This guide is going to teach you EXACTLY how to trade Altcoin.
How to place trades.
How to read price charts.
Everything you need to know about trading is in this guide.
By the end, you’ll be able to go off and start trading yourself.
Here’s an overview of what’s discussed:
- What is Altcoin and how is it different from a Cryptocurrency
- How to place buy trades and sell trades using an Exchange
- What’s the best Altcoin trading platform
- How to read and use price charts
- How you make money as a trader
- Where you can find a profitable trading strategy.
There’s also a small FAQ at the end.
Consult this for answers to some of the most common Altcoin trading questions.
Let’s get started.
What Is An Altcoin And How Is It Different To Normal Cryptocurrency?
First off, let me clear up a big misconception.
Altcoin is not a Cryptocurrency.
Yes, it has “coin” in it, just like Bitcoin, Litecoin and hundreds of other Cryptos do, but it’s not a Crypto itself that you can trade or invest money into.
Instead, it’s a name used to describe a lesser known Cryptocurrency, a currency that isn’t very popular (at least when compared to the big Cryptos), and that never really gets mentioned in the news.
Altcoins may not be as popular as the big Cryptos, but they are very similar.
Take Verge for instance.
Verge is a Cryptocurrency just like Bitcoin. It uses the same Blockchain technology as Bitcoin – like most other currencies do and it was even been created for the same purpose.
Listen to this message on its site…..
“A cryptocurrency designed for everyday use”.
“Improving upon the original Bitcoin blockchain and aims to fulfill its initial purpose”
Heck, with a message like that it might as well BE Bitcoin.
How Do Traders Make Money?
So in trading, you make money by selling a coin at a higher than what you bought it for. How much you make when you sell is determined by the amount you bought and the price you’re selling it at. (The bigger the difference between the buy price and sell price the more you make).
Buying and selling are completed using trades.
When you BUY Altcoin using normal currency, you place a buy trade.
When you SELL Altcoin to get normal currency, you place a sell trade.
To make money you have to both buy and sell. You can’t just buy, you have to buy and then sell.
Here’s an example to explain further.
Let’s say you bought 1 Bitcoin when the price was at $53000. If, after a few days, the price increased to $58000, your 1 Bitcoin would be worth $58,000. Not bad for a few day’s work.
Now even though your Bitcoin is worth $5000 more than it was when you bought it, you haven’t actually made that $5000 yet. To do that you have sell the coin using a sell trade.
So using the example again: If you sold the 1 Bitcoin purchased at $53,000, at $58,000, you’d make a $5000 profit.
And that’s how you make money trading.
Of course, you don’t just buy and sell once then that’s it. To make money you’ve got to buy and sell multiple times over. Also knowing when to buy and sell comes from your trading strategy (more on this later).
Now let’s look at how to trade Altcoins.
First Thing First – Find A Trading Platform
Like all cryptocurrencies, altcoins are traded through exchanges.
An Exchange is a place where you can buy crypto using normal currency (Usd, Eur, etc) and sell crypto to get normal currency.
Note: You also buy crypto using other cryptos.
All exchanges function as websites, so when you trade Altcoin, you buy, sell and do everything else through the site. You don’t go to a physical location and then start trading, like the traders on Wallstreet, you just log in to your account. Also, buying and selling take place instantly. It’s not like a delivery service, where you buy some coin then it arrives later in the post, it happens straight away.
Most exchanges have free mobile apps too. So if you need to trade on the go, or check positions whilst out – like when at work, it’s a good idea to download the app.
Which Exchange Is Best For Trading Altcoin?
Most of the well-known exchanges don’t let you trade Altcoin – probably due to the scams, but there are a few that do allow it and that you should use in trading.
Poloniex and Binance are the top two most recommended exchanges to trade altcoins.
You can read about how to trade cryptocurrencies on Binance exchange because this guide is focused on Poloniex exchange.
Poloniex doesn’t support the trading of all Altcoins, but it does let you trade the majority of altcoins (the good ones that are not scam). It has some really neat features too that make trading simple and easy, such as built-in price charts (more on this later).
It also has low fees, which is good because Altcoins cost more to buy and sell than the big currencies (Bitcoin, Etherium, Litecoin, etc).
You can sign up to Poloniex below.
If you want to trade on a different exchange then by all means go ahead. Just keep in mind, the instructions below on how to buy and sell Altcoin won’t be the same.
How To Trade On Poloniex – Understanding The Trade Screen
When you sign in to your Poloniex account you will arrive on the trade screen.
From here you can place trades, set stop losses, look at price charts, review past trades, select which currency to trade. Every major trading action is taken from this screen.
There are quite a few different tabs and options dotted around the screen.
Here’s a quick overview of what each one does and what it’s used for.
The chart window lets you look at how the price of a cryptocurrency has changed over time.
Its default setting is 1 hour – so each little bar you see shows how the price changed over an hour, but you can change it to something else using the 1M, 1H, 1D, etc options at the bottom.
Note: To change the chart to different crypto click on a currency in the “Markets” tab.
The markets tab in the top right lets you select which crypto you want to trade and the four tabs; BTC, ETH, XLR, and USDT let you choose which currency to buy with.
If you want to buy using Bitcoin, select a Currency under the BTC tab.
If you want to buy using normal currency, choose a currency under the USDT tab.
ETH and XLR are for buying with Etherum and Litecoin, so if you wanna buy with those, make sure you click these.
Below the chart window, you’ll see the trade buttons.
These are used for buying and selling currency as well as for setting stop losses.
I’ll go over how to use these in the next section.
The order book lets you see information on all the buy and sell trades people are placing. This will always be updating, so the prices seen above will not be the same prices now.
The two other options on the trade screen; Market Depth and Trade History aren’t really used when trading, but here’s a quick overview of them anyway.
This shows how deep the orders are into the market.
Here you can look at all the past trades you’ve placed. that is the list of all the past buy and sell trades you’ve placed.
Placing A Buy Trade (Buy Altcoin)
Placing a buy trade on Poloniex is very simple.
Here’s how it’s done.
First, select the currency you want to buy using the markets tab then go down to the Buy tab in the trade button window.
Now click inside the “Price” box.
If there’s a number inside just delete it.
Next, go to the “Sell order” section of the Orderbook and click the price at the top.
Some numbers will appear inside the “Amount ” and “Total” boxes.
Delete these and enter the amount of coin you want to buy in the “Amount” box.
A number will show up inside the “Total” box.
This is how much it will cost in USD for you to buy the amount of coin.
If you’re happy with the cost, click the grey “Buy Button” to buy.
Note: You can’t see the button in the image because I’m logged in.
A message that says “Your buy order was successful” should show up within the next few minutes.
If it doesn’t show after 5 minutes, go to the “My Open Orders” tab (this appears next to the trade history tab whenever you place a trade), and cancel the order.
Once the order is canceled, click inside the “price” box and select the price at the top of the order book. Now, enter the amount again and click the grey “Buy” button.
The message should pop up within a few seconds or a couple of minutes.
If it doesn’t appear again, just keep repeating the above steps until it does.
Most of the time the message will appear straight away, and your coin will be bought. It’s only when lots of people are trading that it can take a couple of attempts.
How To Place A Sell Trade (Sell Altcoin)
Placing a sell trade is the same as placing a buy trade, only the other way around.
To do it, head to the Sell tab and click the “Price” box.
Note: Make sure you select the right currency to sell from the “Markets” tab.
Now go to the “Buy Orders” section of the orderbook and click the price at the top.
Again, some numbers will show in the “Amount” and “Total” boxes.
Get rid of these then enter the amount of coin you want to sell inside the “Amount” box.
The number that now shows in the total box is the amount of money you’ll receive for selling the coin.
With everything entered, click the grey “Sell ” button to sell your Altcoin.
A message saying “the coin has now been sold should show” the coin has been sold should show up.
Again, if after 5 minutes it hasn’t come up, go to the open orders tab, cancel the order then follow the above steps.
Like before, it may take a couple of attempts for it to appear.
The faster you enter the information and click the “sell” the more likely you’re coin will be sold straight away.
How To Set A Stop Loss
Earlier, I explained how the way you make money trading, but what I forgot to mention, was that it’s also possible to lose money.
To make sure you don’t lose much when you do lose – because you will lose it’s unavoidable, always use a stop loss.
To set a stop loss go to the “Stop Limit” tab.
In the “Stop” box, enter the price the Altcoin must reach for the stop loss to be executed.
If the coin falls to this price, the stop will be placed at the price entered in the Limit box.
Make sure you put it just above the Limit price to ensure the stop loss will be placed. If you set the stop price too low there’s a small chance the price could come down and not trigger the stop loss. If that happens the stop loss won’t be placed, so there’s a chance you could still lose all your money.
In the “Limit box”, enter the price you want the stop loss placed at when the coin reaches the “Stop” price.
Finally, enter the amount of coin you want sell when the price reaches the stop loss into the “Amount” box.
The total shows how much you’ll receive if the price hits the stop.
The difference between this, and the amount you paid for the coin, is the amount of money you’ll lose if the stop loss is reached. For example: if I bought 1 Bitcoin at $57,000 with a stop loss set to $56,000 if the price fell and hit the stop I’d lose $1000.
Remember, this is a good thing. We use stop losses to protect our money. Yes, when one is hit we lose a bit, but without one we could lose everything. So don’t think placing one is bad because it’s there to help. Plus, stop losses are just a safety precaution. They don’t get hit all the time, in fact, if you find a good trading strategy they will rarely get hit.
When you’re happy with options, click the grey “Sell button” to have the stop loss placed.
Note: You can remove a stop loss at any time using the “My Open Orders Tab”.
The Next Step: Learn Basic Chart Reading
So far we’ve gone over what Altcoin is, I’ve shown you how to place buy trades and sell trade, how to use the Poloniex exchange, and also how to protect your money with a stop loss.
You’re almost ready to begin trading. There are just a couple more things to learn, after that, you’re all set.
Okay, so the first thing is chart reading.
This is a skill you must learn to be able to make money. If you can’t read the information charts give about the price of an Altcoin, you won’t be able to use a trading strategy (more on this in the next section) and will have little chance of being a successful trader.
In trading, the charts we use are not like the charts you’re taught about in school.
These are price charts. They show lots of information on how the price of an Altcoin is changing, like whether it’s increasing or decreasing, how much it’s increasing or decreasing by, the size of the increase or decrease. They also update in real-time, so the information they show is always changing and they’ll never look the same.
At first glance, these charts will look quite confusing but don’t fret, because I’m going to go over them
Note: Make sure you use this site for price charts. Register on Poloniex
Let’s take a look.
Okay, here’s a price chart of Bitcoin.
This is a candlestick chart. It’s one of 6 different types of charts you can use when trading and is the one you should always use to look at the price. The other types, Line, Bar and Heiken Ashi (there are some others too, but I won’t go into those) can be useful for some things, but don’t show the same level of information as candlestick charts – so they’re not as useful for trading.
On the chart, you can see there are lots of tiny blue and red bars.
These bars are candlesticks (hence the name candlestick chart).
They show different information on how the price of an Altcoin changed over time.
Their color shows whether the price increased or decreased (if it’s green it increased, if it’s red it decreased). And the size of their body (the part that’s green or red) shows how much it increased or decreased (the bigger the body, the bigger the increase or decrease).
By knowing what the candlesticks show you can understand what the price is doing.
For example, if I look at the chart above you will notice that a small rise has just taken place because the most recent candlestick is green and has a small body.
Let’s do a little test.
Using what I’ve explained, see if you can answer these questions in the following image.
- Which candlestick caused the biggest price change 1,2 or 3?
- What did the price do on the candlestick marked with an arrow, did it rise or fall?
If you said candlestick 3, you were correct.
If you said the price was rising, you were also right.
Got them both right? Great. Get one wrong? Go back and read what I said. In time you’ll get it right once you’ve read it a few times
Have a look at some charts in your free time and see if you can understand what’s going on.
Find A Profitable Trading Strategy
Earlier I showed you how to buy and sell Altcoin using Poloniex.
One question you might have had when reading the instructions was “How do you know when to buy and sell?”.
The answer is from a trading strategy.
A trading strategy is like a business plan. It provides you with specific instructions on what you must do to make consistent money trading. The instructions cover everything from when to buy and sell, to the price a stop loss should be placed.
All strategies have their instructions for buying and selling based on different conditions.
Must use technical analysis – the study of price charts, to tell you when to buy and sell, but there are some that use robots – automated computer programs, that buy and sell for you – make sure you stay away from these.
The strategies that use technical analysis tell you to buy and sell when the price of an Altcoin acts in a certain way, or when a technical indicator – a special tool applied to a price chart, reveals a bit of information about the price.
Here’s a Moving Average indicator. It shows how the average price of an Altcoin changed over time.
The average itself is the black line you can see moving up and down. These black lines represent the average price, so when it moves up, it means the average price of a currency (in this case Bitcoin) increased, when it moves down, the average price decreased.
A strategy that uses a Moving Average gives a signal to place a trade every time the line crosses the price. So if you were using this strategy, you would place a buy trade every time the line crosses above the price – like it did where I marked the circle.
It may sound complicated, but using a strategy isn’t difficult.
It’s just a case of understanding how it works and then follow the instructions it gives.
The real difficulty comes from finding a strategy in the first place.
Altcoin trading isn’t that popular, so there are virtually no strategies out there you can copy and start using.
It is possible to use a Crypto strategy on Altcoin, like a strategy you’d use for Bitcoin, but the results won’t be that great. You might make money every now and again, but over time the profit will be inconsistent.
The good news is that I do have a trading strategy you can use to trade Altcoin.
The bad news is it’s too complicated to explain here, so what I’m going to do instead is explain the strategy in a future article or book.
Your Questions Answered
Before we come to the end, here’s a quick Q + A of the most popular Altcoin trading questions.
- Can You Day Trade Altcoins?
- Yes, but I wouldn’t recommend it. Like I said earlier, Altcoins cost a little bit more to buy and sell than the big crypto’s.
This isn’t a problem when you buy and sell infrequent (like you do trading normally) but in day trading you are placing lots and lots of trades. So the cost, though being only slightly higher, impact the profit a lot more.
- Should I Invest In Altcoins?
- A. Not unless you want to potentially lose lots of money. Altcoins have not received much support or investment (hence the low market cap), so there’s a very high chance they could disappear within a few years. If that happens when you’ve invested in them, you will lose all your money, and there will be no way for you to get it back.
- How Is Trading Different To Investing?
- In trading, you make money by buying and selling currency many times over. In investing you make money by buying and selling only a few times.
I hope this guide has shown you that Altcoin trading isn’t as hard you may expect. Yes, there are some nuances to it – as there are with any form of trading, but the overall process of buying and selling is actually quite easy and can be done by anyone.