, and different strategies as well. Even beginners can earn a lot of money from this market. Continue reading to learn more.
Two Ways to Earn from Trading Crypto
There are two ways to earn when trading cryptocurrency, actively and passively.
Beginners are usually advised to try out passive trading first. This type of trading involves buying crypto assets from the market and leaving it to increase in value and earn you profits over the years.
Passive trading is like investing in stocks or properties, where you are working under the assumption that the market value of your assets will increase as the years pass.
Active trading is recommended for traders who are a bit more experienced. This type of trading involves watching and analyzing the market. Your analysis of the market will determine when you will buy or sell cryptocurrency. One of the most popular active trading strategies is day trading, where all transactions are executed within a single day.
Beginner-Friendly Trading Strategies
Trading cryptocurrency does not have to be intimidating, especially when you can earn anywhere from $100 to $1,000 (or more!) in just a couple of weeks. Most strategies recommended for beginners are passive trading strategies. Once you have familiarized yourself with the ins and outs of crypto trading, you can try adapting more active strategies when trading.
These beginner-friendly strategies will help you learn more about the world of cryptocurrency trading.
The hold strategy involves passive trading. To execute this strategy, all you need to do is buy your preferred coins according to the market prices and leave it for a few years. Even if the market is bullish, you need to muster all the patience that you have, to not touch your crypto assets.
For beginners, this is the safest way to start trading cryptocurrency. You do not need to purchase a large amount at once if you are having doubts about the market price rising. But once you purchase your assets, you will be able to earn profits after waiting for quite some time.
This strategy is also less stressful because you do not have to worry about the changes in the cryptocurrency market. However, you should keep an eye on market prices. Regularly keeping track of the market will help you decide when to buy more crypto assets, or sell, if you need to spend the profits you have made over the years.
Cost Averaging Strategy
This strategy also falls under passive trading. Let’s say you have been watching the market for some time now, and you want to buy the cryptocurrency that you have been eyeing even if it is still sitting at a very high price.
If you cannot decide whether to wait for the price to dip or to buy immediately, cost averaging is the right strategy for you. You need to schedule buying from the market at a consistent interval, be it every other day, week, month, and so on.
This is a more conservative strategy that protects you from the possibility of large losses. The cost of buying, whether at a high or low price, is averaged. Thus, you will be able to add to your crypto assets while balancing the costs of buying.
Buy the Dip Strategy
You may have heard of the phrase, “buying the dip” around the cryptocurrency community. This strategy involves watching the market for a sudden dip in prices. A cryptocurrency’s price can continuously increase over a certain period, and then suddenly drop. Once the price starts dropping, this is the time to buy.
The best advice if you want to try out this strategy is to be patient. When the price starts dipping, there is no need to spend all your money on the crypto assets immediately. Don’t get too excited because chances are, it will dip some more before slowly picking up again.
Just buy a small amount when the price first starts dropping and buy later when it drops some more. The key is to be ready for more drops. If it suddenly picks up after just a minimal drop, no need to worry, because you can save that extra money for the next drop or for another cryptocurrency.
Lock in Profits
Locking in your profits is very difficult to do, because once you see that your crypto assets are on an upward trend, you will be very tempted to just keep it there and see how high it can go.
Unless you just started passive trading using the hold strategy, you should lock in your profits every so often. The randomness of the cryptocurrency market contributes to the extreme fluctuations in prices, where the price of a cryptocurrency can go very high or drop very low in just a single day.
Locking in your profits means that you will sell a small percentage of your crypto assets when it has a high market price. You do not need to sell everything at once, especially if you are keeping some using the hold strategy.
Just make sure that when you sell, you do so at a price that is higher than what you bought it at. You can use the profits that you make to buy some more at the next drop or invest it in other crypto assets.
Lock Away Your Coins
This is probably the easiest strategy on the list. Once you have decided which strategy to use and have bought the crypto assets that you want, you can lock them away.
Apply the passive trading strategy and do not touch your coins for a long time. You can place them in a paper wallet or a hardware wallet, or in other places that are harder to access. This way, you will be able to ensure that your coins are increasing in value according to market prices. You can check on the market occasionally when you are ready to sell or buy some more. Learn more about trading cryptocurrency here!
How much can you earn trading cryptocurrency? There is no fixed answer to this question, but the bottom line is that you can earn a lot, with the proper strategies and mindset.
If you do the work to learn how to trade cryptocurrency, and you choose the right platform, you can earn enough to make trading a fulltime job for many, many years.
UPDATED April 1, 2021
By: Owen Landry
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UPDATED February 1, 2021
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